I'm suggesting if Google is driving, and the passengers are passengers, then why the hell would anybody pay for things like liability insurance for an AI?
You are going to need basic liability insurance no matter what, but it should be a lot cheaper in a car that you're not allowed to drive, because you won't be able to cause an accident.
Could it be because it's still going to have a "fuck it, you drive" mode which passes responsibility to the human so Google can claim they're not responsible?
For the foreseeable future, cars are going to have a human-driven mode, so you're going to need liability insurance for that. If you're willing to let your insurer into your car's data, perhaps they will give you a discount if you don't actually use it.
A self driving car becomes useful when I can have no controls, and be asleep in the back. I don't pay liability insurance on a bus, train or taxi
Mechanical failure. Again, your rates should go down if you're not driving, but there will still be opportunities for failure.