A parent at my son’s preschool drives a Tesla. It is creepy because it’s so eerily quiet. He saw me staring, my brain trying to wrap itself around the silence. “There’s no engine,” he said, smiling. Of course, I knew that, but it was still strange not hearing some sort of purr from the engine.
Tesla may make electric cars that make no noise but it’s also stealthily entering the car insurance market. The company, according to The Wall Street Journal, says it’s creating its own branded insurance programme – a move which it deems to be an opportunity to offer a lower-cost product to drivers of the vehicle.
Apparently, Elon Musk – Tesla’s chief executive – has been working with a unit of Virginia-based Markel Corp and another company, which hasn’t been named in the press, to offer cover to drivers of the electric vehicles.
But the insurance comes with some rules and regulations. Drivers have to “agree to not drive the car in a crazy way.” If they ignore the advice their rates would either increase or some reports hint that cover may not be offered come claim time.
It’s understandable why Tesla wants to create its own type of insurance product. The Wall Street Journal points out that a report from a consumer insurance information website says that the Tesla Model S is ranked as the 15thmost expensive car to insure in America. Tesla Drivers pay as much as $3,300 (£XXX) on a yearly basis and this is because of the technology features of the vehicle and because the parts are expensive.
This could clearly prove to be a barrier to consumers adopting the Tesla on a grand scale. It’s simply too expensive to insure. And there’s a good reason behind that too. Tesla hasn’t made the news for the best of reasons. According to Whatcar.com, nearly 38% of the Tesla Model S owners reported faults with the car. Then, of course, there’ve been concerns about the car’s safety following reports of the Tesla vehicles catching on fire.
It certainly makes for dramatic news but that only tells half the tale. According to the National Fire Protection Association in the US, about 174,000 vehicle fires were reported back in 2015 – and the majority of these cars where all gasoline powered.
Meanwhile, CNN Business says that Tesla claims that petrol powered cars are 11 times more likely to catch on fire than a Tesla. What’s more, Teslas on the road have been driven a total of 7.5 billion miles and only 40 fires have been reported. When you put it in that context, electric powered Tesla cars seem far safer by comparison.
Experts reckon the ability to offer cheaper premiums is made even more possible because the offering will tap into internal data from the AutoPilot driver-assist system.
If what they say is true, Tesla’s car insurance product could well disrupt and offer a far cheaper alternative and not because they need to only tailor-make cover to suit their customers – but because they can! And what’s to stop them offering the same deal to other drivers?
Remember, Elon Musk is a serial entrepreneur. An electric vehicle is not the only business idea he’s had over the years – think SpaceX and PayPal – and with the connections, he has why would it be so unreasonable to think that he’d want to dip his toe in the insurance world too?
With the technology at Elon’s fingertips, those who don’t embrace tech and innovation may well have cause for concern. We may not be close to having driverless cars worldwide – but what about worldwide cover from an innovative company that knows how to base its risk on science?
