In 2019, Tesla set out to lower insurance rates for owners of its electric cars. The goal was simple, at least in theory: fix the broken cost of car insurance. Instead, Tesla may have broken its own calculator trying to make sense of repair costs.
See, Musk's vision of Tesla's insurance product was that traditional companies just didn't "get it." Tesla's data claims that its Full Self-Driving software has fewer accidents than a human driver. Plus, its cars are rolling computers that can collect copious amounts of data on its drivers and adjust risk based on their driving. So why wouldn't drivers get a lower rate for putting around with FSD enabled if they also happen to be a safe driver? Tesla quickly found out that despite these assumptions, it's still taking a bath on claim-related losses.
The data comes from S&P Global and shows that the automaker's insurance subsidiary took a loss ratio of 103.3 in 2024. The loss ratio, for those who don't know, is the amount of money that Tesla pays out per claim versus the money it takes in from premiums. The lower the number, the better, and break-even is a flat 100. In 2024, the rest of the industry averaged 66.1.
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Umm isn’t this good for Tesla customers…? Seems like a low loss ratio is only good for the insurance company since they either up the premiums or pay out less…
Sure, but it's another hit for the myth of the "genius businessman" Musk. Though I'm sure he and his stans would claim it was a Loss Leader all along.