Shorting personal car insurance stocks
While the timeline is debatable, it's clear that fleets of autonomous vehicles and the elimination of personal car ownership is on the horizon. Personal car insurance (and other adjacent industries) will cease to exist within the next decade or two. My question–is there a way to profit off the demise of this industry? Either by shorting allstate, progressive, etc, or some other financial instrument. TC 350K
It seems highly unlikely that personal car ownership will end in the next two decades.
Like I said, the timeline is debatable :D. But I'd imagine once AVs are widely rolled out, it just won't make financial sense to own anymore as booking AV rides will be cheaper, faster, safer, etc.
Textile industry in US was also dying at some point, yet shorting Berkshire Hathaway would have been a mistake.
Fair point, though BRK is an anomaly. I'd imagine not all of these companies will make the transformation into conglomerate holdings companies. Look at Toys R Us, JC Penney, Linens n Things, Barnes and Noble etc from the brick and mortar retail industry.
That is true. One thing I would like to point out though is that the actual product of the companies you listed was an outdated sales channel (their product was: moving stuff to a physical location so people can look at things and buy them). This is not the case with insurance companies listed.
Word of caution. Stock can hold out for a very long time. Shorted Sears ~10 years back when online retail was picking up, learned this the hard way.
"The market can remain irrational longer than you can remain solvent."
This is a good insight, thanks.
And why do you think this isn’t already baked into the current stock price
Because obviously OP was the only one to go through this thought process.
Given Uber’s history with autonomous driving, I’m not sure shorting insurance companies is the best idea...
And obviously autonomous cars would need insurance for the cars and for the passengers. Who’s in a better position to offer these?
Wouldn't car insurance premiums drop significantly as collisions will happen far less frequently? This would mean significantly less revenue. Companies are also much more likely to self-insure for certain types of claims. So AV fleet companies may not be paying as much to insurance cos.
Hey genius, those auto driven cars will still need insurance and the people sitting in those auto driven cars will also need to be insured in some way.
Wouldn't car insurance premiums drop significantly as collisions will happen far less frequently? This would mean less revenue for them at the very least.
Drinking too much kool aid, huh..
You misunderstand how insurance companies are valued.
Please enlighten us.
Think of insurance companies the same way you think of banks. However unlike traditional banks where depositors can withdraw from their accounts at any time, insurance customers can only withdraw when tragedy strikes. Additionally on balance sheets these deposits are viewed as liabilities and not assets which gives a number of advantages. Well managed insurance companies make a good bundle off of reinvesting the premiums they collect. Not that different from traditional banks. Even in the event of full level 6 automation there would still need to be some form of insurance even if it’s only $1/month/vehicle. The deposits on balance wouldn’t have changed only the amount of new deposits. What would have changed is the rate of withdrawal since you can assume fully automated cars will result is fewer accidents.