Tesla CEO Elon Musk weighed in on the automaker’s new insurance plans in a recent All-In Podcast last month, as reported by Bloomberg. In the conversation, Musk talked about the use of real-time driving data to determine safety scores — a move that both lowers Tesla’s rates versus typical insurance rates and incentivizes drivers to drive more safely.
The safety score in question is measured using five pieces of criteria: forward-collision warnings per 1,000 miles, hard braking, aggressive turning, unsafe following, and forced Autopilot disengagement. User safety scores start at 90 out of 100, going either up and down based on driver behavior. This model also excludes factors traditional auto insurance companies use, such as age and credit score.
Part of the benefit of Tesla’s insurance model is how it simplifies the process of determining rates, as distilled from the safety score which can be measured based on real-time driving. As explained by Musk in a recent interview with All-In, the current auto insurance system isn’t very efficient, by comparison.
“The car insurance industry is incredibly inefficient,” Musk said at the recent All-In Summit Miami event he joined through an online livestream. “You’ve got so many middle entities, from insurance agents all the way to the final reinsurer, there’s like a half-dozen companies each taking a cut.”
Currently, Tesla’s insurance services are only available in Arizona, Colorado, Illinois, Ohio, Oregon, Texas, and Virginia, in addition to California, in which the automaker doesn’t utilize real-time driving behavior.
Upon entering Texas, Tesla CFO Zachary Kirkhorn — internally thought to be the passionate motivator for the insurance project — says the automaker’s insurance had immediately become the second-largest insurer in the state. While Tesla only offers its insurance services in eight states at the moment, coverage is expected to reach at least 80 percent of the U.S., before expanding internationally.
Only time will tell how Tesla’s insurance plans will really affect driver safety, especially as they expand to much of the rest of the U.S. But the incentive for policyholders to drive well for lower rates seems impenetrable, and with drivers already accustomed to using the Tesla mobile app and the company’s entire ecosystem, it’s likely to be heavily utilized by new customers in the years to come.