Tesla has created a customized insurance package | Hacker News Reader

Tesla has created a customized insurance package

businessinsider.com

84 pointsIgorPartola57 comments

Insurance as a business relies a lot on past actuarial table data to draw up algorithms to price the premiums. It contains factors like gender, age, occupation etc and the car, which is the highlight here.

If insurance companies do find data supporting the fact that these cars are less prone to payouts, due to Autopilot, they will decrease the premiums. So I am confused what is this whole "car insurance world upside down" all about?

The interesting is this:

> "If we find that the insurance providers are not matching the insurance proportionate to the risk of the car then if we need to we will in-source it," Tesla CEO Elon Musk said in February.

So Tesla as a business recognizes the cost of car has gone up due to insurance and might be actively working on subsidizing the costs.

It can either by paying some part of insurance or providing data on crashes. If it is latter, you have to wonder what kind of business Liberty Mutual is running. Any company will always say their wares are safer but it's up to the insurance companies to collect data and verify.

He is implying that the algorithms used by insurance companies are optimizing for profit instead of solely accessing the risk of payout. In other words, Tesla drivers are willing to pay a higher premium to mitigate the same risk.

In the competitive car insurance market, how can you optimize for profit without incorporating the risk of payout?

Maybe there's something preventing the car insurance market from being competitive, who knows.

Are you implying collusion?

Have you noticed the massive amount of money the competing car companies spend on advertising? Have you ever suspected collusion when you shopped for your own car insurance?

> Have you noticed the massive amount of money the competing car companies spend on advertising?

Have you ever suspected that maybe they put so much effort into advertising because it takes a lot to get someone to bother to switch insurers?

Why do you think people are reluctant to switch? Perhaps because the market is so competitive that there really isn't much difference between the offerings?

All these hypotheticals!

I don't switch because it's a pain to even try. I've had experiences in which a price I was quoted turned out to be lower than I was actual billed, so I don't have a lot of confidence that I'll get a straight answer if I do ask for quotes for new companies. I'm not sure I have accurate answers for questions they might ask. So I keep paying whatever, even though it's more than I like.

For all I know, I could be paying half as much elsewhere. This is just the company I've been with for many, many years.

Yes, it is a multidimensional competition. Price is not the only variable.

So is service when you make a claim (I've been "screwed over" twice when making car insurance claims). And so is obfuscation of services provided. So is money spent on advertising. And lobbying.

All insurance companies compete with a unique strategy on the mix of variables.

Thats not what the parent is saying. The parent is saying that, in the same way that retailers might act on the knowledge that OSX users are willing to pay higher prices for goods, insurers act on the knowledge that Tesla drivers are more risk-averse.

Its a pretty bold accusation. Car insurance is probably the most competitive market out there.

Why would dozens of car insurers in multiple states collude to hurt poor Tesla and put themselves at risk of Federal and State sanction? If they were doing that for a tiny niche automaker like Tesla, why wouldn’t they screw over BMW or Lexus?

This whole controversy is just a distraction to draw attention from Tesla’s service practices and support for a integrated “car as a service” model where Tesla owns financing, sales and insurance.

> why wouldn't they screw over BMW and Lexus?

Because Tesla markets itself as "the safest car on the road".

> collude

Who is saying anything about collusion?

So did Volvo for decades. You didn’t need magic Volvo insurance.

When you have a highly competitive market, and most participants decide to make an identical business decision that isn’t in their competitive interest (ie charge a high margin for a commodity), that’s generally accepted as evidence of collusion.

Tesla is a super risky piece of kit for an insurer.

They are a sole source provider of sorts and maintain a tight lock on authorized body shops. Even a car with lots of low volume high cost parts like a Benz has a competitive market of resellers, dealers and service providers.

Tesla is the problem here. Having them be an insurance provider just makes them a bigger problem.

Can you name any aluminum-bodied car that doesn't lock down authorized body shops?

I know that BMW has 50+ in my state, and that Tesla recently doubled their authorized body shop count — to 2.

And all 50+ BMW authorized body shops can work on BMW's aluminum-bodied cars? Only a modest % of BMW's cars are aluminum-bodied.

A little googling shows sentences like "Any body shop you are considering to repair your BMW 5 and 6 series, should be specifically equipped to perform special aluminum welding." and "As part of our CERTIFICATIONS by various manufacturers, we are required to purchase state of the art tools specifically for aluminum repair."

I might have missed it. Which line implies that?

Additionally how does that turn the car insurance world upside down?

"It contains factors like gender, age, occupation etc and the car, which is the highlight here." -- also a big portion of it is your credit score, which, in my opionion, should not be a factor, but it is...

There are a number of data provider startups with the business model of providing insurance companies with innovative data sets that are proven to be predictive of payout rates. In time, I suspect the coarse proxy of credit score will be supplanted by new data.

>they will decrease the premiums

Idk, I was told point blank that my premiums went up because the company/local insurance agent was struggling. Had nothing to do with my driving.

I might get some sticker price reduction, but I'll end up paying for it down the line somewhere. Insurance isn't primarily about the collective good, so despite technology making us safer, they still have to make profits.

I think the more likely reason rates are lower for Teslas is that they log everything happening and send it remotely to Tesla. If someone gets in a wreck and is at fault it's going to be a lot easier for the insurance to see this and deny non-comprehensive coverage.

Interesting question: can Tesla do this because their cars are safer, or because they already include the surveillance tech for which insurers offer discounts?

https://www.nytimes.com/2014/08/16/your-money/auto-insurance...

I don’t think that what you’re describing is a significant cost to insurers. Many (most) accidents are shared responsibility. And if you get full coverage (assuming people with Tesla’s generally get full coverage) insurance covers it regardless of whether or not it’s your fault.

The article says that autopilot reduced accidents by 40%, and Elon Musk seems to be frustrated that they’re not taking this into account when determining risk.

I'm really curious about this, I'm sure the expert review process is extremely inefficient. People will lie and make everything slow. Having loads of data right away is godsend. Also having alert faster may also help (say fire).

Perhaps this varies by country, but in the US I’ve never been involved in an accident where either insurance company looked at it as a ‘shared responsibility’. In fact, in each case a significant amount of effort was expended to prove fault and determine which insurance company was going to pay.

It also varies state to state.

This doesn't seem very innovative to me. Insurance companies are already taking this into account. I recently purchased a new vehicle (Subaru) with active safety features (EyeSight). The insurance is the least I've ever paid, by a pretty decent amount. The insurance company (Geico) specifically asked if I had the EyeSight package when I signed up.

Quote: "The National Highway Traffic Safety Administration found that crash rates for Tesla vehicles have plummeted 40% since Autopilot was first installed."

"that crash rates for Tesla vehicles"

"for Tesla vehicles"

You'd need to compare this to vehicles from other brands that have had Autopilot-like features for over a decade to actually get a sense of the number, otherwise, it is meaningless. That's like saying:

"Cars with ABS have lower crash rates than same cars without"

Why is the comparison necessary? My understanding is that insurance should be factoring in the expected value of accidents, which is an absolute measurement, not a relative one.

I don't think so. In fact, since they're comparing very similar pools of cars and drivers with the introduction of Autopilot being the major difference, I'd think that this is a more valid comparison than one which compares vastly different pools of cars and drivers.

Isn't that still an indicator, albeit not a strong one, that Tesla-like autopilot features are safer?

Saying "Cars with ABS have lower crash rates than the same cars without" means that I'd prefer a car with ABS... I don't wanna spin out in the snow. I'd also enjoy and feel somewhat entitled to a lower insurance rate than a non-ABS car.

When they talk about Autopilot, are they also including assisting technologies that help you avert accidents even when you're driving yourself (technologies that other car manufacturers have too)? I'm asking because AFAIK you can't use the Autopilot in urban driving, and I would expect most accidents involving insurance (including non-fatal ones) to occur in urban driving...

There is also the fact that Tesla purchasers tend to be from high socioeconomic classes, even more so than the baseline (extremely predictive) education / occupational category / credit score triptych would indicate. Most insurance risk predictors map directly to SES.

The high cost of insurance is partially due to high repair cost. Repairing aluminum car panels is expensive relative to standard steel panels.

Autopilot significantly reduce the crash rate, and Tesla feels other insurance companies don't sufficiently factor this when setting rates.

>Its benefits include replacing Teslas damaged beyond repair within one year.

I don't understand. Most people's insurance will cover the replacement value of your car if it is in an accident. Is this referring to something else?

If you wreck your brand new Model 3 next week, how long to get a replacement? The waiting list is quite long.

I've never had a car policy that covers the replacement value of the car. Instead, it covers the value of the car. Big difference.

Insurance companies are actually undergoing something of a silent revolution in terms of underwriting policies. Many of them are upgrading to some sophisticated machine learning algorithms instead of the traditional actuarial tables. Assuming tesla cars are really safer you would see the algorithms pick up on that (there may be some lag until they catch on) and then price the policies appropriately, assuming that the insurance company is willing to pass that value to the customer.

Another thing is insurance which takes into account how much, where and how you drive. Smart car companies like Tesla are in good position to start offering these as well.

"Its benefits include replacing Teslas damaged beyond repair within one year."

They make you wait for a year to get a replacement car?

I just got a quote (Model X, California) that is 42% higher than my current monthly premium through USAA :-/.

"which lowers overall insurance costs by factoring in the vehicles' Autopilot safety features"

Are they saying the autopilot makes the care safer? Hasn't the opposite occurred? [1]

[1] https://www.ntsb.gov/news/events/Documents/2017-HWY16FH018-B...

No. Perhaps in a couple of cases, but on average, I believe it has shown to be safer.

From the original article:

"The National Highway Traffic Safety Administration found that crash rates for Tesla vehicles have plummeted 40% since Autopilot was first installed."

Are there actually enough crashes involving Teslas for this to be statistically useful? It’s not a particularly common car brand.

Good point. The sample size of one crash cited a few comments above is way too few to show autopilot makes cars more dangerous.

You don't need that big of a sample size for the results to be significant. A lot of people overestimate the sample size you need.

No, the organization that put that slideshow together concluded at the end of its investigation that the primary causes of the crash were the truck failing to yield properly and the Tesla driver not paying attention for a long time. Their only recommendation to Tesla was to make Autopilot nag drivers more strictly if it doesn't detect that they're paying attention, which Tesla followed. Another agency investigating the crash, the NHTSA, concluded that they could not find a safety risk with Autopilot, they could not find any defects warranting a recall, and they noted that in broad terms Autopilot appears to have increased driver safety.

https://www.ntsb.gov/news/events/Documents/2017-HWY16FH018-B...

https://static.nhtsa.gov/odi/inv/2016/INCLA-PE16007-7876.PDF

The safety benefit is from the automated emergency braking system, which Tesla has coupled with the Autopilot package. It's not from Autopilot itself.

I don't understand what the maintenance costs have to do with the price of insurance.

Maybe an incorrectly maintained car is less safe.

And why cost of repair isn’t mentioned.

Perhaps due to lower fraud rates involving cars that have failed.

Dupe, previous:

https://news.ycombinator.com/item?id=15524800

The previous story probably didn't get enough attention to qualify this one as a duplicate, so we've left it. (See https://news.ycombinator.com/newsfaq.html)

Reply on news.ycombinator.com