Tesla has finally announced its car insurance offering that CEO Elon Musk teased back in April. The company describes it as a “competitively priced insurance offering designed to provide Tesla owners with up to 20 percent lower rates, and in some cases as much as 30 percent.” Tesla’s insurance will be available in California to start, and it will “expand to additional US states in the future,” the company says, though no timetable was given.
Musk originally claimed that Tesla would be able to offer such vast discounts on insurance for its cars because the company has access to reams of data that each one produces. In a blog post about the insurance product, Tesla says the company’s advanced safety features, such as Autopilot, also contribute to the lower cost.
“We essentially have an … information arbitrage opportunity where we have direct knowledge of the risk profile of customers,” Musk said in April. “And then if they 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.”
All that said, Tesla explains that it “does not use nor record vehicle data, such as GPS or vehicle camera footage, when pricing insurance.”
Lower-priced insurance might seem like a tantalizing offering, but the cost to insure Tesla’s cars is already a bit higher than average; the Insurance Institute for Highway Safety ranked the Model S as the most expensive vehicle to insure in 2018.
Tesla promised existing customers in California the ability to purchase an insurance policy in “as little as one minute” on its website. New customers can request a quote, too.
For Tesla, offering insurance policies gives the company another chance to pad its margins as it searches for sustainable profitability. But if Tesla winds up having to pay out too many claims, it could also deplete the company’s cash reserves.