Tesla to enter insurance market, promising to undercut rivals
Electric car maker Tesla has entered the insurance market, and some commentators have said it seems like a smart move.
Tesla co-founder Elon Musk announced the venture earlier in the year. He claimed Tesla will have “information arbitrage” advantages to the company as it will have more data about its customers. Initially, the venture will only operate in California. However, it aims to roll out the operation to other parts of the United States over time. Tesla’s insurance will only be available to owners of Tesla cars.
Speciality insurance company Markel writes the underlying insurance policies, but Tesla told the Financial Times that it is progressing with a plan to become an insurer in its own right.
Tesla has one obvious advantage in having a knowledge of the product being insured and therefore an understanding of issues such as the costs of replacing parts. It will also be better placed to detect fraudulent claims. Tesla only has a small number of basic models, making product familiarity even more straightforward.
The electric car firm would hope to have to pay out fewer claims, as it believes its cars have a better safety record than others, though this is disputed by rivals.
Tesla claimed it is offering cover for 30-40 percent less than drivers would otherwise pay. But this too is disputed by rival insurers.
Ian Sweeney, general manager of Mobility at Trov, which provides insurance for passengers of Waymo’s autonomous vehicles, said:
“Tesla has taken advantage of a great opportunity facing the mobility and insurance industries – the ability to leverage data."
Get all the latest re/insurance industry news with our daily newsletter - sign up here.
Strong capitalisation and pricing uptick support stable outlook despite 2020 ‘headwinds’ Lloyd's 'remains strongly capitalised' despite two years of heavy losses
TigerRisk eyes UK, EMEA and Asia expansion with top MS Amlin hire
Top executive departure prompts MS Amlin to expand CEO duties
AIG poaches Marsh property leader to drive profitable growth
Marsh reshuffles US property, FINPRO leadership following departures
Fidelis taps Brit marine expert for London underwriting team
Former Validus US CEO Ritz lands new job at Aspen
Feature: 10 ways insurers are using insurtech to drive new business
