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Comment by cloudwalking | Hacker News Reader

Everybody is missing a huge point:

Vehicle fire now completely covered under warranty, even when caused by operator error.

"Third, to reinforce how strongly we feel about the low risk of fire in our cars, we will be amending our warranty policy to cover damage due to a fire, even if due to driver error. Unless a Model S owner actively tries to destroy the car, they are covered. Our goal here is to eliminate any concern about the cost of such an event and ensure that over time the Model S has the lowest insurance cost of any car at our price point. Either our belief in the safety of our car is correct and this is a minor cost or we are wrong, in which case the right thing is for Tesla to bear the cost rather than the car buyer."

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That will be interesting to see a manufacturer warranty stuck in the middle of normal insurance disputes. Like what if someone is at fault and hits a Tesla and causes a fire, would that be covered under the Tesla warranty, or the other party's insurance?

I'd assume the other person's insurance would be paying for that ... or they'd fight it out in court.

Tesla will pay for that and will have to use its channels to get its money from the one who is at fault (either his/her insurance company or him directly). I'm pretty sure that's more or less standard insurance stuff and Tesla is not inventing anything new - they just invest some of their money into that. It might be more interesting how they solve international problems regarding that but I'm sure other car manufacturers should have something similar to that.

Its called subrogation, and it happens everywhere in the insurance industry to properly account for fault/cause.

It's interesting that Tesla says they will pay regardless of fault. That must make the insurers very excited.

An insurer has to pay the manufacturer the full price of the vehicle. Tesla's margins are approaching 25%. Tesla is betting its cheaper for them to replace the car at cost than the PR hassle because people suck at math. In the event another few cars go up in fire, Tesla eats the vehicle manufacturing cost in return for goodwill and people continuing to purchase their vehicles.

You have to admit, Elon stands behind his vehicles, literally with his personal wealth. Compare that to other luxury brands. It's brilliant.

>Vehicle fire now completely covered under warranty,

Have you considered that the reason they are doing this is that insurance companies may look at the fires and begin to increase premiums on the Tesla cars, or refuse fire coverage altogether?

This isn't altruism; it's damage control (literally).

Don't insurance companies have highly trained and highly paid actuaries? My understanding is they look at numbers, not headlines. I'm sure there is some sort of professional ethical standard they are expected to uphold.

You aren't looking at the whole picture. In fault states, the insurance company would have to pay out to the other party in the case of an accident. That money needs to come from somewhere, namely the premiums, which is why they go up after there is reason to believe it could happen again. This isn't about emotions or ethics but rather cold logic

Yeah, but I find it hard to believe they hadn't already included some amount of fire probability in their calculations. Isn't it possible their assumed probability is higher than the actual, since it was perhaps based on the track record of internal combustion cars? I'm out of my depth here. IANAAA - not an actuarial analyst, nor an automotive engineer.

It's about future likelihood, not prior probability, and the fact that an issue was discovered means that the likelihood is much higher than if it were some isolated incidents.

To put it differently, if it were entirely random, the premiums would not change, but if there were a systemic problem (which appears to be the case here) the premiums should change to reflect the risk

> This isn't altruism

Who cares if it's altruism? It clearly benefits consumers, so why should anyone care if it also benefits the company?

Typically insurance would cover this anyway.

His point is that insurance cost for an 85k car with a potential design flaw is (1) likely to go up; and (2) likely to be perceived as a red flag by potential buyers. Insurance companies are often accused of over-reacting to recent data (eg, a recent hurricane will jump up insurance next year). That being said, the insurance companies are also likely to actually look at the data and dis-regard pr spin when they are on the hook for the damages. By removing the insurance co's scrutiny from the data as well, it kills two birds with a single stone.

You're right, I glanced over that part of the statement, and thought he was just trying to assure owners that they "are covered" in case their car bursts into flames.

Or at minimum an excuse for insurance companies to charge more. And Tesla keeping this insurance, at minimum, allows them to manage the costs for owners - and if there are 'profits' to the 'paid' insurance (embedded in cost of car, and the ecosystem as a whole), then it is Tesla that gains the benefits either as profit or can re-invest it into their ecosystem. Insurance overall is a scam, however government and politicians prefer to not be responsible or accountable by allowing private for-profit companies take advantage of everyone.

You should qualify that with "In the U.S., government and politicians..." My car insurance in Canada is public, and quite affordable($66 a month.)

My car insurance in Canada is not public and it is not affordable ($250/month with five years clean driving record) so you should perhaps qualify your statement as well. :)

Qualify it with what? It already is a specific case... MY car insurance.

That logic makes sense if you assume the only incidents are single-car. When this happens near other cars and is deemed to be the factor behind a multi-car accident, the insurance company still has to pay out for the other participants (unless you are in a no-fault state). I would argue that, regardless of the PR spin and warranties, unless Tesla takes liability for entire accidents I would expect insurance rates to skyrocket

Why? Insurance companies are looking at the data and would easily find the 1/5 as likely to be in a vehicle fire bullet point.

> "Insurance companies are often accused of over-reacting to recent data (eg, a recent hurricane will jump up insurance next year). That being said, the insurance companies are also likely to actually look at the data and dis-regard pr spin when they are on the hook for the damages."

Could the surge in prices after a recent hurricane be the insurance company 'cashing in on'/exploiting the irrational reaction of the public, rather than the insurance company itself having an irrational reaction?

Insurance companies can only survive long term if they are data-driven, so it seems likely to me that they are reacting rationally (although perhaps coldly) to an irrational market reaction.

Competition should also help here. If InsCo A is trying to overprice coverage due to a recent disaster, InsCo B can undercut their price.

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