As the electric vehicle revolution continues, Musk is set to gain a key position in the insurance sector, providing further competition for insurers
By Technology Editor Clare Ruel
Elon Musk has this aura that anything is possible. When the business magnate and investor isn’t trying to buy social media platform Twitter, he can be found growing his electric vehicle (EV) company, Tesla.
In May 2022, Musk - who works as Tesla’s chief executive - announced his intention to revolutionise car insurance by taking motor policies for Tesla vehicles in-house, with the EV firm providing a claims and underwriting service, as well as offering its drivers a 60% discount on premiums.
Musk believes he can lower the cost of insurance policies.
Tesla’s insurance proposition is now available in eight US states - including Illinois and Texas, which initially launched the cover in March 2022.
The policies are broked by Tesla through State National, a subsidiary of insurer Markel.
Overall, Musk hopes that his in-house Tesla policies will be available to 80% of the US in due course. He also has bigger plans to take this cover model international.
Musk’s focus on insurance could be helping to drive financial benefits for Tesla.
In August 2021, Morgan Stanley’s managing director for research, Adam Jonas, estimated that the electric vehicle giant could be worth more than insurer Aviva at $700bn (£506bn). He reckoned that Tesla’s insurance segment alone could be worth $30 (£23.79) per share.
Plus, the firm’s financial results for 2022’s first quarter, published in April 2022, reported a revenue of $18.8bn (£14.9bn), while its operating income increased to $3.6bn (£2.9bn) over the first three months of the year.
More data, more problems?
Musk unveiled plans for further innovations alongside Tesla’s improving financial results.
He said: “We are also working on a new vehicle – the robo-taxi, which is highly optimised for autonomy, so it would not have a steering wheel or pedals.
“There are a number of innovations around it that I think are quite exciting. It’s trying to achieve the lowest fully considered cost per optimised kilometre. We aspire to reach body production of that in 2024.”
But is Musk biting off more than he can chew?
James Blackham, chief executive of By Miles, noted that there are still “many difficulties with electric car repairs”. He suggested that it would be more helpful to address these issues first before car manufacturers work on taking claims or cover in-house.
However, if manufacturers are already making moves in this direction, Blackham explained that the foundation for any strategy will rely on access to relevant data.
He said: “Car manufacturers don’t have to share data with insurers, but they do need to share data with customers, who can then consent to share it with insurers.”
To fuel this process, Blackham added that customers will most likely need to be incentivised to share their data - he thinks this can be achieved via usage-based policies.
Broadway Insurance Brokers’ chief executive, Daniel Lloyd-John, agreed that although car manufacturers’ in-house insurance policies could provide an opportunity to reduce costs, it is also a ”dangerous territory” due to the fact that the EV marketplace is still “fairly unknown and untested” and claims have the potential to be complex.
Lloyd-John warned that “there is more work to do”.
Both Blackham and Lloyd-John concede, however, that Musk currently has the most data on EVs.
Will the steps Musk has taken to enter the insurance market see other firms look to bring insurance processes in-house in a bid to reduce costs as the world transitions to EVs?
And can the insurance industry keep pace with Musk? Will there be a battle for who has the best data?
Either way, the insurance market must keep up with manufacturers’ innovations or it risks falling behind.
One thing is certain - there will be winners and losers amid the rampage for EV data and tailored insurance products. It’s inevitable.
No comments yet