Back on August 23rd, 2019 Tesla launches insurance for the first time in California. In the future, the company plans to expand its insurance to additional US states. Tesla already has solar panels, power, walls, Power, Packs, mega packs and vehicles. So the question is: why would a long must decide to go for the insurance industry in this video we're gon na unpack, Tesla's secret plan for insurance? In order to understand why pasla is going into the car insurance business, we need to understand how an insurance company works out of every million people, a certain number of people get into a car accident.

This number goes up and down based on different factors. Given this insurance companies can charge premiums based on these factors in order to guarantee a profit for them. In the long run, statistics work where, in the short term anything can happen, but in the long run the percentage of people that get into a car accident will eventually converge with the data insurance companies have the more expensive a car is the more it would cost To repair the car, therefore, the premium would be higher if a car insurance company charges too much, they won't get any business. If the car insurance company charges too little, then they won't make profits.

The more data an insurance company has about a specific person, the better they can pin down the exact amount of charge in the case of car insurance company's data is ultimately, the money makers survives Tesla, offering insurance every quarter Tesla releases. How often their vehicles go into an accident with the unit being millions of miles? I plotted this data on a graph and compared it with the US average for how many accidents occur. Per million of miles, as you may have noticed, the data for Tesla's with autopilot turned on is the safest by a large margin. The data for Tesla's with safety features, but not autopilot, is slightly safer than a Tesla without either.

Last but not least, those that drive Tesla's are in general, far safer than the average driver in the US. However, too, many of you that likely wasn't a surprise. Everyone has this public data, the auto pilot discount. We know that Tesla has the data on how often a driver uses autopilot and safety features.

We also know that those that use these features are generally safer. So why not give this counts based on how often someone uses autopilot or Tesla's safety features? That's exactly what Tesla has done. Tesla has openly spoken about how they factor in how often someone uses autopilot and safety features in order to determine what their insurance premium is. This allows Tesla to out-compete competitors from a pricing standpoint, as the other insurance companies will likely charge a higher price that those that use auto-pay, often due to the fact that they don't have this data.

Usually, people try to get quotes from multiple car insurance companies and they choose which insurance company charges, the least Tesla's ability to use autopilot and safety feature data will help them be the company that charges the smallest amount, at least when it comes to those that use Autopilot and Tesla's safety feature often Tesla insurance has openly told clients that they would be better off going to a traditional insurance company. These clients are the people who drive pass laws without autopilot or safety features. However, this isn't the only advantage Tesla has over other car insurance companies. Lowered Commission Tesla has far lower Commission on its insurance products due to the fact that it can digitalize such a large portion of the insurance process using the formulas it can derive based on the data.

It has sentry mode with the traditional vehicles. Items and vehicles are stolen. Quite often, however, Tesla's vehicles are far safer when it comes to theft. Almost every time Tesla's are stolen, they have recovered cash loss.

Sentry mode technology is continuing to become better and better making it nearly impossible to bypass a system. Not only that, but Tesla's also have trackers that can locate the vehicle when stolen, cheaper repairs. When insurance companies repair a vehicle, they must pay for repairs to our charge at a premium in our design, the profit, for example. If you go to a repair shop, they may charge you double what it costs for them to repair the vehicle in order to have a 50 % margin.

On the other hand, pasla insurance will be able to repair Tesla's at a fraction of what they normally charge. For repairs, special coverage Tesla has a multitude of special coverages, but the most important one out of these is autonomous vehicle owner liability, which covers all damages done by autopilot when autopilot causes a car accident. While traditional car insurance company would still treat it as if the driver was responsible for the car accident, however, since Tesla has the data on whether an accident was from autopilot, they have the ability to take responsibility and cover all costs. This will incentivize Tesla insurance customers use autopilot more often leading to more safety for the driver and, as a result, more profit for Tesla insurance.

Not only that, but by incentivizing autopilot Tesla obtains more autopilot data, which can be used to continue improving autopilot. Another special coverage from Tesla is cyber identity fraud. Expenses. Tesla knows it is responsible for digital identity.

Fraud will cover up to $ 15,000 per occurrence. Some less important special coverages also include wall, charger coverage and electronic key replacement driver behavior. Along with what we talked about earlier, Tesla also has data on what the drivers behavior is like. For example, how aggressive is the driver? How often does the driver actually use the lane changing signal? Other insurance companies attempt to obtain this type of data by offering a telematics device that you can plug into your car.

But since it's optional, not many people do it. So once I locate the obd2 or the deutsche connector of the vehicle, I will simply install the device into the port. The device will beep six times as adjusted to verify a good, solid, install as a result. This once again leaves Tesla insurance ahead in terms of data as more Tesla's go on the road.

The market for Tesla insurance will continue to expand overall Tesla insurance is a win-win for both the customer and the company. It's not costly for Tesla in terms of R & D, as the company can visualize most of the process and it incentivizes more people to buy Tesla's vehicles by improving customer satisfaction. However, some people think Elon Musk should stay away from the insurance business with all due respect to Warren Buffett. Undeniably, one of the greatest investors in history.

He has said that Tesla wouldn't be able to perform well in the insurance industry. Elon Musk says the Tesla will start to offer insurance for its cars and can price it better than a typical insurance company because of the data it collects from all the vehicles on at the road. You've talked about the threat of autonomous vehicles on the insurance business, but what about the threat to Geico of automobile companies themselves getting into the insurance business and on a very similar topic. Tesla recently announced that they're shifting to an online-only sales model and several traditional auto dealerships are also reducing their property holdings, as car buyers increasingly used smartphones and the internet to shop for cars.

What does this portend for Berkshire, Hathaway, automotive, yeah? Actually, General Motors the company for a long time about motors insurance, company and various companies who have tried it. I would say that the success of of the insurance company of the auto company is getting the insurance business are probably about as likely as this success of the insurance companies getting into the auto business. I worry much more about progressive than all of the auto company possibilities that I can see in terms of getting an insurance business. It's not an easy business at all and I would bet against any company in the auto business being any kind of an unusual success.

The idea of using telematics in terms of studying people studying people's drivers have assets, that's spreading quite quite widely, and it isn't important. It is important to have data on how people drive how hard they brake, how much they swerve all kinds of things. So I don't doubt the value of the data, but I don't think that the the auto companies will have any any advantage to that. I don't think they'll make money in the insurance business.

The using the Internet to shop for cars is, like you know, using in or shopping for everything, it's another competitor and there's no question that people will look for better ways of the gross margin on news. Cars on new cars is about six percent or thereabouts. So there's there's not lots of room in the game, but but that's that will be a method and that will solve some cars and that there are. You know it's it's another competitor, but I don't think it.

It destroys the auto dealer who takes good care of the customers, and it is there to service the customers. No, it's not a it's, not an overwhelming threat, but it's obviously something that's going to be around and we'll sell some cars Charlie again, nothing. Okay, please consider supporting me on patreon in the description below it really helps me keep making videos. Also, let me know what you think about Tesla insurance in the comment section below, if you guys enjoyed, please hit the like button and subscribe.

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