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Tesla Insurance: Information arbitrage to save money



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Published on May 3, 2019 |

Vijay Govindan

3. May 2019 by Vijay Govindan


Tesla Insurance will increase customer satisfaction

I have recently gone through the pain of looking for car insurance for my new Tesla Model 3 Long Range. Some car insurance companies are more sophisticated than others. Others … need some work. Some of the insurance places I visited could not identify my Tesla VIN. One company said they would call me back. Another company that had an app for my phone would offer me a three-week offer. An insurance company thought our Tesla was a gas car. Face Palm.

Example A: Large, named auto insurance believes that Model 3 is a 4-door sedan that runs on gas.

Enlightenment: I worked for several insurance companies for several years.

Think of two situations: One is a good customer experience for Tesla. The other is somewhere between bad and good, depending on the individual.

Imagine the following: You are ready to order your beautiful Tesla on the phone. You're very excited. You can't wait to run it and show it off. Before you place your order, you realize that you need insurance before delivery. Magically, Tesla asks you if you want Tesla Insurance on your new vehicle. You add the insurance and you're ready! Painless! You are very pleased with the ease of buying the car plus insurance. You look forward to delivery.

Contrast with this situation below, which is not so nice. (Please note that it is a little exaggerated.)

Imagine the following: You are ready to book your beautiful Tesla on the phone. You're very excited. You can't wait to run it and show it off. You place your order. So, horror of horrors – you must find car insurance before delivery . Yuck!

Panic is included. How much will it be? Should it be super expensive? Do I need to visit a dozen sites to get the best insurance price? Do you call the weird uncle of you who knows the best deals in dark alleyways with shady signs for everyone and everyone? Suddenly, the purchase of your new Tesla fog became quite a lot.

Insurance companies cannot individually assess driving characteristics. Instead, they bend your experiences and characteristics to similar "groups." These groups are rated, usually by using a multiplicative rating factor with another. Common Groups include your age when you first received your license, if you are married or single, if you own a home, credit rating, accident history, and anything else they ask for when applying for car insurance.

Sophisticated insurance companies use generalized linear models – think y = a + bx (instead of a and b being resolved, they can be changed based on your properties). Expand it to y = a + b1x1 + b2x2 + b3x3 etc. (Linear algebra is very important here.) Even more sophisticated insurance companies are implementing or experimenting with Machine Learning and Big Data analysis.

Buying your insurance when buying the car will pull more people to Tesla. It saves you time, effort, frustration and inconvenience.

Tesla knows how to drive better than you

At Tesla's Q1 2019 earnings call, Elon announced that Tesla is creating its own insurance product. The company expects to start it in a month.

How could Tesla start an insurance product without having any insurance experience? Very easy. They will have detailed information on how to run your Tesla, better than an insurance company would. They also know their customers. Most people who buy a Tesla probably have good credit. Excellent credit is a key factor that determines your insurance costs.

"Your insurance points are largely based on your overall credit rating."

Last, Tesla knows the inherent safety of their vehicles. Safe cars mean reduced chances of having an accident, less chance of being injured, and less chance of harming someone else. New Teslas has a series of cameras, radar and sensors to keep you and others safe. They are moving towards Full Self Driving (FSD).

Clearly, Tesla would not classify your electric vehicle as a gasoline car. The company will be able to perform deeper classifications. In one word, it is information arbitrage. I would define information arbitrage as a party that has more knowledge of a situation than the other party in a contract. They use this "added" information to position themselves in front of everyone else and generate profit from the opportunity. But this is not my term.

"Tesla has an" information arbitrage opportunity, "Musk said. The company is able to capture driving data, and gives the company direct knowledge of the driver and car risk profile. If customers want to buy Tesla insurance, they may need to be agree not to drive the car in a bad way, says Musk, who added that they can, they just want a higher insurance rate. "

Tesla benefits from having machine learning skills, which continuously performs analysis on many Big Data, And to finish it, the company has an excellent network of networks, the first two being key competencies for insurance companies, and the third includes the skills insurance companies want them to have, and Tesla can take information about your car, anonymize it, group it together, perform statistically Analyze and determine which combination of behaviors is safer or more risky, use Autopilot more than 80% of your driving time, which can give you a discount. Can be another discount, drive more freeway than local? Discount! Take your Tesla and jump off rocks? Penalty!

The beauty of this is that Tesla only has to praise the insurance itself or a small profit. It does not have to function as stand-alone insurance companies seeking profit as their primary source of income. This will lead to a lot of chaos for car insurance companies like Tesla's fleet.

Now, with this in mind, Tesla Insurance saves you time, effort, frustration, inconvenience and cost. It improves the customer experience.

Example B: Esurance, what happens to your prices? This is for an FSD model, which insurance companies do not yet have enough price.

What Are Some Benefits Tesla Has Against Insurance Companies?

For a simpler format, I will see what I see as benefits for Tesla as an insurance company here.

  • Tesla creates the vehicles it will insure. These vehicles are some of the safest, if not the safest, on the road.
    If a Tesla comes into an accident, the inhabitants of Tesla are less likely to be injured. This reduces the cost of liability.
  • Features like Traffic Safety Cruise Control and Navigate on Autopilot reduce the risk of ending up with someone (very common) or getting into an accident on the highway. This reduces the insurance frequency and severity.
  • It is difficult to steal a Tesla, which reduces property damage.
  • Tesla software such as Sentry Mode and live camera recordings can provide evidence of theft, accidents and who's wrong.
  • Standard Range, Long Range and Performance versions of the car are similar in body structure so that data can be grouped together as needed.
  • Tesla owns some body stores.
  • Tesla operates Mobile Ranger service. 19659032] Tesla has machine learning, large data and neural web experience. Tesla gets detailed vehicle telemetry from each vehicle.
  • Tesla can supply the parts for repairs to brooms and without labeling.
  • Tesla already calls you in a few minutes if you are in a serious accident.
  • Tesla will give you a rope if you run out.
  • Tesla can apply for a nominal profit.
  • Because of everything above, Tesla can suppress insurance companies on price.
  • Due to these inherent benefits, Tesla can offer similar coverage for smaller ones or offer more coverage for the same price versus competing insurance companies.
  • By combining the purchase of insurance and the purchase / lease of a Tesla together, the customer experience is greatly improved.

Many things an insurance company offers, Tesla already does.

Detailed "Tesla Insurance" information

Below you will find some information recently found about Tesla Insurance Services. The link for the entire 4000+ pages document can be found if you have the link to the actual insurance documentation or visit the CA DOI headquarters. Source: Twitter. Thanks, Steve Jobs! (@tesla_truth)

Figure 1: Some states where Tesla has already set up Tesla Insurance Services. This includes MA, CA, NV, AL, NY, MT, OR, PA, VA and TX.

Figure 2: Tesla's rating algorithm filed with the California Department of Insurance.

Above we see Tesla's rating algorithm for Tesla Insurance Services. The base rate for each coverage is multiplied by the respective discount / surcharge. All the different tires are added together for the final prize (Line 27).

Summary of coverage definitions
BI = Body injury
PD = Property damage
MED = Medical payment
UM = Uninsured Motorist
COMP = Comprehensive
COLL = Collision
COLL = Collision
UMPD = Uninsured Motorist Property Damage
GAP = Gap Insurance
RR = Rental Merger
RA = Directions
CDB = Collision Deductible Refund

The most interesting is the autonomous vehicle package on line 28 (page 66) [19659021] AUTOMATIC VEHICLE PROTECTION PACKAGE

] Subject to all terms, conditions, and omissions of the policy, we will provide the following covers: [19659056] Autonomous Claimant Liability

  • Cyber ​​Identity Fraud Expenses
  • Wall Charging is Coverage [1945901] 9]
  • Electronic key replacement
     
  • We later find out that this coverage will be mandatory for Tesla drivers (page 868).

    • Car Expression Pack Change
      SNIC suggests adding a vehicle automation package approval mandatory for all Tesla vehicles, which include:
      • Autonomous Vehicle Liability
      • Cyber ​​Identity Fraud Expense
      • Wall Charger Coverage
      • Electronic Key Replacement

    On page 1772 we find the premiums for this coverage. It's not expensive at all.

    Autonomous vehicle protection package Premium
    Non-good driver $ 25
    Good Driver 20

    Some concerns about Tesla Insurance

    As I would with any new insurance program, I have some concerns.

    • This is a new program. With all new programs, the assessment factors cannot reflect actual experience.
    • Tesla has no experience in setting rating factors for insurance programs.
    • It seems that Tesla is working with the State's National Insurance Company in California. Do premiums and profits go to Tesla or SNIC? It is unclear at this time.
    • There is no guarantee Tesla will make money from the program.
    • The insurance departments are very conservative. When Tesla quickly changes its software and hardware, insurance coverage can stay?
    • The insurance program for SNIC does not seem to exploit the deep data Tesla has about your driving habits. [ Editor's Note: It seems to use personal driving data is not legal, from what I heard on ... Internet. The Internet can be wrong. ]
    • Final thoughts on buying insurance for your new Tesla (US edition)

      . Tesla continues the driver and vehicle privacy in connection with all this data. Tesla Insurance has the potential to dramatically improve the insurance experience for Tesla owners. If you are looking for insurance for your new Tesla, I suggest the following.

      1. Ask your existing insurance company how much it would be to add your new Tesla. Many insurance companies will require your VIN for the most accurate quote.
      2. If you want a general idea of ​​price, go through some of the major car insurance sites. Be prepared for a barring of phone calls. Use an email you don't care about.
      3. Make sure you use similar coverage for the most accurate quotes.
      4. If you have another vehicle or driver, make sure that these factors also match. An offer with just one Tesla against a Tesla plus another vehicle will trigger multiple vehicle discounts. Get all the discounts you can.
      5. If you have any doubts about the whole process, ask an insurance agent for help. They have rating software that instantly compares many auto insurance companies all at once. They can also explain what the different tires mean.
      6. Compare, compare, compare! I would recommend checking with at least 10 different insurance companies.
      7. Before you begin the process of buying insurance, you clean up your credit score as best you can. Insurance companies have found your credit score is an excellent proxy for the risk of filing a claim. Higher credit points are less likely to submit a claim.
      8. If you have previous claims, see how long it will take to remove the credit history. More claims, points or accidents (even if you are not mistaken) will give you a higher ranking category for up to 5 years.
      9. I recommend getting GAP insurance. If you have a total loss, the GAP insurance will cover the difference between what the vehicle is worth and how much you owe. It's not much, but will give you a lot of security.
      10. If you rent or finance, your finance company can claim comprehensive and collision cover on your new Tesla.

      Purchase insurance can be a real role. Cheer up, your new Tesla is on its way to making it worthwhile!

      If this article helps you decide to order a Tesla, use my Tesla referral link to get up to 5,000 miles of free Supercharging on a model S, Model X or Model 3. (If you order before 28. May, we both get 500% more Supercharging miles than the usual 1,000 miles and five more chances to win a Founders Series Model Y or Roadster.) Here is my code: ts.la / vijay59877

      If anyone else helped you more with your purchase, please use the referral code.

      Disclaimer: I currently own Tesla shares. A recent discussion with $ TSLAQQ people confirmed that they are more concerned about Tesla's finances and profits than promoting the world towards sustainable energy. This article is my opinion and is not meant to be investment, financial or car buying advice. Please see a properly licensed financial advisor to discuss investments. Follow me on Twitter @ vijaygovindan17.





      Tags: Tesla, Tesla insurance, Tesla Model 3, Tesla Model 3 Insurance


      About the author

      Vijay Govindan Vijay Govindan is interested in sustainable living standards, economic education and the intersection of astrophysics and climate change. Rick and Morty fan. Follow him on twitter @ vgovindan17




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