Investment idea generation.

Blog

Our thoughts.

GEICO In Trouble After Buffett Checks Out

The imminence of autonomous vehicles poses a massive shock to the auto insurance industry. Liability will move to OEMs (car manufacturers and their suppliers) as human error is taken out of the equation. GEICO insures (human) drivers and will need to shift to offering insurance to autonomous automobile hardware/software manufacturers. So long as there are not major defects/hacks with autonomous vehicles and their underlying networks, there will be fewer traffic fatalities and fewer collisions. Therefore, the cost of automobile insurance will face considerable downward pressure.

While we're still a handful of years from a complete shift to autonomous vehicles, I believe the gradual roll-out of underlying features (lane departure warnings, automatic breaking, etc) will reduce the rates of collisions and fatalities.

While I believe Berkshire is undervalued regardless of GEICO's prospects, I do think GEICO should be sold or spun-off while investors are willing to pay a premium for the business unit/brand.

BWIBerkshire, Warren Buffett