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Tesla owners should pay more for insurance, AAA says
- Overtonwindow 9y agoBecause less maintenance? I don't see the logic here. Does AAA have something to gain by requiring anyone to pay more insurance?
- hkmurakami 9y agoThey have a major auto insurance operation.
- rory096 9y agoBecause "Model S and Model X had abnormally high claim frequencies and high costs of insurance claims compared with other cars in the same classes." AAA is the insurer — they obviously directly gain from increasing premiums (all else being equal) and lose when premiums are lower than the insured risk.
- tptacek 9y agoAuto insurance is fiercely competitive, and margins are relatively low, and companies spend a lot of money on overhead and cost of customer acquisition, so AAA has a lot to lose by unilaterally raising rates.
- Spooky23 9y agoNot really, Tesla drivers will just flock to other insurers who don't rate their cars appropriately. Insurance is regulated, competitive and low margin.
- paulddraper 9y agoInsurers don't pay for maintenance. They pay for collision repair and medical. And data say those are more. No real surprise here. Expensive luxury/sports cars.
- dwtdfw 9y ago> Does AAA have something to gain by requiring anyone to pay more insurance? If their premiums are too low, they will lose money when insuring Tesla owners. According to AAA, their data shows that their premiums on Teslas were set too low, and need to be raised. If costs to insure Tesla are not, in fact, higher, then other insurers could keep their prices lower. It will be interesting to see if other insurers follow suit.
- JKCalhoun 9y ago> Collision damage claims for large luxury vehicles are reported 13 percent more frequently than average, and those claims cost about 50 percent higher than average, the Highway Loss Data Institute said. The rear-wheel-drive Tesla Model S is involved in 46 percent more claims than average, and those claims cost more than twice than average, it said. Go with the data then. Perhaps luxury car owners are more likely to make a claim from even a minor scratch? And since they are "luxury cars" there is more of a premium on repairs? Just throwing out guesses, but as I say they have the data and should charge as appropriate.
- CoolGuySteve 9y ago> Tesla said the high rate of acceleration in both the Model S and Model X make it "false and misleading" to compare against vehicles such as the XC70
- Judgmentality 9y agoThat's a bullshit response from Tesla, roughly equivalent to 'our cars are special snowflakes and should not be compared to other cars (but only when it makes us look bad)' - I see zero reason to believe that faster acceleration means fewer claims and would love to see their evidence that contradicts what this article states. Their owners are filing more claims and more expensive claims. The way insurance works is those people pay a higher rate (or insurance loses money on them).
- ars 9y ago> I see zero reason to believe that faster acceleration means fewer claims I think what they mean is that the fast acceleration puts the Tesla cars in the "luxury" bracket, but really they should be in a regular bracket.
- myko 9y agoI think Tesla is arguing the opposite? AAA is comparing the cost of repairs of Tesla's do cars that cost less than half as much. Tesla is saying their costs should be compared to other cars of comparable value (other high end luxury vehicles).
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- tuna-piano 9y agoTesla's response is pretty non-sensical. Tesla basically says the vehicles they're being compared to aren't real competitors, and that their cars are very safe. Both of those things may be true, but it doesn't respond to the institutes' point: "In the large luxury SUV class, where collision coverage claim frequency is the same as the average for all vehicles and the cost of claims is 43 percent above average, the owners of the Model X file for claims 41 percent more often than average, and those claims cost 89 percent more than average, according to the institute."
- Animats 9y agoAlso "the rear-wheel-drive Tesla Model S is involved in 46 percent more claims than average, and those claims cost more than twice than average." The big problem seems to be cost of repair. Tesla owners have complained about the high cost and poor availability of body parts.[1][2] (I miss the 5mph bumper standard. For a few years in the 1980s, US cars were required to have bumpers that could withstand a 5mph collision with no damage. I have a Ford Bronco which complies with that. It was once rear-ended by a SamTrans van. The van's nose and front end collapsed, as it should, for crush depth. Damage to the Bronco was a bent bracket for the trailer power connector.) [1] https://electrek.co/2017/03/09/tesla-parts-repairs-lead/ https://electrek.co/2017/03/09/tesla-parts-repairs-lead/ [2] http://jalopnik.com/teslas-potential-body-shop-backlog-nightmare-1793269803 http://jalopnik.com/teslas-potential-body-shop-backlog-night...
- ryandrake 9y agoI'm curious as to why Teslas are involved in 46% more claims than average. Are the cars shopping cart magnets or something? Are they falling apart? Do Tesla owners get into more accidents than non-Tesla owners? Or do they just file claims for every little scratch and paint chip?
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- marvinv3 9y ago
- wjnc 9y agoActuarial pricing is pretty simple in it's basis. Estimate claim frequency and claim severity (loss) per model, age group, state, [100s more categories]. Use proper statistical distribution. Apply markup for costs. Apply commercial markup or discount when comparing to competition. Repeat yearly. Since claim size is highly skewed, don't trust the new entrant to have enough data. Often 5+ yrs of data are used. So a new model / development like Tesla will give you headaches. Usually some leap of faith and pressure from product development will get the early premiums coming in too low, since everyone wants a piece of the pie. I've seen that played out in many markets. There are lots of interesting things going on in the data, so a proper PHYD-scheme should be able to beat old school pricing rather quickly. But then again, adoption of that is usually in sub-markets that are really different (f.e. young drivers in a direct market are really not what you want dominating your portfolio). With regards to Tesla's reply. AAA will be modelling on an individual brand basis. They are just using the data as a outside source comparison. The Volvo comparison is not really important. Perhaps in the group F1-cars for regular people they wouldn't stand out, but that doesn't change the equation for AAA. Even with low N, if all the simple claims come in 1000s $ higher, you don't need to be able estimate the entire distribution to expect a loss leading proposition.
- scarmig 9y agoWhy don't companies price new models to the market relatively high instead of low? That seems like they're leaving a lot of money on the table. And I can't see why an actuary would care about pressure from product. Do you mean from the car manufacturer, or some internal insurance product team? Even if it's internal product pressure, I don't see why any insurance company would do anything but give the actuaries a massive amount of say. That's the core competency of insurance companies.
- oe 9y agoInternal pressure probably. Not all insurance products are profitable. Especially big insurers are willing to take a hit to get in "good" customers, for example rich Tesla drivers. Then cross sell other products and raise the price of the original insurance yearly.
- revelation 9y agoI have no idea what on earth Tesla is trying to argue here. "Among other things, it compares Model S and X to cars that are not remotely peers, including even a Volvo station wagon" Okay? I don't see how any of that is relevant. Insurance prices should be based on risk, and risk is probability times severity.
- loourr 9y agoThey're arguing the insurance costs will always be more for higher end cars, so comparing the cost of repair to a much cheaper car makes no sense. If there is a car 1/10th the cost of a Tesla but the Tesla is 3x as safe, you would still expect the Tesla's insurance to be more.
- igamer 9y agoAs a Tesla owner I found anecdotal evidence of one of the core ideas here: Tesla's just cost more to repair. My wife had some guy back in to the front of our car - she was completely stopped at the time. Parking lot collision and the other guy just wasn't paying attention, "crash" speed was probably < 4MPH. It ended up costing him $13K, although clearly his fault I felt bad for the guy. He managed to crush the instrumentation cluster in the nose and warp the hood and front end (remember, aluminum). Also the redonkulous torque and speed are abound to get some people in trouble, as fun as they are.
- protomyth 9y agoDid you have to take the Tesla to a certified repair shop? If so, that is going to push the insurance rates up when the insurance company cannot use their own favorite body shops.
- igamer 9y agoYes, because of the unusual materials etc. Regular shop wouldn't have been able to do if they wanted to (and Tesla is picky about verifying shops). To be clear it was easy to find a certified shop, and the entire experience felt well cared for by Tesla as is their rep. But it was a ton of cost (to him) for what amounted to a fender bender.
- posguy 9y agoWow, I get that a Tesla costs more than the median yearly income in the US, but $13k for a sub-10mph crash seems excessive. Repairs for a similarly priced BMW or Volvo would likely be less, knowing a few people involved in accidents with expensive vehicles like those. Meanwhile, I'm gonna stick to buying used for less than the cost of your accident :P
- nullc 9y ago> I'm gonna stick to buying used for less than the cost of your accident The cost here wasn't to the Tesla driver, but to one of the people sharing the road with them without any say in the matter. :) Part of the cost of an expensive to repair car is an externality on all the other drivers.
- loourr 9y agoTesla owners in fact already pay less insurance because of agreements the company has made with certain insurers. The reason they are able to make such agreements is that the cars are objectively safer.
- FireBeyond 9y agoIf they were objectively safer, all insurers would have lower rates for them based on the actuarial data. "Agreements with certain insurers" is a commercial, promotional consideration, and has precisely zero correlation with your claim that it shows they are "objectively safer".
- loourr 9y agoWhile commercial and promotional consideration's definitely come into play if the insurers were losing money I highly doubt they would be doing it, so to say there's zero correlation seems strong/wrong to me. Tesla's are objectively safer according to measurements by NHTSA but that doesn't necessarily mean that all insurers would charge less. For one there is a long time delay in building an accurate insurance model. Also, insurers are not altruistic, they will price at whatever the market will bear so until it becomes very clear that Tesla's cost less or all of the competition starts to do it, you won't see prices come down.
- legolas2412 9y ago> I highly doubt they would be doing it, Unless the said "agreement" involved Tesla slipping them money. Essentially you paid for your insurance upfront to Tesla. Yes, Tesla are safer. But this doesn't mean 1) Tesla have less accidents 2) Tesla repairs are cheaper
- briandear 9y agoThe cost of comprehensive/collision coverage has nothing to do with safety. Bodily injury insurance sure, that's lower if the car is safer but comprehensive/collision premiums have nothing to do with safety.
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- pfarnsworth 9y agoI know a few people with Teslas. One got a fist-sized dent in the back door and it cost $6000. Another got into a fender bender and it cost $30,000 to fix. Im surprised insurance isn't higher already.
- loourr 9y agoIt needs to be considered within the bracket of car you're dealing with. Insurance will always be higher for higher end cars. I imagine putting a dent in a Rolls Royce is not a cheap matter either. The big costs in insurance though I think are medical bills, which could run well above the total cost of the car. In this respect, Tesla's should be much cheaper to insure then say a Bugatti.
- briandear 9y agoWhat is the safety record of a Bugatti?
- myko 9y agoIt already is. Tesla is arguing that the Model S shouldn't be compared to cars like the 38k XC70 because it is in a higher (more expensive) class, which is what AAA is doing.
- Animats 9y agoThat seems to be a common experience.[1] Dent repair on aluminum is difficult. The Tesla Model 3 is said to be mostly steel. That's common as production volume increases; aluminum or Fiberglas is cheaper in low volume, but if you're making enough cars to justify the huge stamping dies and presses required, steel is cheaper. [1] http://www.greencarreports.com/news/1096220_tesla-model-s-aluminum-body-why-repair-costs-are-higher http://www.greencarreports.com/news/1096220_tesla-model-s-al...
- slackingoff2017 9y agoIt sounds like the main issue here is repair cost. The cost of repairs is about twice as much, which could at least partially explain why there's also around 50% more claims. Most people only report incidents to insurance if the damage exceeds the cost of their deductable. If repairs to Teslas cost twice as much that could push a non-trivial amount of repairs over that threshold. Elon should make repair parts and shop training a higher priority. One of the only advantages of the dealership model is having a large force of mechanics very familiar with your vehicles. Perhaps Tesla should partner with some shops or build their own in locations with Tesla offices. I kinda agree that the Model S certainly isn't bought for the same reasons as a luxury SUV. It's kinda funny that they're not comparing one of the fastest cars in the world against other supercars. Sound like someone at AAA has stock in Ferrari or something :).
- Pulcinella 9y agoThe Model S may have a fast 0-60 time but it is no supercar. It can't even do one lap of the Nurburgring without entering limp mode.
- TwoBit 9y agoTrue, though I imagine a lot of crashes can occur from just that 0-60. There are lots of Internet videos that attest to this.
- Pulcinella 9y agoOh I agree. It still has far more performance than anyone really "needs" and you can totally wrap yourself around a tree with that. My Mazda 3 does 0-60 in about 7 seconds which would have been hot hatch territory a few decades ago. That's plenty for most people even for highway driving. The Model S has a weird performance profile. Most other cars that have similar acceleration also have the handling to accompany it.
- sliken 9y agoSure, but if you do the equivalent of even 25% of a record laptop on the Nurburgring on a public road you should be jailed.
- tomcam 9y ago>Other large insurance companies, including State Farm and Geico, said that claims data is a major factor in calculating premiums, but would not disclose if their Tesla-owning customers would also see rates rise. Ruh-roh!
- clamprecht 9y agoCould Tesla just create an insurance company and offer their own insurance for Tesla cars? They could probably offer a better rate than other companies. In the helicopter world, I think this is what Frank Robinson did - created Pathfinder insurance that offered the cheapest insurance for Robinson helicopters. Their web page claims it is independent from Robinson Helicopters, but I think there is a common owner somewhere up the chain. http://pathfinderindemnity.com/index.php?option=com_content&view=article&id=68&Itemid=466 http://pathfinderindemnity.com/index.php?option=com_content&...
- disiplus 9y agohow would that work. if the crash is my fault then my insurance is paying for the repair and not yours. so it does not mather if you have tesla insurance. or are we talking about casco insurance (that repairs your car if its your fault ? ) i pay my insurance based on my age, power of the car, past accidents and the city i live. is it different in usa ?
- robotresearcher 9y agoNow consider the case that you own the Tesla.
- jakelarkin 9y agoHypothesis: Aluminum Body and frame cars are still in the minority and require more careful/specialized/costlier repairs.
- sliken 9y agoAll new Teslas have the 12 sets of fancy sensors (cameras and ultrasonic) sprinkled around the car, complete with mounts and cabling. The car is also fairly well optimized for minimum air resistance to maximize range per watt. The complications mean that your average body shop can't do it and/or doesn't have access to the parts. So you get higher prices, which of course results in more claims because more of the repairs are well above the deductible.
- rasz 9y agoIn Europe we have two types of insurance: Compulsory liability insurance - this one pays out for damages and injuries to the victim of a collision you caused. Comprehensive insurance - covers everything even if you are the cause of accident. >the owners of the Model X file for claims 41 percent more often than average, What exactly does that mean? Did they cause the accident, or did someone else rear ended their Tesla? This smells like victim blaming.
- douche 9y agoGenerally, in the US, we have the same. The catch is, that if you are leasing or have a car loan on your vehicle, you are usually required by the financing company to carry comprehensive coverage - so that if you total the vehicle while the loan is active, you don't get caught with having to buy another vehicle, and still pay the loan for the wrecked vehicle off. Thus, while you can carry just liability insurance on your vehicle in most states, it isn't all that common, aside from older, paid-off vehicles, or used clunkers that are cheap enough for people to buy outright without financing.
- LanceH 9y agoIf you had a deductible of $1000 and bump your fender on something in a ford focus, it won't be worth filing a claim. You do it in a Tesla and it might run several thousand and make filing a claim necessary.
- Spooky23 9y agoWhen I hit a deer with my 2003 Pontiac, I lost the bumper, radiator, quarter panel, hood, mirror and had a hoof scratch running down the length of the car. Total cost: $6k in 2007. From what I hear, bumper replacement alone can top $10k on a Model S.
- rasz 9y agoSure, but that means you are talking voluntary self insurance, not the compulsory third party liability one. To me, European, statement "AAA claims Tesla owners should pay more" means they want to bump price of compulsory insurance for Tesla owners - insurance that covers damage done to other cars, not the expensive Teslas. No one is stopping you from charging more for voluntary coverage.
- jimrandomh 9y agoHypothesis: this is coming from insurers whose pricing isn't mileage-based, and Teslas are getting more miles per month than other cars in the same class.
- legolas2412 9y agoIs the entire industry so dumb they overlooked such an obvious parameter? I mean it's possible, but back your claim up with something
- magnetic 9y agoI own a Model S and I know that one of the painful parts of ownership is that you have to go to approved bodyshops and Tesla service centers, as well as use only Tesla original parts. That translates into very long wait times to fix your car (they haven't scaled those yet, and they are exclusive, so it's a bottleneck), and higher costs. Not to mention that parts aren't available that quickly since they have a limited production rate and have to decide what % are used for repairs vs producing new cars, and guess who impacts the bottomline the most? Then higher costs of repair translates to higher premiums. BTW I'm not complaining that the repair/service centers do a bad job - I've generally had a good experience with them - but their scarcity and exclusivity is an issue. It can turn a minor fender bender into months-long waiting game without your car (it's "at the bodyshop waiting for parts").
- rjdagost 9y agoThis makes me wonder how slow service will get once a large volume of Model 3's are on the road.
- magnetic 9y agoI guess it all depends how much they invest in scaling that part of the business. It's a bit of an optimization problem to figure out the "right" formula to grow the business. I can already feel the pinch at the supercharger stations. It's ridiculous to have to wait for a spot to open. I wish the charging stations were designed with 2 "pumps", so you can plug in next to someone, even if no current flows to your car, and you get energized as soon as the other guy leaves. Also, with a double feeder, it's easier for one party to share the input power with someone else: sometimes I don't want the charge to go too fast (when I'm at a restaurant inside a mall for example, and have to rush out in the middle of the main course to free up the space). I wish I could simply say: "ok, let my ETA be 1:45pm" and have the system dial everything such that another car can charge while preserving my ETA.
- throwaway-1209 9y agoThere are only a handful of shops around where I live that will even touch a Tesla when it comes to body work. Aluminum is hard to work with. OTOH someone who has paid $100k for a car should be able to fork over $300 more a year.
- NewSystems 9y agoMakes sense for a $100,000+ Ferrari... I mean Tesla.
- zekevermillion 9y agoSimple solution -- if Tesla thinks this is price gouging, why not get into the insurance business. If they can go to mars, they should be able to underwrite the cost of replacing Tesla body panels, haha.
- mathattack 9y agoIs this a preemptive strike? Autonomous cars will kill insurance company profits.
- vkou 9y agoJust like 99% autonomous ships have killed shipping insurance company profits, and how 95% autonomous airplanes have killed air insurance company profits?
- mathattack 9y agoAir insurance profitability is down, in part due to technology innovation. http://www.theactuary.com/features/2015/09/on-a-wing-and-a-prayer/ http://www.theactuary.com/features/2015/09/on-a-wing-and-a-p...