Tesla Rolls Out Insurance Offering, Claims Big Savings

Steph Willems
by Steph Willems
tesla rolls out insurance offering claims big savings

Late Wednesday, Tesla seemingly gave Tesla owners and intenders what they’ve been looking for: an opportunity to lower their insurance premiums. For a number of reasons, mainly high claim frequencies and the cost thereof, Tesla owners often find themselves saddled with sky-high coverage costs.

What if Tesla provided that insurance?

Owners will soon find out the pros and cons of such a setup, as Tesla has now rolled out its promised Tesla Insurance — a product the automaker claims will benefit owners by offering “up to 20% lower rates, and in some cases as much as 30%.”

With coverage offered initially to California residents (no word on when other states come onboard), the Tesla Insurance website went live last night, then promptly went blank. It currently reads “Algorithm update in progress.”

Tesla CEO Elon Musk first floated the concept of Tesla Insurance back in April, with some questioning how the automaker could afford the offering given the price it charges insurance companies for replacement parts.

“Because Tesla knows its vehicles best, Tesla Insurance is able to leverage the advanced technology, safety, and serviceability of our cars to provide insurance at a lower cost,” the automaker wrote in a blog post. “This pricing reflects the benefits of Tesla’s active safety and advanced driver assistance features that come standard on all new Tesla vehicles.”

Not long ago, the Insurance Institute for Highway Safety declared the Tesla Model 3 to be the most expensive 2018 model-year vehicle to insure in the United States. A year earlier, AAA-The Auto Club Group, citing claims data from the Highway Loss Data Institute, said premiums for Tesla vehicles should go up to the tune of 30 percent. French insurer AXA recently claimed electric luxury vehicles are 40 percent more likely to be involved in an accident.

Certainly, Tesla likes to tout its vehicle’s fleet-footedness, and videos continue to appear online of Tesla owners dangerously misusing their vehicle’s semi-autonomous Autopilot feature. Snoozing behind the wheel usually doesn’t lead to lower premiums.

Initially, Tesla might realize a windfall from this gambit, but one wonders what will happen when the unprofitable company has to pay out.

[Image: Tesla]

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  • Lokki Lokki on Aug 29, 2019

    I don’t think that the Elon Insurance Company (sic) is really intended as a profit center but more as a defensive move to protect market share. The concern is that as word of mouth grows about the cost of insuring Teslas spreads that expense will become a decision factor for potential buyers. The great insurance caper is a win for Tesla if it protects sales levels for the corporation, even if the Insurance arm itself loses (some) money. Tesla cars are expensive to repair for a couple of reasons - they use a lot of aluminum and many (most) shops are not able or authorized by Tesla to do repairs, especially if there is structural damage. A friend had his Model S totaled because the floor was damaged by a piece of steel flung up from the roadway. The Insurance company couldn’t find a shop willing to guarantee the car’s structural safety after cutting the damaged piece and welding in a new section. The car was functioning perfectly but... Then there's the fact that even more than other makes, Teslas are built to be easy to assemble, not repair with glued in rear windows, etc. Finally, the parts availability problem keeps a lot of damaged Teslas off the road for a long time with the owner’s driving rental cars at insurance company expense, and meanwhile complaining to their insurance agents about having to wait. I suspect that some insurance companies are overpricing Tesla coverage on the theory that there are plenty of other fish in the sea that aren’t such headaches. Let Tesla owners go elsewhere while we happily wave goodbye. Tesla may be able to coordinate their insurance and repair functions and keep costs down by prioritizing parts to their insured, focusing repair volume on specific shops to grow their expertise and thus reduce costs, and finally by using otherwise unsaleable cars as loaners. I would assume that Tesla will use contracts with other insurance companies for appraisers and other such ‘back room support’. It’s an outside the box idea that is definitely worth trying for a few years.

  • HotPotato HotPotato on Sep 04, 2019

    Presumably the savings comes from selling themselves parts at cost, not having brick-and-mortar locations, and not wasting time on the phone with insurance adjusters arguing that they should be able to steer the customer to Joe Kickback's Auto Wrecking & Repair. I recently saw a true cost of ownership comparison between a mainstream sedan, entry-luxury sedan, and Model 3: IIRC it was Camry LE, Model 3 SR+, and Audi A4 over 5 years. The Tesla's TCO knocked the teeth out of the Audi and was almost dollar for dollar the same as the much-cheaper-upfront Toyota. But the part that didn't compute for me was the insurance: whoever did the study seemed to have gotten a much cheaper insurance quote for the Model 3 than I had ever heard of.

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