The US-based billionaire told investors that insurance data had provided a useful feedback loop for manufacturing process alterations
Telematics insurance data collected via electric vehicle manufacturer Tesla’s proprietary insurance offering has been used to alter the production of vehicle parts.
Speaking during a fourth quarter and full year earnings call last week (25 January 2022), Tesla chief executive Elon Musk said that Tesla Insurance allows the company to minimise the cost of repair for its vehicles.
He explained: “It is giving us a good feedback loop into minimising the cost of repair of Teslas – for all Teslas worldwide – because we obviously want to minimise the cost of repairing a Tesla if it’s in a collision.
“Previously, we didn’t have good insight into that because other insurance companies would cover the cost – and actually, the costs in some cases were unreasonably high.”
Musk added that most accidents required relatively cheap repairs to “a broken fender or scratched side of the car”, for example.
He explained that the company’s insurance offering had allowed Tesla to “adjust the design of the car and made changes in the software of the car to minimise the cost of repair”.
The intention behind starting its own proprietary insurance company was to reduce the “total cost of owning a Tesla”, according to Musk.
According to Matt Munro, chief executive of telematics brokers IGO4, driving data collected by vehicle manufacturers is the “Holy Grail” for telematics-minded motor insurers, as it skips the cost of installing a telematics device.
Steady growth
During another earnings call in April 2022, Musk revealed key details about the firm’s new insurance product designed specifically for Tesla drivers that utilises telematics technology embedded into all Tesla vehicles.
Read: Telematics uptake rises by nearly 30% among under 30s – GlobalData
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Tesla Insurance is currently only available in a selection of US states but has been designed to reward safe driving, with monthly grading of driving performance used to influence the following month’s premium.
During the most recent earnings call, Tesla did not release official financial details of how its new insurance product was performing.
However, chief financial officer Zack Kirkhorn did confirm that the vehicle manufacturer’s insurance business was growing at a rate of 20% per quarter and was projected to hit $300m (£248m) annual gross written premium by the end of the current financial year.
“[The insurance business] is growing faster than the growth in our vehicle business,” noted Kirkhorn.
He added that, in the states in which Tesla operates, around 17% of customers driving Teslas were using Tesla Insurance products to cover their vehicles.
“We see most of the adoption occurring when folks take delivery of a new car, as they’re setting up insurance for the first time as opposed to going back and switching when they already have insurance set up,” he explained.
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