Car Insurance in Recent Tesla Earnings Call

Warren was asked about insurance offered by car manufacturers in the past. I can recall he said the manufacturers were not successful or something to that effect. Below is a transcript from the recent Tesla earnings call when a question was asked about the Tesla insurance product. I guess we need to keep an eye on it.

Mark Delaney (Goldman Sachs)
… And for my second question, could you share any more details on Tesla Insurance, in particular, as you roll it out in more states. Are there any metrics you can share on what take rates have been like? And how do profitability margins on the insurance offering compared to the corporate average? Thank you.

Zachary Kirkhorn (Tesla CFO)
So, we just launched Tesla Insurance for real-time insurance in Virginia, Colorado and Oregon earlier this week. Maybe one step that I’ll share. So, Texas is our longest-standing real-time insurance market. But based upon the information that we have; Tesla is the second largest insurer of Teslas in the State of Texas. And possibly by the end of this quarter, maybe early next quarter, we’ll be the largest insurer of Teslas. And so, the customer reception to this has been quite positive. And I was reading social media on Monday after we launched in the three new states, a lot of folks who are reporting their stories of saving quite substantial amounts of money relative to their previous insurance. And so, we’re quite encouraged by that. And we’re working as quickly as we can to get to 80% of customers having access to a Tesla Insurance product by the end of this year in the United States, at which point we’ll pivot our attention to expansion outside of the U.S.
The other thing I’ll say on insurance is with these three new states, the model is different because we are now the underwriter, and we are also now holding the risk. And so, with those states, we are a fully vertically integrated provider of insurance from systems and financials. With respect to the financials of the program, it’s still very early. And so, as the program gets more scale, happy to share more information on that.

Elon Musk
And ones I noticed that we are seeing that the – having real-time feedback for driving habits is actually resulting in Tesla owners driving the cars in a safer way because they can see the – they get real-time feedback on, okay, this is affecting my insurance rate or it isn’t. And so, when people see it – they can see a real-time score, they realize, if I make the following changes in my driving habits, then I pay less in insurance, then they have a very – like a real-time feedback loop for driving for safer driving and an incentive to do so. So, it is – actually, what we’re seeing is it is causing people to drive their cars in a safer manner, which is also net good.

Zachary Kirkhorn
It’s safer on average, what we see in the data, to Elon’s point, and premiums are lower. We see that in the take rate data, we have extremely high retention for customers who experience the product. And I think I’ve talked about this in the past, but this has become a real passion program for us for these benefits. It’s bigger than just the economics. We’re trying to do a good thing here for our customers, save people money and make the roads a little bit safer.

Elon Musk
Yes. I think it improves just overall macroeconomic efficiency. It’s also a feedback loop for Tesla because we see if there is crash, both large or small, like we sort of see exactly what that caused. And then we think about how can we change the design of the car or the software in order to minimize the probability of that accident. Most accidents are minor, but how do you have those accidents occur less frequently? And how do we make the repair associated with that accident super-fast? Like, aspirationally, it would be like a same-day repair of a collision, which is night and day difference compared to sometimes having to wait for a month while insurance claims are settled and figured out – because Tesla is also doing collision repair.

Zachary Kirkhorn
Yes, the feedback loop is instant.

Elon Musk
Yes.

Zachary Kirkhorn
Right. So, I mean, we do claims management in-house. And so, we receive the notification that there’s an accident, we work to prepare the estimate. And we can, with the support of our customers, use our collision centers to do the repair. And so, it’s full end-to-end visibility. And all of that, to Elon’s, we can then identify areas of cost inefficiency, feed those back to our engineering teams or elsewhere, software teams, actually improve the product. This lowers the cost of insurance, improves reliability of the product. So, it’s a full circle.

Elon Musk
Yes. And basically, the customer experience is just vastly better because if there’s an accident, there’s no argument. We’ll repair it immediately. And this is as compared to arguing with an insurance company and then a claims adjuster and then a collision repair center. And this can be a nightmare basically. So, we’re trying to turn a nightmare into a dream with Tesla Insurance.

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