Musk moves into insurance to cut premiums for Tesla owners

Tesla is in the early stages of becoming a fully-fledged motor insurer, in a rare move by a carmaker to break into the insurance market as it attempts to bring down the cost of premiums for owners of its electric vehicles.

The electric car maker announced last week that it would begin offering auto insurance to its customers, but only acting as a broker in the state of California. Speciality insurance company Markel writes the underlying insurance policies.

However, Tesla has told the Financial Times that it is “taking steps” towards becoming an insurer in its own right and “taking on these responsibilities in the future”. Using its own balance sheet to underwrite car insurance would be a highly unusual, if not unique move by a car manufacturer.

Tesla chief executive Elon Musk, who is known for his ambitions that span industries from solar power to space travel, has complained in the

past about the high premium paid to insure Tesla cars, which range in price from $38,000 to more than $80,000. He said in April that Tesla was hoping to launch an insurance programme by as early as May, adding that “it will be much more compelling than anything else out there”.

He also suggested that Tesla’s access to data captured by the cars themselves would give the company an edge in pricing over third party insurers: “We essentially have a substantial . . . information arbitrage opportunity where we have direct knowledge of the risk profile of customers and basically the car.”

Tesla said it used “anonymised fleet data” but not driver-specific data to assess risks.

The company’s announcement of the current programme said it was “designed to provide Tesla owners with up to 20% lower rates, and in some cases as much as 30 per cent”. The lower price also reflected “Tesla’s active safety and advanced driver assistance features”, it added.