Elon Musk has once again been tweeting about the company’s vision to have its own insurance and there are a myriad of reasons why this makes sense for Tesla.
Palo Alto, California-based Tesla already offers auto insurance in California and is seeking permission from state regulators to offer coverage in Illinois, Texas and Washington. During Tesla’s October earnings call, Musk said insurance someday could represent 30% to 40% of Tesla’s auto business.
The high levels of technology and connectivity in Tesla models means that the company has real-time data from all its drivers' behaviour including camera recording and sensor reading, so it can estimate the risk of accident and repair costs accurately. With this reliance on data it may only offer its insurance products to drivers of its own brand. With all of the data it could also offer cheaper quotes based on how the driver actually drives and even maintains the car.
Every time there is an accident Tesla has instant access to data about the driver behaviour that led to it. Another attraction is that it can evaluate how some of its technologies, like autopilot, stability control, anti-theft systems and bullet-resistant steel, can reduce risk.
It could also bring down the lifetime costs of the vehicle by offering cheaper insurance. After all Musk boasts that all of the autonomous systems mean the driver is less likely to have an accident - and if it is involved the damage will be less severe and less costly. Some insurers charge a relatively high premium for Tesla cars - they don't have as much historic information about the cost of repairs for electric vehicles.
Tesla drivers tend to be older, wealthy and better educated there will likely be fewer fraudulent claims, which again could help keep premiums lower. They are also very loyal and can be contacted through its direct sales channel rather than indirectly through a network of dealers, as well as the effect of offering its customers an all-in-one solution.
The company could also protect its brand and potentially speed up repairs by ensuring on it's own network of approved and trained repairers touched the car likely ensuring high customer experience, satisfaction and safety.
Tesla isn't the only data rich, tech savvy company getting into insurance and financial products - chinese giants Alibaba and Tencent as well as Apple and Google. In all cases the capabilities of AI and big data-driven automoation have acted as the catalyst.
It may be some time before Tesla Insurance reaches Australian shores but those who got their foot in the door as part of the repairer network could benefit immensely when and if it does.
Souces: Forbes and Business Insider