I don't follow... are the economies of scale that allow insurance companies to operate in the current market graduated such that if they only had to insure a fraction of the current driving population, they couldn't do it at the same cost per person?
Granted they will fight the shrinking of that market tooth and nail (and probably lobby to mandate insurance for all cars regardless of who or what is driving them), but it's not as though their cost structure stays the same once most of the population stops having accidents.
There is non-insignificant fixed cost to insurance business: people, advertising cost immediately come to mind.
But I see another scenario: traditional insurance business will not be willing to insure self-driving cars rationally (i.e. at much lower cost due to much lower incident rates) and robo-taxi companies will self-insure. That will deprive traditional insurers from a lot of revenue and since they are publicly traded companies, they won't just accept that and scale down to match smaller market. Instead, they'll try to prop up revenues in short term by rising prices which will make self-driving cars even more attractive to more people, fueling their own decline.
Insurance companies make money by investing the premium in investments. A correctly balanced insurance book will match premiums + claims over an expected time period. The idea is to invest the premium and make money off the investments. This is why Warren Buffet buys insurance companies, because he is a good investor.
If an insurance company is paying out more in claims than they are taking in in premium, that is when they will increase the premiums. If they are taking in more premium than they are paying in claims, they will generally identify areas where this is the case, and lower premiums to attract more customers.
There is a lot of ignorance about insurance companies on this thread. There is also a lot of ignorance that self-driving cars will require no insurance. Not all of the cost of insurance goes to insuring the driver hitting something. There are fire, theft and third party property + injury components. None of these will be removed, though some may be reduced over time in line with claims being lower.
Most of the extra cost of insurance in a large city has to do with the theft component (especially if not garaged). People who live in rural areas pay much less insurance than those in city areas, principally due to decreased theft rates. Autonomous cars will be stolen just like regular cars.
Are taxi companies currently allowed to self-insure?
I would bet current insurance companies are more likely to fight any legal distinction between traditional and self-driving cars as it would require a change to their (lucrative) business model.
Sure, but how hard would it be for Google to create a wholly-owned subsidiary that is an insurance company, which only happens to insure Google?
Patent troll Intellectual Ventures reportedly created hundreds of shell companies. Amazon creates tens of subsidiaries (e.g. Kindle is technically created by lab126, owned by Amazon but a separate company) etc. Whatever the legal roadblocks insurance companies might try to throw, I don't see how they can stop new insurance companies from being created and that's a simple loophole against any anti-self-insurance laws.
