Tesla has $300m insurance business & best tools to cut claims severity
Electric vehicle maker Tesla has driven its car insurance business to $300 million in annual premium with 20% quarterly growth plus huge efficiency gains on the repair side, founder Elon Musk and his deputy have said.
“We're currently at a $300 million annual premium run rate as of the end of last year,” CFO Zach Kirkhorn told the company's Q4 investor call.
“We’re growing 20% a quarter, so it's growing faster than the growth in our vehicle business.”
Currently, Tesla has 17% of its auto buyers in the Tesla insurance deal in the states where the insurance is up and running, he indicated.
“That number continues to tick up as we spend more time in markets,” Kirkhorn said. Pick-up is strongest on new vehicles where buyers don't have to go back to their carrier to make a switch.
Even where Tesla buyers aren't taking the insurance, both the driver and the company are taking cost efficiencies thanks to the Tesla insurance product, founder and CEO Musk added.
Buyers are benefitting as Tesla's below-market insurance rates are forcing the competition to keep pace, pushing down the overall cost of owning a Tesla, Musk insisted.
And the company is benefitting as it turns its direct handling of claims into insights on repair cost cutting, he added. Collision damage data feeds back to the company to inform design changes that minimise repair costs.
“Previously we didn't actually have good insight into that, because the other insurance companies would cover the cost,” Musk said. “And actually, the cost in some cases, were unreasonably high.”
“So, we've actually adjusted the design of the car and made changes in the software of the car to minimise the cost of repair,” Musk said. “It’s remarkable how small changes in design … have an enormous effect on the repair cost.”
Tesla ended 2022 having its telemetric insurance offer in place for 11 US states, covering some 30% of the US population.
Tesla also has a garden-variety insurance offer for its clients in the nation's most populous state of California, although the telemetric options are not allowed in that jurisdiction.
Tesla moved from a white label insurance offer to underwriting its own exposures in a move begun in select states earlier in 2022.
Officials said in April that they hope to have an offer for 80% of US Tesla owners by year-end before looking to take its offer abroad.
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