Elon Musk not only wants to sell you a car, he wants to insure it too. Traditionally, auto dealers and insurers have been separated like church and state, but Tesla’s CEO is hardly a traditionalist. His latest disruptive idea offers existing and future Tesla owners one-stop shopping by putting the option of auto insurance on the menu.
- Tesla wants to disrupt the auto insurance industry by offering deals to Tesla drivers.
- Leveraging data already collected from its cars, Tesla says it can save customers 20-30% on premiums.
- Getting into the insurance business could become a key revenue stream for a company that has yet to prove it can profitably manufacture and sell cars.
Tesla is already watching you. At least now it wants to give you a discount on insurance for your trouble. (Photo: Bram Van Oost on Unsplash)
Most insurance companies determine rates by weighing risk factors such as a person’s age, type of car driven, driving record, miles driven in a year, and location. However, this does not generate an entirely accurate picture of a person’s road habits. Hard data can give specific details and provides deeper insight into the risk any given driver represents.
Tesla already has much of that data at its fingertips. When you drive a Tesla, the car tracks where you’re driving, your speed, distance traveled, and pretty much whatever else happens on the road while you’re behind the wheel. Tesla uses this to continually refine and update its cars’ systems. Now it plans to apply the same data harvesting to insurance.
Not a new idea
Some insurance companies already offer data-driven insurance rates to some customers. In these cases, an auto insurer installs an electronic device in the vehicle to monitor the driver. This can be something as simple as a module that plugs into the on-board-diagnostics port.
Tesla wouldn’t have to install any additional equipment in its cars, and at first, it doesn’t even plan on looking at each driver’s individual behavior. Rather the company plans to pool and randomize data received from all Tesla cars to calculate its insurance rates. On its support page, Tesla states that it won’t be using data from individual vehicles, such as GPS or footage from its cameras, but will be incorporating more types of data for future product offerings.
The obvious question: How can Tesla provide comparable insurance at a better rate than other companies? Tesla explains that the attractive pricing comes from its unique understanding of its vehicles, along with eliminating fees usually tacked on by other providers. Customers will benefit from Tesla factoring in its active safety and advanced driver assistance features, but they won’t get the sorts of discounts for bundling other insurance products, like homeowners policies, that other insurance companies usually offer.
The Tesla auto insurance program rolls out in California first, with plans to expand to other states in the future. All the details can be found here.
WHY THIS MATTERS
Tesla has already cut the auto dealer out of its business model, so you had to figure the insurance company would be next. Not only would insurance represent a new revenue stream, but the move paves the way for Tesla to offer one-stop (or click) subscriptions to its vehicles.