Tesla Hopes To Bundle Insurance Into Purchase Of S, X & 3

3 months ago by Steven Loveday 46

Tesla Model X

Tesla Model X

Tesla has developed a knack for “doing it all,” so it was really only a matter of time before we would hear of the company’s auto insurance pursuits.

Jeff Evanson, Tesla Vice President of Global Investor Relations, revealed during Tesla’s fourth-quarter earnings call, that Tesla is planning to offer vehicle customized insurance policies for the Model S, X, and upcoming 3. He shared (via Teslarati):

“We’ve been doing it quietly, but in Asia in particular where we started this, now the majority of Tesla cars are sold with an insurance product that is customized to Tesla, that takes into account not only the Autopilot safety features but also the maintenance costs of the car. It’s our vision in the future that we’ll be able to offer a single price for the car, maintenance and insurance in a really compelling offering for the consumer. And we’re currently doing that today.” 

Tesla Model S

The insurance policies being offered in Asia are more geared to maintenance at this point, but that won’t likely remain the case as the electric automaker moves forward. Tesla was lauded by the National Highway Transportation Safety Administration after the agency concluded its report regarding a fatal crash linked to Tesla’s Autopilot system. The administration didn’t find the automaker at fault, and actually concluded:

“Tesla vehicles crash rate dropped by almost 40% after Autosteer installation.”

As self-driving vehicles come upon us, at an even quicker rate then previously anticipated, many questions arise related to insurance. Will some companies refuse to insure cars being driven by software? Will insurance be more expensive until there is more research and proof concerning their safety? Will insurance be cheaper, due to the removal of human error? Who gets blamed if the car injures or kills someone? How will the car decide what is right and wrong?

No one really knows how any of this will pan out, so it is a fantastic concept for Tesla to furnish its own insurance. It also adds to Tesla’s “total package” mentality. One would think, that the company believes in itself and its technology more that some independent insurer, so it should save drivers money. CEO Elon Musk confirmed from the Q4 call:

“This is not to the exclusion of insurance providers if we find that insurance providers are not matching the insurance proportionate to the risk of the car. If we need to we’ll in-source it, but I think we’ll find that our insurance partners do adjust rates proportionate to the risk of a Tesla.”

Tesla has already caused quite a bit of market stir with its unique tactics. The fact that it sells its vehicles directly, without a franchise dealer, is being dealt with in courts throughout the country. If the company follows the Asian model and includes “maintenance” insurance in the equation, it will upset the status quo even further.

Regardless of how any of this impacts other automakers, Tesla is doing everything that it can to put customers first, and that really is where any company’s priorities should be.

Source: Teslarati

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46 responses to "Tesla Hopes To Bundle Insurance Into Purchase Of S, X & 3"

  1. georgeS says:

    Genious!!

    1. georgeS says:

      Embarrassing. A one word comment and he can’t spell it correctly:)

      1. SparkEV says:

        Eye understude eat. Luke’s fein two mi. 🙂

        1. MikeM says:

          I think you two gentlefolk need to consult you thesorcerus, er . . theraucerous . .

          Oh never mind!

          1. SparkEV says:

            Isn’t it funny that English is supposed to be phonetic, yet there’s only one “right way” to write the words? Makes you wonder if we should all just write Chinese.

            1. Pushmi-Pullyu says:

              “Isn’t it funny that English is supposed to be phonetic…”

              Right, that’s why “ghoti” is pronounced “fish”.

              That’s “gh” as in “rough”

              “o” as in “women”

              and “ti” as in “nation”.

              /sarcasm

              If English was actually “intended to be” phonetic, then we’d be using a phonetic alphabet (see link below), instead of the Latin alphabet with a couple of extra letters.

              The reason why so many foreign language students say English is so hard to learn is because very nearly every single rule for pronunciation, spelling, grammar, verb conjugation, etc. has multiple exceptions. If English were phonetic, then it wouldn’t have so many exceptions to the rules for pronunciation.

              https://en.wikipedia.org/wiki/International_Phonetic_Alphabet

              1. Ambulator says:

                We once got a text-to-speach card in for an Apple ][. After testing on various words I suggested “ghoti”. The card clearly said that as “fish”.

                Smart alec developers.

    2. SJC says:

      Smart, sell energy and insurance after sale.

  2. unlucky says:

    PSA has been doing this for decades. I fail to see how this would be amazing. You have a choice of insurance right now, why would having a single source improve things?

    Heck, Musk even implies Tesla would simply be bundling insurance, not even providing it themselves. If a company has done their actuarial work and determined a rate directly to you, why would offering it to Tesla and then Tesla resells it to you make a big difference? Or even any positive difference? Seems like Tesla would just mark it up like any other middleman.

    1. ItsNotAboutTheMoney says:

      They might need to do it. Some people are having problems getting insurance in some states. Possibly related to cost of collision repair.

    2. Pushmi-Pullyu says:

      “PSA has been doing this for decades.”

      I never heard of PSA, in the context of automobiles. Wikipedia says:

      Groupe PSA… is a French multinational manufacturer of automobiles and motorcycles sold under the Peugeot, Citroën and DS Automobiles brands”

      I don’t know anyone who owns such an automobile. Perhaps they’re far more common in whatever country you live in?

      “I fail to see how this would be amazing. You have a choice of insurance right now, why would having a single source improve things?”

      Well for one thing, it would eliminate any potential problems with assigning blame for an accident with a self-driving car. Since the courts haven’t even begun to dive into the can of worms of what companies (or people) are responsible in case of a self-driving car causing an accident, we can easily see a case where the insurance company and the auto maker — and possibly even the self-driving software developer — might all point fingers at each other, making it a nightmare to finalize any insurance settlement.

      If the auto maker is selling insurance, then the customer can be reasonably sure of a settlement quickly. Even if the auto maker has an internal struggle over where to assign blame, there’s no question that the company has liability and will pay for the damage.

      “If a company has done their actuarial work and determined a rate directly to you, why would offering it to Tesla and then Tesla resells it to you make a big difference?”

      Because insurance companies are (with good reason) conservative, and slow to make changes; changes such as taking into account the increased safety, and lower accident rate, of autonomous cars or even semi-autonomous cars.

      As the article correctly points out, the NHTSA has already reported that Tesla cars with AutoSteer installed have a 40% reduction in accident rate. Has any insurance company yet lowered its rates for that variety of Tesla Model S? I’m guessing the answer is “no”.

      I would expect that Tesla will be much more proactive with reducing its rates to reflect the increasing safety of its semi-autonomous cars. I could be wrong, but that’s my expectation.

      1. Alan says:

        PSA group 2016 sales = 3,146,000 worldwide sales, after the purchase of GM Europe their sales will be over 5m annually, just shy of VW group.

      2. unlucky says:

        PSA is enormous, they just bought Opel/Vauxhall!

        Why would which insurance you have affect how blame is assigned? I have insurance right now even though the blame for an accident can lie with me, the other person, the designer of the road, designer of the car, manufacturer of the car, etc.

        If the automaker is just reselling insurance as is referenced here it doesn’t solve anything. An agreement as to who would be at fault in certain circumstances would help, but that doesn’t require you buy your insurance from the automaker. It just means the automaker and insurer have to work out guidelines ahead of time.

        Insurance companies are conservative and Tesla reselling insurance isn’t going to change this. Again, as I said, they will do the actuarial math and calculate a figure. Tesla talking in their ear isn’t going to change their math BECAUSE they are conservative.

        The NHTSA figure is certainly not casual. You have to be a rube to think it is. NHTSA said that the reduction in accident rate is present whether autosteer is employed or not. If you think that autosteer can reduce accident rates when it isn’t even on then you’re not thinking clearly. Surely these figures are due to something else, perhaps Tesla’s customer profile.

        There is no reason to think that Tesla’s actuarial math would be any different than anyone else’s. They aren’t there to lose money any more than an insurance company is. If the figures suggest reduced aggregate liability then insurance companies will charge lower premiums. If they don’t, then they won’t. Tesla would be no different. It’s just actuarial math. Calculate the expected amount of payout per customer, add a selected portion of profit on top and then charge that sum to each customer in premiums.

        1. Pushmi-Pullyu says:

          unlucky said:

          “An agreement as to who would be at fault in certain circumstances would help, but that doesn’t require you buy your insurance from the automaker.”

          I didn’t suggest it did. Do I need to start dumbing down my posts for you?

          “If you think that autosteer can reduce accident rates when it isn’t even on then you’re not thinking clearly.”

          As I recall, that’s not the first time you’ve posted that clueless assertion. Clearly critical thinking isn’t your strong suit.

          Actuarial tables are not going to try to predict whether any individual driver will be using AutoSteer at the time of a potential accident. Actuarial tables will merely reflect the overall lower incidence of accidents when AutoSteer is installed in the car.

          That you’ve accused me of “not thinking clearly” here… Well, dude, there is this concept called “irony”. Perhaps you’ve heard of it? You certainly don’t seem to recognize it in your own comments!

          1. unlucky says:

            Yes, you suggested it did. In response to my comment about how I don’t see how Tesla reselling insurance improves anything you said that it would because it would (could) eliminate arguments over blame. So yeah, you said it would. But it wouldn’t.

            No, it’s not the first time I correctly pointed out that autosteer cannot reduce accident rates when it isn’t even on.

            Actuarial tables are not designed to predict whether autosteer would be on or not at the time. And again, if you look at figures that say that autosteer reduces accidents when it isn’t even on and don’t realize the error there you just aren’t thinking at all clearly.

            Actuaries aren’t going to be bedazzled by Tesla comments that somehow autosteer reduces accidents even when it isn’t on. It’s just simple math. If the rate of accidents goes down in a segment for any reason it shows up in the math. It doesn’t require puffery or bizarre blind acceptance of nonsensical assertions to change their figures. And it doesn’t require Tesla agree to resell their insurance to do it either.

            1. Lucky one says:

              @unlucky you are dumb. Tesla can underwrite their own insurance and don’t need to mark up quotes from other insurance companies. They understand their vehicles best including how safe it is with autopilot technology. They have all the data and they can easily combine that with driver’s history to come up with insurance premium.

              It is not in favor of insurance companies to lower premium as it cuts into their profit. They will only do it if driven by competition. Tesla wants to change that and drive the insurance cost down. As buyers we have choice to shop around and go with the best quote.

            2. Pushmi-Pullyu says:

              “unlucky” said:

              “In response to my comment about how I don’t see how Tesla reselling insurance improves anything you said that it would because it would (could) eliminate arguments over blame.”

              Yes, that’s what I said. What I did not say was anything that can be reasonably interpreted as “…require you buy your insurance from the automaker”.

              If you can’t understand properly phrased, clearly written English any better than that, then you have no business posting responses here… or anywhere else, for that matter.

      3. Martin Winlow says:

        “I never heard of PSA…” are you *kidding*!

        1. Pushmi-Pullyu says:

          Well, actually I have heard of a “PSA”… a Public Service Announcement. 😉

          Would it be incorrect for me to guess that you, like Unlucky, don’t live in the USA?

  3. Daniel says:

    This is a good solution, its a win-win trade.

  4. SparkEV says:

    Will the big brother let Tesla do this in US? Insurance is one of the most regulated industries.

    1. unlucky says:

      I can’t see why not. It would be a huge pain in the butt to get qualified in each state, but if other companies can do it, why not Tesla?

  5. Disappointed says:

    The Next “Customer Centered” Price Boost:
    In addition to full insurance your new Tesla will come with a life time supply
    of breath mints and bottled water !

    At a price which like these Insurance plans, will be “Included” in your car’s purchase price. The Add will read:
    the Fully Packaged Tesla, sold as evidence that buying a Tesla protects you from Everything, including, never leaving you with a bad taste in your mouth or thirsting for another brand.
    At a price that Will surprise you !

  6. Four Electrics says:

    A brilliant move by Tesla. I’d guess that insurance companies won’t be able to update their actuarial tables fast enough in response to improvements to Autopilot, but Tesla’s data is always up to date. I can’t wait to sign up.

    1. Four Electrics says:

      There’s another benefit–if Autopilot ends up creating a lot of liability (killing someone, for example) it’s a lot better for Tesla to be the insurer. Otherwise it would be a third party, and flaws in the system would be made embarrassingly public in the flight between all parties.

      1. Nick says:

        Tesla would likely want such investigations to be public anyways since it showcases how crazy advanced their tech is.

        NTSB finds 40% reduction in accidents after the introduction of Auto steer! Imagine how much better it will be one full level four autonomy lands.

      2. Pushmi-Pullyu says:

        And this, gentle readers, is what’s known as a “concern troll” post. A Tesla basher pretending to be oh-so-concerned while actually posting FUD.

    2. John Brophy says:

      Now there is an intelligent Response!!
      Of course Tesla has immediate contact with the DATA that shows WHAT happened and WHY.
      So TESLA CAN be an Insurer and help their customers evermore!!

  7. Hank S. says:

    This would be awesome if it was for the life of the car. I estimate I’ve paid $20,000 in insurance and have had zero claims in my life. But there is no END in sight…if I could pay a lump sum, I’d definitely do it.

    1. unlucky says:

      Tesla didn’t really say it would be a one-time fee. But it hardly matters anyway. Insurance is an actuarial business. They’re not a charity, if they charge a lump sum it will be an amount equal to what they expect you would pay in insurance premiums over the life of the car.

      In other words, you wouldn’t necessarily save any money. They aren’t here to make things cheaper for you than paying premiums to other insurance companies, just take your premiums in a different fashion.

      1. Hank S. says:

        I’m not naive, just didn’t want to write a thesis on the subject. There are many things I can think of that would make the concept sensible. For example, Tesla probably already has insurance to cover Autopilot litigation and will certainly have additional insurance to cover car sharing. External insurance wouldn’t reflect either and would actually add even more costs due to inevitable litigation and disputes. In addition, Tesla would not have to run endless commercials like Geico, Allstate, etc. I’m just scratching the surface, but there’s efficiencies they they could do that couldn’t be done by an independent insurance company.

      2. John Brophy says:

        I almost did not buy a Tesla because 4 Insurance Co’s raised by double their rates they quoted me 2 weeks before I bought the car.

        I had no choice but to pick the best rate, but Tesla would probably charge LESS and encourage me to BUY.

    2. Pushmi-Pullyu says:

      I don’t see anybody, including Tesla or any other auto maker, offering insurance on a lump-sum-for-life basis. Just as with betting in a casino, the “house” always wins on a long-term basis. The insurance payment would be monthly, just like automobile loan payments or lease payments are monthly.

      Tesla might bundle the insurance payment with the loan/lease payment, altho perhaps not since Tesla doesn’t do internal financing of auto sales (except in China). But then, that may change also. As Tesla continues to grow, it may indeed start financing auto loans itself.

      1. Four Electrics says:

        Tesla’s balance sheet is way too poor to self finance. In ten years, when Tesla has assets, perhaps.

        1. unlucky says:

          If Tesla had any sense they wouldn’t do so. But this is the same company who in-housed leasing when their sheets couldn’t really absorb that either. It wrecked their profitability figures and was one of the reasons they used illegally tailored non-GAAP accounting figures in their financial reports for years.

          Sometimes it’s easy to draw a line from “wouldn’t make sense to do so” to “can’t do so”, but when a company doesn’t really pay attention to the sensible way to do things it can lead to deviations between the two.

          1. Pushmi-Pullyu says:

            1. Tesla has never handled the financing for leasing (or purchasing) in-house, except in the China market, and even there they did it with a financial partner. I would guess you’re confused because Tesla will arrange the lease for a leasee, but that is financed by US Bank and Wells Fargo. See, for example, the link below.

            2. If you really believe non-GAAP accounting is “illegal”, then you should report Tesla to the FEC. Or better yet, you shouldn’t post on subjects regarding which you obviously know so little.

            http://www.autonews.com/article/20130402/RETAIL02/130409969/tesla-offering-special-financing-plan-for-model-s-sedan

      2. Hank S. says:

        By lump sum, I meant treat it like an asset attached to the car…could still be monthly installments. It’s actually not an unusual concept–some life insurance works like this. Has nothing to do with betting, but only people who never wreck or file claims would come out ahead. Current insurance is like Term Life insurance…great if you wreck frequently or die young.

        1. Pushmi-Pullyu says:

          If you don’t understand that insurance is a form of (legal) gambling, then you don’t understand insurance at all.

          For an insurance company, actuarial tables show the house odds on their bets.

    3. Mint says:

      There are millions of people in the same boat as you: $10k+ in insurance payments but no claims.

      But they will not all remain that way. Thousands will have accidents in the future with claims many times larger than their cumulative payments.

      Unfortunately, there’s no way to tell who is who.

      1. Pushmi-Pullyu says:

        It’s only “unfortunate” if you don’t understand that insurance is a gamble. Once you accept that, then you’ll understand that it’s actually fortunate. If it were otherwise, if companies could assess risk on an individual basis, then there would be no reason for anyone to buy or sell insurance.

        When you buy insurance, you’re betting the insurance company will pay out more in settlements than you pay in premiums. Contrariwise, the insurance company is betting they won’t. This arrangement is only possible because neither party can assess risk on an individual basis.

  8. bro1999 says:

    Cadillac already started a similar program. $1,500 a month that includes all insurance and maintenance costs, and you can swap cars 18 times a year.

    http://money.cnn.com/2017/01/05/luxury/gm-book-cadillac/

    1. Dolt says:

      Nice find

  9. Nicholas says:

    Honda does this for Clarity and used to for Fit EV that I drove

  10. Martin Winlow says:

    Is it just me or is this story being blown out of proportion? It sounds like Tesla is offering accident insurance but it isn’t – not yet anyway and not even in Asia. It’s just ‘maintenance insurance’ which sounds like a common or garden pre-paid maintenance plan to me. One of the main reasons I bought my Tesla is the fact (at point of purchase at least) that it did not tie me into any sort of regular costs – other than the (very cheap, PV discounted) electricity I put into it (and accident insurance, of course).

    Where is everyone getting the idea this is all about accident insurance?

    1. wavelet says:

      See the very first quote in the piece, by Tesla VP Evanston: “It’s our vision in the future that we’ll be able to offer a single price for the car, maintenance and insurance in a really compelling offering for the consumer.”

      Insurance is mentioned separately from insurance, ergo it refers to potential future (property and/or liability) accident insurance, not to prepaid maintenance plans, which Tesla already has.

      It also makes sense since at least in the markets I’m familiar with insurance premiums are certainly higher than maintenance costs for high-value cars, and for all cars if you also include the typical medical liability — that’s the more significant line item in TCO for the car.

  11. carcus says:

    Elon Musk is taking on:
    1. The auto industry (OEM’s and dealers)
    2. Big Oil
    AND
    3. The Insurance Industry (the biggest of the 3)
    ???????!!!

    All Tony Stark did was take on the military industrial complex, …. this is way bigger!

    /.. oh wait, .. Tony Stark IS the military industrial complex. Soooooo, .. does this mean Elon is shooting for super hero or super villain?

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