Tesla Insurance Musk's Masterstroke or Mistake?



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  • Yesterday, Tesla (TSLA) launched an insurance service in California. The company also intends to extend this service to other states.
  • The Tesla stock is down more than 35% this year. The Chinese manufacturer of electric vehicles, NIO, is also in red. However, Ford and General Motors grew this year despite the decline in car sales.

Yesterday, Tesla announced the launch of a car insurance service in California. The company plans to make the service available in other states. In his press release, he said his insurance "would provide Tesla owners with rates that are 20% lower, or even 30% lower in some cases."

Elon Musk mentioned Tesla insurance in April

Tesla CEO Elon Musk spoke for the first time about insurance operations during the company's first-quarter earnings call in April. Yesterday, a few hours after the launch of its insurance service, the company tweeted "We are updating Tesla Insurance and we will be back online soon," he adds. "Update of the current algorithm". Some users were surprised that Tesla update the algorithm so early in the launch of the insurance.

Is Tesla the right choice?

Auto Insurance is a competitive, specialized, narrow-margin business that requires a lot of capital. Tesla, whose core business is the production of electric vehicles, has no experience in automobile insurance. In addition, the company burns money.

However, Tesla could partner with another company for its insurance offer. According to Reuters, Tesla is registered as a broker for State National Insurance.

While insurance activities revolve around risk management, risk pricing and floating investment, Tesla could have the edge. If managed properly, the insurance industry could be a source of money. In its press release, the company said, "Because Tesla knows its vehicles best, Tesla Insurance is able to take advantage of the advanced technology, safety and ease of maintenance of its cars. to provide insurance at a lower cost. " premiums would reflect its security features.

Tesla's insurance fee

The costs to insure a Tesla car are usually higher. According to insure.com, the Tesla Model S was one of the most expensive cars to insure in 2018 and 2019. Car insurance companies set their premiums based on several factors, including the likelihood of ## 147 ## Accident, the average payment per claim and the cost of the vehicle. Some fatal accidents involving Tesla cars made the headlines. Most of these accidents occurred with the Tesla autopilot switched on.

Tesla autopilot

According to Tesla, she should be able to charge her insurance cheaper than others because of her safety and her "advanced driver assistance features". Tesla's quality of service has recently been under scrutiny and some car buyers have complained about the unavailability of parts. This month, a German car rental company criticized the quality of Tesla's service. Walmart also sued Tesla for fires sparked by seven of its solar panels.

Should Tesla really get into insurance?

Traditional auto insurers rely on actuaries and established pricing standards to price their premiums. However, Tesla seems to rely on artificial intelligence and his confidence in his cars. Early on, few people thought that Tesla would survive in the auto industry and no lasting profit was recorded over the last decade. However, the company's sales have increased fivefold over the last five years. The established automakers Ford (F) and General Motors (GM) are relying heavily on electric vehicles because of the "Tesla effect".

Can Tesla prove that the reviews are wrong?

Only time will tell for the Tesla insurance project. Will he follow Tesla's less successful solar roof project, or succeed like his cars? This year, Tesla's stock dropped by more than 35%. NIO (NIO) is also down this year. However, based on yesterday's closing prices, Ford and General Motors gained 23.4% and 11.2% respectively.

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