Without humans to cause accidents, 90% of risk is removed. Insurers are scrambling to prepare.

Dan Peate, a venture capitalist and entrepreneur in Southern California, was thinking of buying a Tesla Model X a few years ago—until he called his insurance company and found out how much his premiums would rise.

“They quoted me $10,000 a year,” Peate recalled.

For all the concern over accidents involving driverless cars, including Tesla’s troubles with its limited self-driving “Autopilot” mode, it’s easy to forget one of the supposed virtues of autonomous vehicles: they will make the roads safer. A sophisticated array of lidar, radar and cameras is expected to be more adept at detecting trouble than our mortal eyes and ears. And computers never get drunk, check Tinder or fall asleep at the wheel.

Peate, 40, previously started a company called Hixme, a provider of group health insurance. Now, he wanted to launch a new firm specializing in insurance for vehicles with automated-driving modes (and eventually fully-autonomous cars). His experience with the insurer of his old-fashioned, non-driverless car only confirmed the need.

When underwriters and actuaries price insurance on a new type of risk, Peate said, they charge more because they don’t have enough data. With so few Model X’s on the road, its safety record was, at best, opaque. But Tesla and other carmakers collect reams of data on their vehicles’ operation in order to improve automation. Peate said he realized “we can get large amounts of data across entire fleets and be able to underwrite without having to wait for years of data” from accidents after they’ve happened.

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