Elon Musk, CEO of Tesla, believes that insurance over time, with the development of the Tesla Network, may become one of the main products of the company. “The amount of money that people spend on car insurance is like a remarkably big percentage of the cost of a car,” said Musk during a recent earnings call, “A lot of that insurance cost is just because the insurance companies don't have good information about the drivers.”
Tesla cars are perfect for collecting and using valuable information in real time. The company already provides insurance to owners of their vehicles in California.
Such coverage will also presumably use the upcoming ‘Autopilot’ mode, which, according to Musk, will cut insurance costs and the likelihood of injury.
During a 4Q Tesla earnings call, Musk also reiterated the idea of creating an application for riders in which drivers are insured inside the company. This step, which would compete with similar services offered by well-known companies such as Uber and Lyft, and would be a step towards the fully automated fleet ‘Robotaxi’.
“I think it will probably make sense to enable car sharing in advance of the kind of Robotaxi fleet because the car sharing can be done before Full Self-Driving is approved by regulators,” explained Musk, “So it's probably something that we would enable before a sort of Robotaxi fleet is enabled.”
Following the announcement that insurance will eventually become Tesla's main product, Moody's analysts said smart car manufacturers are in a good position to offer insurance coverage.
The company has every opportunity to use the real-time valuable information that its sophisticated vehicles produce, and Moody's stated that “plans to exploit its unique knowledge” confirms that “smart carmakers are well-placed to move into motor insurance.”
Companies producing smart cars can use information about car technology, as well as customer behavior, to set premiums based on risk, which is more comprehensive and detailed than the information that the insurer usually receives.
Moody's analysts note that Tesla’s movement will have a significant impact on the insurance sector in the long run, because existing insurers may face margin erosion or even a market shift if Tesla’s insurance model is replicated by other car manufacturers.
As well as looking to offer commercial insurance products through its fully owned insurance subsidiary in the future for Tesla Network users, executives explained during the earnings call that the firm was eager to expand its personal motor offering to regions outside of California.
Source: Tech Insider
"Tesla Insurance is currently available in California. A couple of things that we’re working on on this front: The first is to expand it to other locations, and we are preparing the regulatory processes, preparing our processes to go through the regulatory processes in those locations. We’re also working on the processes to continue to adjust our rates in California, which also have to go through regulatory processes as insurance is quite heavily regulated. And that’s where we’re spending our time focusing on Tesla Insurance right now. There is a significant amount of innovation as we’ve discussed before in this space, exactly getting to the intent of what the question here is, using our technology to reduce rates, and this will be rolled in overtime," said Tesla CFO Zach Kirkhorn.
“These moves demonstrate Tesla's confidence that its internet-connected cars 'smart safety features reduce the risk of accidents and theft, and that the real-time driving data they generate will allow the company to price insurance accurately by tailoring rates to customers' behavior,” Says Moody's.
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