Tesla Insurance: Information Arbitrage to Save You Money

May 3, 2019 by Vijay Govindan

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Tesla Insurance will increase customer satisfaction

I recently went through the pain of looking for auto insurance for my new Tesla Model 3 Long Range. Some car insurance companies are more sophisticated than others. Others … need work. Some of the insurance sites I visited could not identify my VIN Tesla. One company said that she would call me back. Another company that had an app for my phone would give me a quote in three weeks. An insurer thought our Tesla was a gas car. Facepalm.

Disclosure: I have worked for several insurance companies for several years.

Consider two situations: one is an outstanding customer experience for Tesla. The other is between bad and good, according to the individuals.

Imagine the following: You are ready to order your beautiful Tesla on your phone. You are super excited. You can not wait to drive it and show it. Before placing the order, you realize that you need insurance before delivery. Magically, Tesla asks if you want Tesla insurance on your new vehicle. You add assurance and you are all together! Painless! You are extremely satisfied with the ease of buying the car and the insurance. You are looking forward to delivery.

Compare this with this situation below, which is not very pleasant. (Please note that there is some hype.)

Imagine the following: You are ready to order your beautiful Tesla on your phone. You are super excited. You can not wait to drive it and show it. You place the order. Then, horror of horrors – you need to find auto insurance before delivery. Yuck!

The panic follows. How much will it cost? Is it going to be super expensive? Do I have to visit a dozen sites to get the best cost of insurance? Should you call your strange uncle who knows the best deals in dark alleys with lugubrious characters for everyone? Suddenly, the purchase of your new Tesla is a bit blurred.

Insurance companies can not individually assess your driving characteristics. Instead, they divide your experience and characteristics into similar "groups". These groups are scored, usually by applying a multiplicative scoring factor to another. Common groups include your age, when you got your license, whether you are married or single, if you own a home, your credit rating, your accident history and any other item requested by your request for auto insurance.

Sophisticated insurers use generalized linear models – think of y = a + bx (instead of a and b being fixed, they can change depending on your characteristics). Then expand this property to y = a + b1x1 + b2x2 + b3x3, and so on. (Linear algebra is very important here.) Even more sophisticated insurers are probably implementing or experimenting with deep learning and Big Data analysis methods.

The purchase of your insurance when you buy the car will attract more people to Tesla. This saves you time, effort, frustration and inconvenience.

Tesla knows how you drive better than you

When calling Tesla's first quarter 2019 results, Elon announced that Tesla would create its own insurance product. The company plans to launch it in about a month.

How could Tesla launch an insurance product without having any insurance experience? Very easily. They will have detailed information on how you drive your Tesla, better than an insurance company. They also know their customers. Most people who buy a Tesla probably have excellent credit. Excellent credit is a key factor in determining your insurance costs.

"Your insurance rating is largely based on your overall credit rating."

Finally, Tesla knows the inherent safety of its vehicles. Safer vehicles reduce the risk of an accident, the risk of injury and the risk of injury. New Teslas offers a series of cameras, radars and sensors to ensure your safety and that of others. They point to total self-driving (FSD).

Obviously, Tesla would not classify your electric vehicle as a gas car. The company would be able to perform more in-depth classifications. In a word, it is the arbitration of information. I would define arbitration information as a party having more knowledge about a situation than the other party in a contract. They use this "added" information to position themselves in front of everyone else and generate profits from this opportunity. But it's not my mandate.

"Tesla has" an opportunity to arbitrate information, "said Musk.The company is able to capture driving data, which gives it a direct knowledge of the risk profile of the driver and the driver. If customers want to buy Tesla insurance, they may have to agree to "do not drive the car crazy," said Musk, who added that they could, but would benefit from a higher insurance rate.

Tesla has the advantage of having expertise in machine learning and performing continuous analysis on many large data. In addition, the company has an excellent neural networking team. The first two are key competencies for insurance companies, and the third is the skills that insurance companies want. Tesla can take information from your vehicle, anonymize it, aggregate it, perform statistical analysis and determine which combination of behaviors is safest or riskiest. Use the autopilot over 80% of your driving time? This could give you a discount. Religiously driving the speed limit? Could be another discount. Drive more miles of highway than local? Discount! Take your Tesla and jump cliffs? Penalty!

The beauty of this is that Tesla only has to pay the insurance price at the breakeven point or at a slight profit. He does not have to act as a stand-alone insurer looking for profit as the main source of income. This would wreak havoc on auto insurance companies as Tesla's fleet develops.

Now, with this in mind, Tesla Insurance saves you time, effort, frustration, inconvenience and costs. This enhances the customer experience.

What are the benefits of Tesla over insurance companies?

For a simpler format, I will list here what I consider to be benefits for the Tesla insurance company.

• Tesla creates the vehicles that he will insure. These vehicles are among the safest, if not the safest, on the road.
  In case of a Tesla accident, the occupants of it are less likely to be injured. This reduces the costs of liability.
• Features such as traffic-sensitive cruise control and autopilot navigation reduce the risk of rear-guard (very common) or accident on the highway. This reduces the frequency and severity of insurance.
• It is difficult to steal a Tesla, thus reducing the costs of property damage.
• Tesla software, such as Sentry mode and live camera recording, can provide evidence of theft, accidents, and wrongdoing.
• The Standard Range, Long Range and Performance versions of the car have a similar body structure, which allows the data to be grouped together if necessary.
• Tesla has body shops.
• Tesla operates the Mobile Ranger service.
• Tesla has experience in machine learning, big data, and neural networking. He can take advantage of this experience to set the price of insurance.
• Tesla receives detailed telemetry of each vehicle.
• Tesla can provide parts for repairs at cost and without markup.
• Tesla calls you a few minutes later if you have a serious accident.
• Tesla will tow you if you run out of charge.
• Tesla can look for a nominal profit.
• Because of all of the above, Tesla can reduce the price of insurance companies.
• Because of these intrinsic benefits, Tesla can offer similar coverage at lower cost or more coverage at the same price compared to competing insurance companies.
• Consolidating insurance and buying / renting a Tesla greatly enhances the customer experience.

Tesla already offers a lot of things that an insurance company offers.

Detailed information about "Tesla Insurance"

Below you will find information recently found on Tesla Insurance Services. The link for the entire document of over 4000 pages can be found if you have the link to the actual insurance file or if you visit the CA DOI headquarters. Source: Twitter Thanks, Steve Jobs! (@Tesla_truth)

Above we see Tesla's evaluation algorithm for Tesla Insurance Services. The base rate for each coverage is multiplied by the respective discount / surcharge. All different covers are added together for the final premium (line 27).

Summary of coverage definitions
BI = bodily injury
PD = Property damage
MED = Medical payments
UM = uninsured motorist
COMP = complete
COLL = Collision
UMPD = Property damage caused by an uninsured motorist
GAP = Gap Insurance
RR = refund of the rental
RA = Roadside Assistance
CDB = Collision franchise redemption

The most interesting is the autonomous vehicle group on line 28 (page 66).

AUTONOMOUS VEHICLE PROTECTION ASSEMBLY

Subject to all terms, conditions and exclusions of the policy, we will provide you with the following warranties:

• • Liability of the autonomous vehicle owner
  • Cyber ​​identity fraud charges
  • Wall charger cover
  • Replacement of the electronic key

We will learn later that this coverage will be mandatory for Tesla pilots (page 868).

• Vehicle Automation Package Authorization
  SNIC is proposing to add a vehicle automation endorsement, which is mandatory for all Tesla vehicles, which includes:
  • Liability of the autonomous vehicle owner
  • Cyber ​​identity fraud charges
  • Wall charger cover
  • Replacement of the electronic key

On page 1772 we find the premiums for this coverage. This is not expensive at all.

Premium Premium Vehicle Protection Premium
Bad driver $ 25
Good driver 20

Some worries about Tesla Insurance

As with any new insurance program, I have some concerns.

• This is a new program. With all new programs, the evaluation factors may not reflect the actual experience.
• Tesla has no experience in defining evaluation factors for insurance programs.
• It seems that Tesla is working with the state national insurance company in California. Do bonuses and profits go to Tesla or SNIC? It is not clear at the moment.
• There is no guarantee that Tesla will earn money with this program.
• The insurance departments are very conservative. As Tesla quickly changes software and hardware, can insurance coverage follow suit?
• The insurance program for SNIC does not appear to benefit from the detailed data Tesla has on his driving habits.[[[[Editor's note: It seems that the use of personalized driving data is not legal, according to what I heard on the Internet. Internet can be wrong.]
• It is not known how Tesla maintains the privacy of drivers and vehicles in the face of all this data.

Final Thoughts on Buying Insurance for Your New Tesla (US Edition)

Tesla Insurance has the potential to dramatically improve the Tesla owners' experience in insurance matters. If you are looking for insurance for your new Tesla, I suggest the following.

1. Ask your existing insurance company how helpful it would be to add your new Tesla. Many insurance companies will require your VIN to get an accurate quote.
2. If you would like to have a general idea of ​​the price, check out some of the leading auto insurance websites. Be ready for a barrage of phone calls. Use an email that does not interest you.
3. Be sure to use similar coverage amounts for the most accurate quotes.
4. If you have another vehicle or driver, make sure these factors also match. An estimate with just one Tesla against a Tesla and another vehicle will trigger the discount for several vehicles. Get all the discounts you can.
5. If you have any doubts about the entire process, ask for the help of an insurance agent. They have a scoring software that instantly compares several auto insurers at a time. They can also explain what the different covers mean.
6. Compare, Compare, Compare! I would recommend checking with at least 10 different insurers.
7. Before you start taking out insurance, clean up your credit score as best as you can. Insurance companies have found that your credit score is an excellent indicator of the risk of filing a claim. A higher credit score equates to less risk of filing a claim.
8. If you have previous requests, see how long it will take to clear your credit history. Claims, points or multiple accidents (even if you are not at fault) will place you in a higher rating category for up to 5 years.
9. I recommend taking a GAP insurance. If you have a total loss, GAP insurance will cover the difference between what the vehicle is worth and what you owe. It's not much, but you'll have peace of mind.
10. If you rent or finance, your finance company may require full coverage and collision on your new Tesla.

The purchase of insurance can be a real chore. Rest assured, your new Tesla is about to make it profitable!

If this article helps you decide to order a Tesla, take advantage of my Tesla referral link to get up to 5,000 km of free supercharging on an S model, an X model or a 3-model. (If you order before on May 28, we both get 500% more boost miles than the usual 1,000 miles and five more chances of winning a Model Y or Roadster Founders Series.) Here is my code: ts.la/vijay59877

If someone else has helped you further with your purchase, please use their referral code.

Disclaimer: I currently own Tesla shares. A recent discussion with $ TSLAQQ members confirmed that they were more worried about Tesla's finances and profits than to move the world toward sustainable energy. In my opinion, this article is not meant to be an investment, financial or car buying tip. Please consult a duly licensed financial advisor to discuss investments. Follow me on Twitter @ vijaygovindan17.

Keywords: Tesla, Tesla Insurance, Tesla Model 3, Tesla Model 3 Insurance