Tesla Charges Into Auto Insurance Market

Strictly producing cars has proven to not be enough for electric car company Tesla. The revolutionary brand is now trying to take the auto insurance world by storm.

In 2019, the automaker began offering its insurance to Tesla drivers in the state of California. In 2021, it expanded its operations to Texas. Tesla Insurance pairs with underwriting companies operating in these states in order to provide coverage. 

This move by Tesla puts CEO Elon Musk in competition with auto insurance giants such as Geico, State Farm and Allstate. It is no secret that Musk can maneuver around the business world pretty well, but when it comes to challenges that are auto insurance-specific, there may be some hiccups along the way.

Tesla Has Its Hands in Everything

The Tesla empire runs deep in the automotive industry; with the addition of auto insurance to its portfolio, it runs a vertical game.

Tesla not only owns manufacturing for its vehicles but also has a hand in distribution, repair facilities and now insurance – pretty much every industry affecting a vehicle in its lifetime. It begins at its manufacturer, moves into a dealership for distribution, eventually becomes insured and undergoes repairs when needed. 

With a hand in pretty much everything, Tesla is capable of controlling certain aspects of a vehicle’s life. Offering auto insurance and handling accident claims may be the cherry on top for the electric car empire if they step into the role.

Where you file your claim, the shop you take your vehicle to for repairs and the adjuster you eventually speak with could possibly all be operating under one corporate entity. No automaker has done this before.

A Brand With an Established Base

Tesla comes with strong brand recognition. Unlike other car brands, Tesla holds a steady stream of “fans” and customers thanks to its appealing, aspirational public perception.

But does this image hold up when it comes to the world of auto insurance? Some research has found that consumers want a strong, bold provider that also has competitive prices.

Tesla can offer this and, for now, this approach is working for the company. With its shine and products with high price tags, Tesla attracts affluent customers. These customers typically have low-risk driving records which, according to various research, mean fewer claims. 

While other insurers in the game spend millions every year on marketing, Tesla is coming in with this prebuilt and boastful image. Consumers shopping for auto insurance have countless quotes available with just as many policies on the market.

But with Tesla already being on so many people’s radars, brand recognition plays into Musk’s favor. This could make an already competitive market even tougher despite the coverage being limited to Teslas.

The Bumpy Road Ahead

For all the positives Tesla and its future insurance endeavors have, there will be some bumps in the road.

It can happen to every brand in every industry, and Tesla is not without its own fair share of struggles. Currently, Tesla vehicles are seen as modern luxury items appealing to a specific crowd. 

But this elusiveness threatens to taper down as Tesla eyes more affordable vehicles. Soon, that client base will be shifting. Tesla Insurance could potentially thrive in the insurance world just fine with the low-risk driver base it already attracts, but once mass-market consumers are added, things may get a bit troubling.

Fadi Sneineh, Auto Navy CEO

However, Tesla Insurance is still in its very early stages, only supplying insurance to Tesla vehicles in California and Texas, so it’s hard to definitively say what Musk has on his hands right now.

It holds some potential but is not without its flaws. Expanding the brand and making it more inclusive for drivers can help, but they need to be ready to adapt.

It is a fascinating time to witness the leading electric car maker stepping into the auto insurance industry.

Fadi Sneineh (pictured above, left) is CEO of Insurance Navy, an auto insurance brokerage.