Tesla CEO Elon Musk has commented on the growing importance of his company’s new car insurance offering, which he says aims to redress the “incredibly inefficient” process that is keeping premiums high for many drivers.
Speaking at the All-In Summit in Miami yesterday, Musk remarked that the solution is “quite significant now because the car insurance thing is a bigger deal it may seem.”
He noted that many drivers are forced to pay a significant proportion of the lease payment for their vehicle over again in insurance premiums, and said that the problem lay in what he views as the unnecessary number of “middle entities” involved in the insurance process.
“The car insurance industry is incredibly inefficient because you’ve got so many middle entities,” Musk told attendees at the Summit. “From an insurance agent all the way to the final reinsurer, there’s like a half a dozen companies each taking a cut.”
“And it’s all very statistical,” he added. “So even if you’re a very good driver, like you could be 20 years old and a great driver, it’s all statistical. So you either can’t get insurance or it’s extremely expensive.”
Tesla’s car insurance offering works by providing real time coverage based on the actual recorded driving behaviours of people in the vehicle, which the company claims can result in fairer premium prices, while also saving costs by removing surplus parties from the value chain.
“Our insurance is based on how you actually drive not how historically people that fit your demographic have driven,” Musk explained.
“And then you can close the loop around your insurance rate by simply driving better and looking at your score and lowering your insurance in real time,” he continued. “And people do it. It actually promotes safer driving.”
Musk has previously indicated that insurance will become a “major product” of the US electric vehicle manufacturer over time, with analysts at Morgan Stanley also having recently warned that Tesla could pose a long-term threat to the US auto insurance industry.
