Wednesday, October 23, 2019

Tesla Launches Auto Insurance in California

Tesla, along with its high-profile CEO, are frequently in the news. The coverage is both positive and negative, as is to be expected when the CEO is worth over $19 billion and the car seems to be where the future of the automobile industry lies. Recently Mr. Musk’s name was a hot topic in the insurance industry because of the launch of a Tesla insurance product. This is being done via a partnership with an established and well-known insurance company. An emerging auto company entering the field of insurance may seem odd, but Mr. Musk feels that it is the high cost of Tesla insurance that is a major factor in limiting the growth of Tesla sales.

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The High CostofInsuring Tesla Vehicles

On the face of it, the high cost of Tesla insurance may not appear to make sense. No insurance company disagrees with the claim that vehicles with driver assistance systems are among the safest on the road. In other words, the number of insurance claims for these vehicles will be less than those for traditional autos. However, the problem is that the size of the average claim may be significantly higher for a Tesla than for other cars because of the high cost of the autonomous driving technology. When an accident does occur, the cost of repairs or replacement could be very high.

In California, the cost of insurance through the Tesla insurance product may be up to 20% lower and in some cases, as much as 30%. Tesla says it is able to offer these prices because the company knows its vehicles better than anyone else and is able to leverage that knowledge to offer lower insurance costs. The counter-argument is that while Tesla may know its vehicles best, how does that translate into a detailed knowledge of their drivers? Even the safest of vehicles can be dangerous in the hands of the wrong driver. Has the huge auto insurance industry, with so many years of experience behind it, got it wrong when it comes to Tesla insurance pricing? The jury is still out on this but that does not mean that Tesla owners need to blindly accept that their car insurance will be very costly.

The fact that insuring a Tesla is expensive cannot be argued. That does not mean that a Tesla owner, or the owner of any car for that matter, should blindly accept that insuring his vehicle is going to empty his wallet. Auto insurance is a highly competitive business with every insurance company offering a variety of coverage plans and options, all designed to maximize policy sales. Add that to the fact that insurance needs can differ widely from car owner to car owner. Only an insurance broker, a company that represents a number of insurance companies, will have auto insurance policy choices and options to offer its clients that will enable them to choose the policy that is right for their needs. Automobile technology is rapidly evolving and new vehicle offerings will keep appearing. Before making the decision to buy, contact an insurance professional to know what the insurance will cost you.

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