Farmer's Insurance has J.K. Simmons of "Law & Order" fame hawking auto insurance. Allstate taps former prime time TV president Dennis Haysbert as the man consumers should trust with their cars. But can they beat the new sales pitch from Tesla chief Elon Musk?
On Wednesday Tesla announced it is now offering its own brand of auto insurance in California for Tesla cars. CEO Musk first teased the idea in April and the automaker said on its website "it will expand to additional U.S. states in the future."
Tesla Insurance, as it’s called, is “a competitively priced car insurance offering designed to provide Tesla owners with up to 20% lower rates, and in some cases as much as 30%,” thanks to safety features like Autopilot, according to the company’s announcement.
Tesla's entry into the auto insurance field received a warning and a welcome from its competition.
"Auto insurance is one of the most competitive marketplaces in our economy and America's mutual insurers welcome those automakers that are offering coverage,” a spokeswoman for the National Association of Mutual Insurance Companies, told Fox Business Wednesday. “Any company offering that coverage, however, must be subject to the rigorous solvency and consumer protection regulations adopted by the states to ensure they will be there when needed."
For its part, Tesla promised it is offering "comprehensive coverage and claims management to support our customers." And in a bold stroke, the company added, "Tesla owners in California can purchase a policy in as little as one minute.”
Or maybe it is more than a minute because, within hours of the announcement, Tesla’s official Twitter account revealed: “we're making some updates to Tesla Insurance and will be back online shortly.”
Musk had previously stated that the electric car company was poised for an easy transition into the insurance industry, as it already has “direct knowledge of the risk profile of (it’s) customers.” Musk maintained that Tesla’s advanced safety features, like the advanced “Autopilot” driver assistance, allows the company to keep insurance costs low.
However, Tesla stressed it “does not use nor record vehicle data, such as GPS or vehicle camera footage, when pricing insurance” in its FAQ webpage.
The move into car insurance comes at a pivotal time for the company, with Tesla stock down 10 percent for the month and more than 35 percent year-to-date. Meanwhile, the current cost to insure a Tesla vehicle is already higher than average when compared to non-electric cars, with the Model S being ranked the most expensive vehicle to insure last year, according to the Insurance Institute for Highway Safety.
But Tesla believes its knowledge of its product will help offset these high insurance costs as it begins to provide its drivers with their own insurance coverage.
“Because Tesla knows its vehicles best, Tesla Insurance is able to leverage the advanced technology, safety, and serviceability of our cars to provide insurance at a lower cost. This pricing reflects the benefits of Tesla's active safety and advanced driver assistance features that come standard on all new Tesla vehicles.”
Tesla’s insurance policies could prove to be a financial windfall as the company looks to sustain profitability, however, the move could also be a bit of a gamble, as mounting claims could conceivably overwhelm the company’s cash reserves.
Tesla Insurance offers a monthly payment with no hidden fees or charges, according to the company’s announcement, with customers being able cancel or change their Tesla Insurance policy at any time.