Thread by @finshots

Insurance is not something we immediately associate with #Tesla.

And yet, during an October 2020 earnings call, Musk said auto insurance could someday account for 30-40% of Tesla’s business!!

Will Tesla's insurance business blow up?🧵(1/n)

The auto insurance industry is worth a whopping $288.4B and has had average growth rates of 2.7% p.a. the last five years.

Tesla entered the insurance business back in 2019 and currently offers coverage to Tesla owners in 3 states, namely- California, Texas, and Illinois.

It’s no secret that Tesla EVs are not the most pocket-friendly. And a 2018 USA Today survey revealed they’re quite expensive to insure as well, with Model S being the costliest.

Now, Tesla’s auto insurance helps it do 2 things: making car insurance cheaper thereby boosting car sales as ownership costs reduce.

But how?

Well, Tesla has adopted the concept of usage-based insurance. Under this, the owner pays monthly premiums based on ‘real-time driving behavior’ and not age, gender, past driving records, etc.

The driving behavior is then used to calculate monthly ‘safety scores’, and users are given premium discounts accordingly.

With this, drivers with average safety scores could save 20-40%, and ones with the highest safety scores could save 30-60% in premiums.

Real-time data can also help Tesla gauge the performance of its vehicle technology and make changes to perfect its car design. This can, in turn, help sell more cars and hence more insurance.

There are roadblocks in terms of selling it to customers and handling higher-than-average customer complaints compared to other insurers.

But, the claims process could be faster since the manufacturer and insurer are the same.

Further, Tesla's vertically integrated supply chain can provide a long-term advantage in the sector with interesting future prospects! Thoughts?

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Finshots too is helping people buy health & life insurance for their families with Ditto.

Check out Ditto- bit.ly/3q5dBtk