Tesla starts underwriting car insurance, set to go abroad in 2023

Elon Musk’s (pictured)  Tesla just launched its real-time insurance offer for its vehicle owners in the states of Virginia, Colorado and Oregon this week, now taking up the full role of underwriter of the automotive policy risks, officials said.

“With these three new states, the model is different because we are now the underwriter and we are also now holding the risk,”  Tesla CFO Zach Kirkhorn told the Q1 earnings conference. “So, with those states, we are a fully vertically integrated provider of insurance.”

Take-up on the insurance offer has proven “quite positive” across the states where the parametric real-time offer is available, officials contended, based on data from the longest-standing real-time market of Texas. Tesla is now the #2 insurer of Tesla vehicles in Texas and should take the top spot “possibly by the end of this quarter maybe early next quarter,” Kirkhorn said. Tesla claims “extremely high retention” wherever customers have tried the product, he said.

Tesla feels “quite encouraged” by the Texas take-up and early customer response following the new offers and continues to believe it will have an offer for 80% of  Tesla owners by year-end before looking to take its offer abroad.

“We are working as quickly as we can to get to 80% of customers having access to a  Tesla insurance product by the end of this year in the United States at which point we will turn our attention to expansion outside of the US,” Kirkhorn said in reiteration of standing guidance.

Financial results are not yet being revealed. “As the programme gets more scale, happy to share more.”  Gross margin on the larger category of services, which includes insurance as well as repair, merchandise and other, neared break-even at negative 0.6%, the Q1 financial release indicated.

Real-time parametrics, including cost to the insured, is consistently improving driving habits,  Tesla founder and CEO Musk insisted.

“We are seeing that having real-time feedback for driving habits is actually resulting in  Tesla owners driving cars in a safer way,” Musk told the investor call. Real-time feedback includes impact on insurance rate and “people realise they can make changes,” he said.

Tesla is likewise feeding real-time data back into collision repair planning, automotive safety design and claims handling, officials noted. “The feedback loop is instant,” Kirkhorn said. “Full end-to-end visibility.”

Tesla launched a standard insurance offer in California in 2019, but remains regulatorily blocked from moving to a real-time parametric format.  In 2021, Tesla launched its insurance product based on real-time driving behaviour in select states. At end-2021, the offer was available in Arizona, California, Illinois, Ohio and Texas.

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