Tesla Insurance hits nearly half a billion in premiums

Tesla Insurance hits nearly half a billion in premiums


Tesla Insurance hits nearly half a billion in premiums | Insurance Business America















And continues to hemorrhage money

Tesla Insurance hits nearly half a billion in premiums

Motor & Fleet

By

That’s the problem with Great Big Ideas. They may be great but they’re also BIG which means, more often than not, deep pockets are required. And Tesla having its own insurance (because the cars can drive themselves so well of course) could be deemed one of those ideas. 

It’s not that Tesla isn’t backed by someone with deep pockets. Hey anyone who can buy something, name it after one third of a Vin Diesel movie and then watch it lose $25 billion in value – and then still sleep at night has got to have pretty deep pockets, right?  

Which is why Elon Musk probably hasn’t lost any sleep after Tesla announced its 2023 insurance figures. 

Overall, the numbers look impressive – $497 million in written premiums is just three million short of half a billion. That’s more than some countries’ entire gross national product (Micronesia, Kiribati, Nauru and Tuvalu we’re talking about you – yes you have endless sunshine and great beaches – electric car insurance? Not so much.) But the big headline number is critically linked to a combined ratio, in some states at least, of 145%. 

Overall, Tesla insurance saw a year-on-year increase in premiums of 115% and with a fronting arrangement with State National, it has become the specialty insurer’s largest producer. Tesla Insurance is also distributed through the company’s two licensed carriers – Tesla Property & Casualty and Tesla General Insurance. 

Unfortunately, for insurance ‘disruptors’, disrupting this incredibly finely nuanced industry is a lot harder than it looks for Silicon Valley’s wunderkind. 

“First of all, when Tesla first came into the industry, they didn’t actually keep the risk themselves; they were just a distribution channel,” said Adam Denninger (pictured), global industry leader for insurance at Capgemini. 

“What you’ve seen for a long time is that a lot of technology companies coming into the industry on the distribution side – offering new agent experiences, new mechanisms of gathering data, even occasionally doing the underwriting piece as well – all have had a similar experience. They lost a lot of money.”

“[These companies] came in thinking that the technology was the hard part, and thinking insurance is this old, slow backwater industry,” Denninger said.

“[They thought] it’s not that complicated, and they could solve it. But they realized [insurance] was pretty complicated, and it’s difficult to do it without losing your shirt. I think that’s what happened to Tesla.”

A timeline of Tesla insurance 

  • 2017                      AAA says it will raise rates for Tesla following a report from the Highway Loss Data Institute, a nonprofit insurance research organization which reported that Teslas had significantly higher collision and property damage claim frequencies and losses than regular large luxury vehicles.
  • Fall 2017              Tesla launches InsureMyTesla for US owners in association with Liberty Mutual.
  • May 2019            Tesla teams up with Markel-subsidiary State National Insurance.
  • August 2019       Tesla launches its insurance offering with the intention of offering 80% of Tesla owners access by the end of 2022. Elon Must talks of offering ‘same day’ collision repairs.
  • July 2020             Musk calls Tesla Insurance ‘revolutionary’ on an  earnings call. Three months later he predicts that insurance could be 30-40% of the carmaker’s value.
  • 2021                      The company starts to act as an independent insurance producer.
  • Fall 2021              Tesla starts hiring claims adjusters for its Draper, Utah office as tesla takes on its own claims processing (previously outsourced to another firm in California).
  • Late 2022            The company’s insurance is now available in 12 states following Tesla’s acquisition of Balboa Insurance Company in January 2022, along with its wholly owned subsidiaries Newport Insurance Company and Meritplan Insurance Company.

Related Stories