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<p class = "canvas-atom-text-canvas Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "But something & nbsp;otherwise & nbsp;Musk confirmed during subsequent teleconference sent shockwaves into another industry: Tesla does not just create its own Insurance product, but he also hopes to launch it by the end of the month. "data-reactid =" 12 "> But something other Musk confirmed during the next conference call a shock wave in another industry: Tesla does not just create its own Insurance product, but he also hopes to launch it by the end of the month.
two people examining a notepad of documents with red and white cars in the background
SOURCE OF IMAGE: GETTY IMAGES.
Musk added that Tesla's insurance "will be much more convincing than anything else on the market". Musk indicates that Tesla wants to capitalize on a "substantial price [and] information arbitrage "by exploiting unique customer data collected from its vehicles.
Warren Buffett is not so sure
<p class = "canvas-atom-canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Speaking to Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B) Berkshire President and CEO Warren Buffett, however, said Wednesday at its annual meeting that Tesla's ambitions for insurance could fail. "data-reactid =" 27 "> Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B) Berkshire President and CEO Warren Buffett, however, said Wednesday at its annual meeting that Tesla's ambitions for insurance could fail.
Given that nearly one-third of Berkshire's operations come from its insurance business, which includes among its subsidiaries Geico and General Reinsurance, Buffett is obviously in a unique position to express itself as a business. authority in the matter.
"It's not an easy affair," Buffett said. "The success of auto companies in the insurance sector is probably as likely as that of insurance companies in the auto sector."
Buffett offered a precedent, recognizing even Tesla's data-centric approach, stating:
General Motors had for a long time a company called Motors Insurance Company. And various companies have tried it. […] I worry about a lot more than progressive. And I would bet against any company in the automotive sector [getting into insurance] to be any kind of unusual success. The idea of using telematics to study people – it is important to have data on how people drive, their braking force, their deformation, all kinds of things. So, I do not doubt the value of the data. But I do not think that automakers will have an advantage to that. I do not think that they will earn money in the insurance industry.
Of course, Buffett spontaneously spoke of a potentially disruptive and competitive solution for providing auto insurance, and knew little about Tesla's specific plans.
But before accepting Buffet's prediction as a gospel – and with all due respect, no doubt for the greatest investor and CEO of all time – remember that Buffett is also the first to admit that he is not always right.
Why the Oracle of Omaha could be wrong
First, at least in the short term, Tesla's main objective may not be to "earn money in the insurance sector".
Instead, the short-term benefits of a Tesla insurance plan could be achieved by streamlining the Tesla ownership experience and offering Tesla drivers additional savings, in addition to their gas bills are now non-existent. Further reducing Tesla's gateway to the world in this way could create a significant network effect that contributes to significantly increase vehicle orders.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "But we already know that Tesla is not going In fact, Tesla has used a specialized insurance company – and ironically one of the most popular companies on the market. "Mini-Berkshire" shares – Markel (NYSE: MKL). & nbsp; In response to a question from an investor during his & nbsp;quarterly teleconference Last week, co-CEO Richard Whitt confirmed that Markel's national subsidiary would provide Tesla's facade to insurance. "Data-reactid =" 43 "> But we already know that Tesla is not doing it alone.In fact, Tesla has sought the help of the specialized insurance company – and, ironically, one of the titles the most popular of "mini-Berkshire" – Markel (NYSE: MKL). In response to a question from investors during his quarterly teleconference last week, co-CEO Richard Whitt confirmed that Markel's subsidiary, State National, would insure Tesla's insurance coverage.
<p class = "web-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Whitt describes the national state – which Markel acquired in 2017& nbsp; – a "company that provides […] piping to shift risk to capital, "helping customers overcome difficult regulatory hurdles, set rates, and realize innovative ideas." data-reactid = "44"> Whitt described State National – acquired by Markel in 2017 – a "company providing […] plumbing to shift risk to capital ", which helps clients overcome difficult regulatory hurdles, set rates and materialize their innovative ideas.
Whitt elaborated:
People with these innovative ideas often have difficulty navigating the regulatory framework and being able to implement their innovative ideas in a very honest manner. It is there that National State can come to the table and help them. In the case of the partnership with Tesla, State National provides exactly that. They support innovative solutions that Tesla has [created] with partners at risk.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "True to this model presented in front, Whitt noted that L State will not retain any of the resulting insurance activities, but will cede these activities to unidentified risk actually & nbsp;data-reactid = "48"> True to this model, Whitt indicated that State National will not retain any of the insurance business that would result. On the contrary, he claims that these activities will be transferred to unspecified risk-taking. Tesla partners has Actually secure this time.
The bottom line
"And I do not want to say more than that," concluded Whitt, "since it's obvious that Tesla and the risk-taking partner have a lot of things that they probably want to say about this arrangement."
For now, this means investors will have to hurry up and wait until the imminent launch of Tesla's insurance product is even more colorful. Without this color, it is certainly difficult to say whether the product will be a success. But until then, I think it would be a mistake to assume that this notoriously disruptive company can not succeed in the insurance world.
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " More from The Motley Fool "data-reactid =" 52 "> More from The Motley Fool
<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Steve Symington has no position in any of the actions mentioned. The Motley Fool owns shares and recommends Berkshire Hathaway (B shares) and Tesla. The Motley Fool has a disclosure policy."data-reactid =" 60 ">Steve Symington has no position in any of the mentioned actions. The Motley Fool owns shares and recommends Berkshire Hathaway (B shares) and Tesla. Motley Fool has a disclosure policy.
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