Tesla Insurance | Hacker News Reader

Tesla Insurance

tesla.com

This is the right model for insurance: the potential reduction of claims incentivizes the car manufacturer to make cars safer and less expensive to repair.

Flip side: from its telemetry, Tesla can derive how safely you drive your car and adjust premiums accordingly. Is this good or bad?

It's good. Incentivises people to drive safer.

Following the law strictly != safer.

In some countries, if I'd obey the law 1:1 I'd definitely be in a crash of some sort.

Bending the law, was the reason I always got home safe.

This will probably be the toughest part for full automation to figure out unless we lived in an Utopia.

In a comedic way, it would be cool if the car could analyze the driving style of the other cars in traffic and change its own behavior accordingly to blend in while still obeying the law somehow. It would make driving from Sweden to Soutern Italy really fun.

Agreed, but presumably insurance companies wouldn't be looking at whether you followed the law, they would be looking at whether you drove safely to the extent that such a difference matters.

For one, that would be illegal in California. Outside of that, as long as it was opt-in, I think it would be appropriate. Progressive at least has been doing this for almost a decade.

What does opt-in mean here? You are still free to insure your Tesla with other insurance providers like Progressive or Geico.

Metromile tracked my vehicle's speed in their app using their ODB dongle. The only way I could opt out of them knowing about my 101 MPH joyrides on the 101 was by choosing a different insurance company.

For what it's worth, they say they don't use or record driving data for their insurance.

Is this actually Tesla running their own insurance company or just Tesla selling Tesla branded insurance backed by an existing insurance company.

The latter:

"the California Department of Insurance website showed Tesla was licensed as a broker to conduct business on behalf of the State National Insurance Company Inc" (https://www.reuters.com/article/us-tesla-markel-insurance/te...)

State National is what's known as a "fronting company" in the insurance industry. Tesla is acting in far larger role than a retail broker.

From the rate filings available from the CA DOI page[1], it appears they are being "fronted" by State National Insurance Co (recently acquired by Merkel[2]). "Fronting" is a new concept to me, but seems to be a special type of re-insurance[3].

1. https://interactive.web.insurance.ca.gov/warff/front 2. https://www.insurancejournal.com/news/national/2019/05/02/52... 3. https://www.captive.com/news/2018/11/12/what-is-fronting-arr...

Markel, not Merkel.

No, fronting is not reinsurance. It's basically a licensed insurance company that is "leasing out" its license/assisting in regulatory/filing matters for a small percentage of the premium.

Tesla doesn't want to set up an actual insurance company, so it's easier to reuse an existing one.

Almost certainly there is a reinsurer involved as well (that hasn't been publicly disclosed), as Tesla likely doesn't have excess capital available to fund the surplus requirements for this auto insurance line.

https://www.insurancejournal.com/news/national/2019/05/02/52...

This seems like a strange move on Teslas part.

Insurance is a business of quantifying risk, charging people appropriately and making your money by investing those sums before claims are paid out.

That doesn't seem like a great fit for Tesla. They cant reasonably invest all that money in Tesla and Tesla bonds, Tesla just becomes a confusing story of car maker and insurance that won't be greater than the sum of its parts.

As others have mentioned, prices indicate this isn't some Muskian disruption of the market so why the distraction? Am I looking for reason in what is intended to be a nice little earner on the side?

Yes, the reason for it existing isn't clear. I don't see how Tesla can practically reduce costs of payouts, so the other option is Tesla claiming that the existing insurance industry is systemically over-estimating the risk of Teslas, which even if true, doesn't seem like it would continue indefinitely.

When the car drives itself, why is the driver accountable?

This feels like a first step towards aligning insurance based on what/how you drive vs. autonomous.

I could see: $.01/mile with autonomous and $.05 human.

Great lever to allow the robots to take over.

If the driver is accountable by default, why would Tesla want to take on the liability?

This is all hypothetical anyway because Autopilot still requires you to pay attention.

Given the rates aren’t at all competitive, I wonder if this is more an attempt to generate positive cash flow than provide the service.

They do have the advantage of controlling replacement part pricing. They can raise those even higher to drive up competitor rates and pocket margin either way.

Why do you say the rates are not competitive (vs the 20-30% mentioned in the release)?

Too bad it seems that 99% of the quotes people are getting are higher than their current insurance. It's a great idea but the prices need to reflect the savings that are being touted on the announcement.

Source? Didn't see anyone on HN saying this.

Pretty much everyone on Reddit is [0].

[0]: https://www.reddit.com/r/teslamotors/comments/cwpl34/introdu...

Twitter, r/teslamotors, teslamotorsclub.com, teslarati, electrek

The website now says they are updating their algorithm.

What's the over/under on this "update" of the "algorithm" taking at least until 2020?

3 months maybe, 6 months definitely

Part of what drives higher rates is expense/lack of replacement parts, which can increase the severity of the claim.

Given Tesla make many of the parts they should theoretically be positioned well to offer vertical integration and presumably lower prices than other insurers.

That this so far is costing more is defeating the very logic used in the press release. Also, despite Musk’s tweets that can be read to suggest otherwise, there is no car telemetry being used at all to tailor the quote.

This looks like a cash grab rather than an attempt to genuinely offer a new form of competitively priced insurance.

I think for this to be truly successful, Tesla would need to vertically integrate better.

that is:

- run the insurer which effectively bet against you crashing your car

- the repairs, we can fix it better/faster/cheaper than 3rd party

- and obviously the manufacture and distribution levers.

Seems like it's an economy of scale problem, but given all the data that they have about their cars/drivers and rates of accidents, they probably can say with some degree of statistical certainty that they can cover their losses paying out on claims; otherwise they probably wouldn't have done this.

My understanding is that Tesla is doing this because it believes that car insurance companies are charging rates that are too high because Tesla's cars and its whole business model are so different from the ones they are used to insuring and so they don't properly understand them.

It will be interesting to see if Tesla is right about this and it can charge lower rates without losing money.

Maybe an interesting idea: with a very granular understanding of crash types, Tesla could add active software features to reduce their occurrence rate and pocket the savings.

It could backfire though. A severe crash that paralyzes the driver is much more expensive than one where the driver dies.

On its face this seems like the incentives are wrong. We should be making liability for killing someone always higher than liability for paralyzing that person.

this makes total sense. If Tesla cars are safer than most, then the insurance price should be lower since there would be less accidents in general and Tesla owners don't have to pay for the "less safe" cars within the same insurance umbrella.

It also makes sense for Tesla to have their own insurance company if they want to someday have "insured" self driving cars and deal with the fact that in case of accidents where cars are not driven by people but by algorithms.

Except that unfortunately all of the following can be (and I wouldn't be surprised if they are) true: (i) Tesla cars are safer than most, (ii) Tesla drivers are safer than most, (iii) Tesla accidents cost insurers more than average, more than offsetting (i) and (ii). (You could also possibly add (iv) Tesla drivers are more likely to be located in states/countries where running an insurer is more expensive).

The cost (to the insurer) of providing car insurance isn't about how "safe" a driver is, it's about a combination of (1) how likely they are to make a claim (including accidents which aren't their fault - locality plays a part here - and thefts etc), and (2) how much will the average claim costs their insurer (and repair costs factor in massively here).

I imagine having the insurance under Tesla umbrella could make repairs cheaper in certain scenarios

If Tesla did quicker & cheaper repairs on cars insured by them, would that be illegal?

It would harm competing insurance companies significantly, and mean they can effectively corner the entire insurance market for their own cars.

It might be possible for them to argue this on the basis of a volume discount.

They get to source the parts at cost. I don't think that's illegal really. It's kind of like AppleCare, right?

Does Tesla own and run all their own repair shops or do they license and certify third party shops.

I think both

There's no such thing as a catch-all "insurance umbrella." Auto insurance providers already discriminate between various makes & models. So if Teslas are actually less expensive to insure then it means every provider which is charging higher-than-average premiums is making a colossal actuarial goof.

The much simpler explanation here is the correct one: the high cost and sparse availability of parts & repair service make Teslas much more expensive to insure.

Insurance prices are spread across the entire risk pool though. Even if the entire pool is overall safer, the mean/median costs might still be higher than a larger, more diversified risk pool that can more easily subsidize low risk accounts by winning long-term bets against bigger risks.

Reply on news.ycombinator.com