Earlier in April this year, Tesla CEO Elon Musk, hinted that the American automotive company based in California’s Palo Alto would be kicking off its own insurance package for its cars. At the time, Musk suggested that Tesla would easily do a fantastic job with its own insurance policy because the company will take advantage of an “information arbitrage opportunity” as it has “direct knowledge of the risk profile of customers.”
Now, Musk has made good on his promise as Tesla has officially launched its own insurance product for its many electric vehicles.
Called Tesla Insurance, the company boasts that its package will be significantly cheaper than other available market packages by up to 20% and a possible 30% in certain cases. Tesla believes that it can achieve this by taking advantage of the cars’ “advanced technology, safety, and serviceability.” Because it’s the manufacturer, it has a better understanding of its cars, the technology involved and also the average costs of repairs.
Furthermore, Tesla has said that prices for its insurance policies will not be derived from driver data such as GPS or vehicle camera footage but will use driving records to calculate discounts.
However, some reports have it that Tesla intends to offer these cheaper insurance rates from reduced commissions, discounts tagged to autopilot and also price slashes for maintenance and repairs carried out at any Tesla service centers.
Traditionally, insuring a Tesla is considerably pricey as average costs sit around $2,450 annually. Tesla vehicles are currently some of the most costly cars to insure for many reasons including the expensive costs of its several parts and components.
Tesla has also published a Frequently Asked Questions (FAQ) page with more than a few more details. For example, the company states that Tesla Insurance is only to be used for the personal use of a car and will not cover any commercial activities like using the car for ride sharing.
The company notes that it will offer a commercial policy sometime in the future which will accommodate the use of a Tesla for ride sharing. The company also notes that Tesla Insurance will initially cover Model S, Model X, Roadster and Model 3 customers who are in California. Tesla Insurance is not yet available in other parts of the United States.
At the initial mention in April, Musk said that purchasing Tesla Insurance would mean that customers have to drive their cars as reasonably safe as possible. According to him:
“[If customers] want to buy Tesla Insurance, they would have to agree to not drive the car in a crazy way. Or they can, but then their insurance rates are higher.”
Tesla probably hopes to shore up its profit margins with its own insurance policy but it could ultimately be a problem for the company if it begins to spend a lot on claims.
2019 so far has not been bad for Tesla, Inc. TSLA stock closed at $222.59 in the first half even though it failed its estimates back in April. By the 3rd of June, TSLA had dropped to $176.99, its lowest point in 52 weeks. However, it picked up and rebounded surging 30.1% in weeks. TSLA stock price closed at 215.59 yesterday but already has a pre-market value of 218, a 1.12% increase.