Insurance proposed by Tesla has upset Warren Buffet.

Insurance proposed by Tesla has upset Warren Buffet. The idea that they are considering setting up Car Insurance for all of their products Model S, X, 3 and Y.

The terse rebuke by Mr Buffett shows that yet another industry can suddenly see that Musk has them in his targets.

With the common complaint that the insurance cost to cover a Tesla is more expensive often being reported. Although when you compare Apples to Pears then what do you expect? A Ford Mondeo at £23k against Model 3 performance model £47k. Yes, one would think the insurance would be more. 0-60 of the Ford Mondeo is sub 9 seconds against Model 3 getting there in under 3.2 seconds. Yep, there will be a difference! Both on the cost of the car and its ability to get to 60 quicker. Quicker equals more expensive insurance or the correct premium. Even the slow Model 3 gets there in 5.3 seconds. Not slow! For me a Directline Insurance with model 3 extended with RP of 47+K came in at £460 per year seem reasonable for 12,000 miles a year.

However, Musk has smelt an opportunity for Tesla to insure the whole fleet under the Tesla banner.

Insurance companies work on the driver’s experience and ability of he or she has shown not to hit other cars and the actual cost of repairing/replacing the car if it all goes very wrong.

Tesla has odd 500,000 plus cars that are increasing by 5,000 a month that it knows exactly what is happening in each. As they are used for gathering data for the self-drive feature when that is possible in the future.

Insurance companies themselves would fall over themselves to have this data on each of us. Hence, the small black boxes that are being installed in newly qualified drivers in the UK to drag down their £3,000-9,000 premiums to something that the recently pass driver can afford.

Tesla knows the cost of repair and can make this at cost plus a small margin. They also know the true cost of a new car. So, they are already in a strong position as a 20% markup is not unexpected in the future. They can then roll out the Taxi element without the cost to the individual owner as the cost will be shared over the complete fleet. They can salvage un-broken parts from the fleet and service the damage vehicles.

The other benefit is the constant revenue stream coming into Tesla rather than the insurance companies. You sort of wonder why other car manufactures did do this in the I.C.E. or another case of the Desiel Gate cartel? Either way, I can’t really see many downsides to this. The repair network is still there for ICE cars. So, all they need to do is provide the parts the next day and I can guess who would be up for that business. Starts with “A” and in the jungle in nature.

No messy Taxi insurance needed when being used by the Tesla Click and Collect the customer service. Just in case Warren Buffett was only concerned about Tesla they should be. As Amazon has also made noises on this car insurance option as well. It’s only an extension to their popular PRIME offering. It’s a Trillion Dollar industry that is ripe for the picking. It will have the effect of Amazon on keeping pricing down. What’s not to like?

Until next time.

UPDATE: Well it happens on the 22nd August 2019 and yes it was a bit wobbly at the start and rates supposedly were not competitive. But,  they grant you better access to parts than normal. I can see these complaints disappearing. Ho Hum Mr Buffertt. Time to look at another sector. This one had just been Amazoned!  https://www.theverge.com/2019/8/29/20839607/tesla-car-insurance-broken-high-rate-quotes-california

 

About tagware

I've worked in IT for over 30 years. As the owner of one of the earlier AutoDesk Dealerships, when Richard Handyside was the main UK guy in The Cut! We supplied complete CAD, Networks and visualisation systems to Corporate clients such as RIBAS, Channel 4, NHS, BBC, Merrill Lynch, COMET Plc, Morgan Stanley too mention a few. We also developed the graphical ADB system for the Department of Health and a graphically lead Asset system for Merrill Lynch. Subsequently became a contract IT Consultant in both Developement and Production area's for both Large and small businesses. Which is what I'm still doing.
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