insurancequotecars Auto Insurance Tesla dips into the car insurance business. Whether it would cost less is not clear

Tesla dips into the car insurance business. Whether it would cost less is not clear

Tesla began offering the new policies in late August through Tesla Insurance Services, which is licensed as an insurance agency in California. Tesla CEO Elon Musk said in an April earnings call that an insurance option through his company would be “more compelling than anything else out there.”

Current Tesla owners can get a quote online through their existing account with the company. The policy management and claims process will be handled through Tesla Insurance, while State National Insurance is the underwriter — the entity taking on the financial risk of the Tesla policies.

Officials at Tesla didn’t repond to a CNBC request for specific policy quotes.

Tesla Insurance is also taking steps toward becoming a full-blown insurance carrier, which would mean also being able to underwrite its own policies. The Tesla spokesperson declined to comment on the timing or whether it would mean venturing into other lines of coverage, such as home or life.

“Discounts for multiple policies, or being a good driver or having an anti-theft device — those are not particular to Tesla,” said Matt Timmons, a ValuePenguin research analyst.

And while anonymous, aggregated data is currently used to help set the price for the California policies, the company does not use or record data from individual vehicles, such as GPS or vehicle camera footage.

Regulatory filings and company executive comments suggest Tesla eventually wants to use individual driving data to price policies, if drivers agree to it and a particular state’s laws allow it.

Where it’s permitted, some insurance companies already offer policies that use so-called telematics — direct data from your car about your driving habits through a specialized device or smart-phone app — to potentially offer additional discounts for safe drivers (those who avoid excessive speeds, hard braking, etc.).

The Tesla spokesperson said the company plans to incorporate more types of data into its insurance offerings over time, but declined to provide additional details.

After the company’s planned move into insurance was announced in April, Warren Buffett, chairman of Berkshire Hathaway, said Tesla would likely struggle as it enters the insurance business — something that Buffett’s company invests in heavily.

Musk has endorsed the notion that automation in cars would bring insurance prices down. However, in 2017, several insurance companies raised their rates on Tesla cars, saying they generated more claims and were more expensive to repair.

That year, the company partnered with Liberty Mutual in the U.S. to offer InsureMyTesla, intended to deliver cheaper policies to drivers. Tesla says the program is available in international markets such as Europe and Asia.

The move into auto insurance compliments Tesla’s preference to deal directly with consumers and cut out the middleman in the car-owning experience. For example, it has no franchised dealerships and sells direct to consumers — which has led to its inability to sell its cars in states that require a third party (i.e., a dealership) to sell all vehicles.

Whether Tesla’s foray into insurance will be successful remains to be seen, Timmons said. He said California imposes more restrictions on insurance carriers than some other states, which generally would make it less appealing for an insurance startup.

“I think its success is still an open question in California,” Timmons said. “There are a disproportionately high number of Tesla drivers in the state, which is why they’re starting there, but Tesla doesn’t get as much flexibility in the rates they offer as they would in some other states.”

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