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An underwriting loss, when you specialize in a very specific risk, is not something you can later make up with volume. They still have to pay for overhead, acqu
by phonon 1y ago
An underwriting loss, when you specialize in a very specific risk, is not something you can later make up with volume. They still have to pay for overhead, acquisition costs, etc. And customers have little loyalty for auto insurance. If they only join in the first place because your prices are lower, they will leave as soon as you raise them.
Most insurance companies would be very concerned this type of concentration of risk, and having no underwriting pricing advantage. At best you can say Tesla wants their insurance to be a loss leader to encourage sales of the cars themselves, and to prevent the risk of other auto insurance companies declining to cover their models due to high repair costs and their customers having no insurance alternatives.
- hn_throwaway_99 1y agoYou sort of touch on this, but I think it's pretty obvious that it doesn't make sense to value Tesla's insurance the same way you'd value an independent insurance company. They are an arm of a car company, designed to help them sell cars. Furthermore, I bet the loss ratio isn't even really comparable to independent insurers. Tesla itself must make some money from their parts that are needed for repairs, not to mention that they are the entire beneficiary of repairs if you use a Tesla service center, so when you factor that in I wouldn't be surprised if Tesla's insurance arm is slightly profitable.
- phonon 1y agoYou make good points, but including underwriting costs, systems and overhead, they must be losing something like 50 cents or more for every dollar of premium they take in (I will assume they have minimal marketing costs.) Insurance is a regulated industry, and the regulators won't allow that indefinitely.