Tesla announced Wednesday that it is launching a new personal auto insurance product in California. Elon Musk said in April that Tesla would offer an auto insurance product the following month. Tesla now says the product is available in California for all Tesla vehicles going back to the original Roadster. The company plans to add additional states over time.
An April filing with California regulators indicated that Tesla planned to offer a Tesla-branded auto insurance product in partnership with the State National insurance company.
Tesla says that its insurance offering will be 20% to 30% cheaper than conventional insurance products.
“Because Tesla knows its vehicles best, Tesla Insurance is able to leverage the advanced technology, safety, and serviceability of our cars to provide insurance at a lower cost,” the company argues.
It’s not clear how Tesla can profitably undercut the premiums of traditional insurance companies. Those companies are experts at gathering and analyzing data to estimate the likely costs of insuring vehicles. Tesla obviously knows more than anyone else about how its cars are designed, but it’s not clear that Tesla has dramatically better data than insurance companies about how often its cars crash—or how expensive they are to repair.
One way Tesla could seek a competitive advantage would be to harvest data from vehicles about individual customers’ driving habits. That could allow the company to offer lower premiums to customers with a safer driving profile.
But Tesla explicitly disavows this approach. “Tesla Insurance does not use nor record vehicle data, such as GPS or vehicle camera footage, when pricing insurance,” the company writes.
One possibility is that Tesla’s insurance won’t actually be cheaper. Some customers on Reddit reported receiving quotes significantly higher than their current premiums.
Tesla’s insurance policy is only for personal use. Tesla says it doesn’t cover losses for customers who use their Tesla in a ride-hailing capacity.