As you may or may not know, the era of self-driving cars will soon be upon us. At the forefront of this mobility, revolution is Waymo, the self-driving subsidiary of parent company Alphabet (GOOGL -3.12%) (GOOG -3.05%). Waymo has the most test miles driven by any self-driving car company by many orders of magnitude and is currently testing its self-driving service in Phoenix, Arizona. The company's voluntary early rider program reportedly has had 10,000 sign-ups, in which a self-driving car accompanied by a safety driver will pick you up and drop you off for daily tasks, such as going to the grocery store. Soon, however, the safety driver will be removed, bringing us closer to an autonomous reality.
One element of self-driving cars that are still being worked out, however, is liability insurance. Waymo is taking an innovative approach to this end of the business as well, as it recently selected Australian insurance start-up Trov to insure both people and possessions inside Waymo's self-driving cars. Here's why.
What is Trov?
It's curious that Waymo would select a small company that has no experience in car insurance as its partner for self-driving cars, but there's actually a very interesting reason. Trov was formed in 2012 and received venture funding recently from Munich Re (MURGY -0.98%). Munich Re will be underwriting the risks in Waymo's program through Trov's technology applications.
Prior to the Waymo deal, Trov actually had no experience insuring humans or cars. The company typically insures electronics, such as cameras, laptops, tablets, and other expensive gadgets. One of the benefits of Trov is that users can insure specific electronic devices through a mobile app, without having to get a blanket renter's policy that covers everything you own.
In addition -- and perhaps most importantly -- Trov's app allows its customers to "swipe on" and "swipe off" coverage as they like. So, for instance, if you are taking your expensive camera on a week-long rock climbing trip to the Grand Canyon, you can insure the camera for just that week.
Waymo was apparently very attracted to this feature of measuring risk in "micro-durations," or relatively small amounts of time, according to the Wall Street Journal. Trov then repurposed this feature for Waymo to insure passengers and their possessions only for the duration of specific, single ride. The ability to measure risk in short increments of time is similar to the way some cloud computing companies are now charging for enterprise storage and compute by the second.
The Waymo win is a big deal for Trov, to say the least. It's not only the company's first foray into self-driving cars, but Waymo is actually Trov's first corporate customer.
Disrupting traditional insurance
One of the more interesting effects of the self-driving revolution is that it will not only transform the automobile and taxi industries, but also the financial value chain that comes along with it. In fact, U.S. auto insurance premiums are forecast to decline over 15% between 2020 and 2035, according to Accenture. In addition, as connectivity and big-data capabilities increase, it will likely enable more usage-based insurance offerings such as Trov's.
Trov itself may be a FinTech name to watch in the future. Though the company is currently private, Trov is looking to enter the U.S. market (it's currently only available in the U.K. and Australia) in 2018. If the Waymo partnership is successful and the company successfully expands geographically, perhaps it will consider going public at some point, so keep your eyes peeled.