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Tesla claims that new insurance product will offer lower prices



  A Tesla Model 3.
Enlarge / A Tesla Model 3.

Smith Collection / Gado / Getty Images

Tesla announced on Wednesday that it is launching a new personal car insurance product in California. Elon Musk said in April that Tesla would offer a car 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-owned national insurance company.

Tesla states that its insurance offerings 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 usability of our cars to offer insurance at a lower cost," the company claims.

It is not clear how Tesla can profitably undermine the premiums of traditional insurance companies. These companies are experts at collecting and analyzing data to estimate the probable cost of insuring vehicles. Tesla obviously knows more than anyone else about how the cars are designed, but it's not clear that Tesla has dramatically better data than insurance companies on how often their cars crash ̵

1; or how expensive they are to repair.

One way Tesla could seek a competitive advantage would be to harvest vehicle data on individual customers' driving habits. This can allow the company to offer lower premiums to customers with a safer driving profile.

But Tesla explicitly rejects this approach. "Tesla Insurance does not use and record vehicle data, such as GPS or camcorder recordings when they cover insurance," the company writes.

One possibility is that Tesla's insurance will not actually be cheaper. Some Reddit customers reported that they received offers that were significantly higher than today's premium.

Tesla's insurance is for personal use only. Tesla says it does not cover losses for customers using the Tesla in a shelf capacity.


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