Even Tesla's Insurance Arm Is Getting Wrecked

https://insideevs.com/news/759156/tesla-insurance-loss-higher-average/

77 97 1 year ago

notatoad• 1 year ago

the article seems to conclude that this is because of tesla's repair or manufacturing practices. but anecdotally, white model 3s are the scariest cars on the road, driven by the worst drivers, most likely to do dangerous and unpredictable things. i certainly wouldn't want to be in the business of insuring tesla drivers

and the data seems to back me up - tesla has the highest crash rate of any manufacturer: https://www.forbes.com/sites/stevebanker/2025/02/11/tesla-ag...

treetalker• 1 year ago

Curious: why white Model 3s specifically?

ljlolel• 1 year ago

Cheapest car. A different color costs more $.

CharlesW• 1 year ago

I can only speak to my area, but Tesla drivers north of San Diego started driving noticeably less idiotically when local dealerships started to be regularly protested.

pfannkuchen3• 1 year ago

I have seen less Teslas around in general since that started. I used to regularly wait in line at the charger, and lately there has been no line.

What you noticed could be a deeper correlation between driving ability or conscientiousness and who is more influenced by perceived social pressure to stop driving a type of car.

Most Tesla owners also have a gas car, so it’s not as if they need to purchase a new vehicle to change their driving habits.

Another explanation might be that the crazy driving was mostly from new owners before they got used to the acceleration, and with fewer new owners now the crazy driving has reduced.

hn_throwaway_993• 1 year ago

This is kind of buried in the article, but it annoys me when articles lead with a clickbait title and then basically admit in their own article how their clickbait title is bullshit. That is, even though the loss ratio is much higher than the industry average and indicates a loss, it has been going down for the past 3 years (116.6 in 2022, 114.7 in 2023, and 103.3 in 2024). I would expect that any startup offering would start out with a loss that then eventually turned to a profit over time.

All that said, I think Tesla and the EV industry as a whole will need to do a lot to bring down their repair costs. It's insane that these cars are designed in such a way that even minor fender benders cost tens of thousands to repair. I actually think government should create liability limits for vehicles to incentivize car makers to make repairable cars. That is, if you're driving around with a Faberge egg as a hood ornament, and I ding it, I don't think I should be responsible for the outrageous repair charges - the recklessness was on your side, in my opinion, for putting such a fragile/expensive machine on public roads. Otherwise car makers have little incentive to improve the repairability of their cars.

moomin• 1 year ago

I think the real problem here is that many of the things that get wrecked are specifically designed to get wrecked rather than the driver.

bob1029• 1 year ago

I actually think government should create liability limits for vehicles

This is effectively already a thing in most US insurance markets. TDI (Texas) requires $25k minimum coverage for property damage, so in general this is what everyone is going to have.

If your car is worth more than that and someone runs into you and totals it, you are ~fucked unless you have additional un[der]insured motorist coverage on your side. Suing someone for the difference is a 10/10 nightmare experience. Many people who are driving like ass also seem to have really bad financial situations. There is such a thing as being so poor that you are judgement proof.

The overall effect of this is that drivers of high value (i.e., luxury) vehicles typically take it upon themselves to ensure the safety of their property. They don't make it the problem of everyone else. If their Faberge egg of a lambo gets wrecked, they understand the other parties probably aren't going to be able to replace it. Certainly, follow through with everyone's insurer and wring every policy dry, but the rest is up to the presumably wealthy luxury vehicle owner.

If you are driving a luxury vehicle and cant handle the risk of an underinsured driver totaling it, you should question if you can actually afford the vehicle.

curiouscats• 1 year ago

Car insurance costs more if you have bad credit score. My guess is that they have data to justify that. I think some states may have disallowed this practice.

Anyway that lends some credence to your beliefs.

Marsymars2• 1 year ago

Getting sued because you only had $25k in liability coverage seems like enough of a nightmare that it seems crazy to me to only have that little. I pay something like $500/year for $2 million in liability coverage.

moepstar• 1 year ago

Overall, your argument is not wrong - however...

The cost comes from "Tesla approved body shops" - which have some sort of monopoly on doing body work.

That is, if you don't want to possibly have arguments with Tesla if something is wrong which they may try to attribute to the car being repaired in some back-alley kind of workshop...

To add, body shops apparently rather replace whole parts which could have straightened out by a skilled repair guy.. for much less, achieving the same thing and even keeping the original panels, welds etc...

Talking about repairability - i really have to give Tesla credit for making the whole of all maintenance manuals (same Tesla themselves have) available for free.

stonogo• 1 year ago

That behavior violates the Magnuson-Moss act. In normal times it would be illegal and you'd easily win a lawsuit about it.

philjohn• 1 year ago

It doesn't help that the official Tesla repair guide essentially says "Order a new side panel for the car, cut the damaged section from the car, weld in part of the side panel".

And the side panel in this case stretches the entire length of the car.

throwanem5• 1 year ago

It's insane that these cars are designed in such a way that even minor fender benders cost tens of thousands to repair.

Twenty years ago I paid about $2000 - not inflation-adjusted, that figure - to put a new bumper on an Audi whose owner, looking back, no doubt had much better reason than I to leave our respective insurance companies out of the matter. At the time it was a shocking amount. These days, even the inflation-adjusted equivalent - nearly five grand! - seems like something a lot of car owners are happy, or at least willing, to swallow.

mschuster913• 1 year ago

All that said, I think Tesla and the EV industry as a whole will need to do a lot to bring down their repair costs. It's insane that these cars are designed in such a way that even minor fender benders cost tens of thousands to repair. I actually think government should create liability limits for vehicles to incentivize car makers to make repairable cars.

That's fundamentally impossible. Just look at car crash ratings and automotive deaths over the last decades.

These old rigid steel frames were damn easy to repair - but were deathtraps for people inside and outside, not to mention Cw values more similar to a brick wall than a F1 car. The reason modern cars are so crash-safe is because literally everything is a crumple zone, absorbing kinetic energy. You can't just heat up and bend affected parts any more, you got to replace them.

And on top of that, requirements on lower fuel usage mean that parts have to be aerodynamically optimized and as lightweight as possible, which means plastics and composite materials, hollowed out shapes and god knows what else. That's making parts more expensive to manufacture and replace as well.

hn_throwaway_993• 1 year ago

It is not impossible to build a car that both has modern crumple zones and is still repairable.

This article talks in detail about why a minor fender bender of a Rivian cost $42,000 to repair. That cost is a bit of an exaggeration (e.g. it includes the ceramic coating on the vehicle), but the article talks in detail about the design choices that made that truck so expensive to repair.

jeroenhd2• 1 year ago

All that said, I think Tesla and the EV industry as a whole will need to do a lot to bring down their repair costs

It's not just Tesla, and it's not just the EV industry either. It's not even recent. My ten year old car has some scratches in a plastic body panel and minor bumper damage thanks to me backing into something. Stupid, I know, but that thin piece of formed plastic should not cost me €700 and the bent plastic bar should not be costing anywhere near €300 to order. The mechanic is expensive enough already. Luckily I don't care about a bit of visual damage, but it's still infuriating.

More and more cars are cheaply produced, with maintenance as an afterthought, and that leads to flimsy, difficult to replace, specialised components, often non-modular to save on production cost.

The cost for cheap manufacturing is blindly passed onto insurance and now a kid on a bike can bankrupt their family by accidentally hitting a Tesla. It's ridiculous. But it's hardly a Tesla-only problem, and it's been going on for years.

tptacek4• 1 year ago

I mean, I guess, but cars have gotten drastically more reliable over the last 40 years.

phonon2• 1 year 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_993• 1 year ago

You 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.

throwanem5• 1 year ago

Oh, Tesla has its own insurance underwriter? That's normal for an automaker, right?

mschuster913• 1 year ago

Dealing with anything financial has been the norm for car manufacturers for many decades.

Germany's Volkswagen for example has its own insurance and banking arm. The bank got established in 1949, however I couldn't find out when they expanded in insurance.

Kinda makes sense - selling cars is a cut-throat business with ever tighter margins, the real money is to be made in financing/leasing, insurance and aftersales services.

throwanem5• 1 year ago

I'm not saying I can't see sense in that level of integration, just that I can't think of another automaker offhand that does business in the US that way, underwriting auto insurance policies specifically through a wholly owned subsidiary.

Maybe I would know differently if I'd ever bought a car new off the lot, but I'm still driving the one I bought in 2019 and back then it still made sense to look at buying new as mostly a waste of money.

fifilura2• 1 year ago

Major Swedish newspaper Dagens Nyheter just ran a story that the insurance cost for a Tesla has almost doubled in a year. While others remained more or less stable.

(Quaterly cost, full insurance)

Tesla Model 3: 3 338 kronor (70,3 percent increase since Q1 2024)

Tesla Model Y: 4 007 kronor (97,3 percent increase)

Kia EV6: 938 kronor (-4,7 percent)

Volvo EX40: 1 097 kronor (-9,8 percent)

https://web.archive.org/web/20250510192608/https://www.dn.se...

They speculate the reason is that relatively few companies insure Teslas. Maybe because they have their own insurance company, or maybe because the leasing company take on the risk. I don't know how this works exactly.

tough2• 1 year ago

one would think the global -lets deface teslas- movement might have something to be with insurance premiums going up for teslas no?

tptacek4• 1 year ago

A rounding error in the economics of insuring cars. Much of the cost of insurance is what your car does to other things on the road.

redox99• 1 year ago

That's unlikely to be a significant percentage of insurance claims.

fifilura2• 1 year ago

The insurance company quoted seems to claim that they have not seen an increase of vandalism.

They say however that one reason is that 2nd hand prices are dropping rapidly and that gives some uncertainty how to put value on the car for replacement. Don't quite understand what they mean with that.

rubyfan• 1 year ago

Probably not. Most of those vehicles at dealers would be covered under commercial policies separate from the loss ratios reported here. Also the backlash is more recent than the loss ratios reported (2024 results).

rchaud• 1 year ago

I would imagine it's because Tesla replacement parts and repair outlets are far more expensive and limited in supply than ICE car manufacturers which make up the majority of insured vehicles. Longer repair time would mean the driver needs a loaner car for longer, increasing costs.

kgwxd• 1 year ago

Mostly propaganda. Narcissists love being "the victim". "Victims" are granted more leeway when using "defensive" powers.

mrweasel2• 1 year ago

Can someone explain Tesla to me, assume I'm an idiot. If Tesla sales are down, the Cybertruck is an unmitigated failure and now they are losing money on insurance, then why on earth is the Tesla stock not going down?

Not only is the stock not going down, it's doing well, up almost 5% year-over-year.

deadbabe• 1 year ago

From what I gather it’s mostly propped up by people who believe Tesla will be more than just a car company but will instead expand out into some general robotics company.

Which is really pretty standard for any tech company whose valuation doesn’t make sense. People are betting the future will be brighter and have more revenue from new products.

testing223213• 1 year ago

People buy stocks betting on their guess of what will happen in the future.

Toyota = safe, predictable, steady ship

Tesla = wildly profitable for many for years, but incredible unpredictable.

It seems many are still guessing it’s going to go up in the future.

__MatrixMan__• 1 year ago

I don't understand it either, but I think it means that more needs to be done. We must establish that tinkering with politics was a good way to scare off investors. These investors are not yet scared enough.

voidspark4• 1 year ago

Tesla stock is extremely volatile. It dropped 56% from the high in december, and is now trading at 40% below the all time high.

mrweasel2• 1 year ago

So investors shaw the stock hit 400+ and now they're betting it will do it again?

outlace• 1 year ago

Well one could make the argument that Musk is a short or medium term problem and that in 4 years when Trump is gone everyone will forget about hating on Tesla and it will be a great car company again. Musk is in his 50s and won’t be CEO forever. So if your investment horizon is 10+ years and you don’t predict total company collapse then it might be a bargain time to buy.

edoceo• 1 year ago

By then Rivian will solidify it's position.

tpm• 1 year ago

Great car companies have far lower P/E ratios than Tesla.

danmaz74• 1 year ago

If you remove Musk, though, what is so special about Tesla to justify the super-high P/E ratio?

arp242• 1 year ago

Tesla market cap is currently $959B, shipped 0.5M vehicles in 2024.

Toyota is second with $244B and shipped 11M vehicles.

Ford shipped 4.4M vehicles and has a market cap of $41B.

If I look at [1] then Tesla is worth more than the next 12 or so combined.

Nothing about this makes any sense. Maybe ten or fifteen years ago you could have made the argument based on future prospects, but that case is exceedingly hard to make today when there's tons more competition on the EV market.

[1] https://companiesmarketcap.com/automakers/largest-automakers...

pfannkuchen3• 1 year ago

Stock market is largely a casino, TSLA is basically a memecoin.

It’s annoying because I have a more optimistic view than most on the long term prospects of the company, but this stock behavior makes it hard to place such bets.

bobthepanda• 1 year ago

TSLA was also divorced from normal P/E ratios on stocks a long time ago.

badlucklottery• 1 year ago

then why on earth is the Tesla stock not going down?

“Markets can remain irrational longer than you can remain solvent.”

TSLA's value has never been correlated to the fundamentals of the business. So it continuing to do so isn't super surprising.

As long as there's a steady supply of unsavvy investors/future bag-holders willing to buy, it'll keep climbing.

naijaboiler• 1 year ago

This is the answer! It is definitely coming down and will reflect business fundamentals at some point. But please don't try to predict when, or you will lose lots of money. "Market can stay irrational longer than you can remain solvent"

mint2• 1 year ago

At one point Tesla had the opportunity to become THE ev charging monopoly.

That ended when Musk went on one of his earlier whimsical firing sprees and destroyed the charging team. Had he instead beefed it up, charging could become a money printing machine. Even with his sabotage of the charging teams, Tesla charging is better than other but it could have been so much more

sillyfluke• 1 year ago

And they will stay even more irrational if the CEO attacking shortsellers becomes the co-president of the United States. It's no surprise that the short-seller Hindenberg Research shut its doors just as the Trump administration was assuming power, as the rest of the country watched on incredulously as Pam Bondi breathlessly bragged about going after a bunch of vandals of Tesla car dealerships as her most impressive accomplishment as DoJ of the USA in the first (?) cabinet meeting with Trump.

api• 1 year ago

TSLA has never traded in line with fundamentals. If the price wasn't rational then, why should it be rational now?

Also note that the CEO has close ties with government, so some people might be betting on Federal contracts or some kind of bailout.

I have a hypothesis that the reason Musk went all-in on Trump was because Trump would keep BYD out of the North American market. There's been whispering for years about BYD building plants in NAFTA nations or perhaps even in the USA (like Toyota and Nissan did), and even with significantly higher costs BYD would probably annihilate Tesla. A higher-end US-market mid-priced BYD EV with 300+ miles of range that undercut the model S would be deadly.

If we had global free trade with no tariffs China would absolutely dominate this sector as well, at least for mainstream vehicles.

tptacek4• 1 year ago

You'll never get a satisfactory answer, but there's presumably:

* some coefficient of meme-stockery (trading in expectation of other people's memetic interest in the stock, like GME) and

* some other coefficient of Tesla's long term vision (gigafactories, their distribution system, their place in the market for power delivery, &c).

Neither of these would be especially sensitive to Tesla's recent performance; Tesla only has to stay viable for both those payoffs to remain plausible.

bgnn• 1 year ago

All good answers here. I have one addition: Zero interest rate regime we had since the financial crisis meant the money supply was cheap. It was enough to just hype yourself to the investors to get money, and Tesla did exactly that and got incredible valuation. That cheap money supply dried out, but the high valuation of Tesla became in itself to keep its outlook good, so it's self sustaining so far in a fragile state. Exactly how fragile is it, nobody would know, but typically you need good profits and earnings to be a stable investment. In a world with a lot of viable alternatives and heating up competition, Tesla needs like a monopoly in a technology or market (be it autonomous driving, be it banning all electric cars in Western hemisphere except Teslas by presidential decree) to not be a ticking time bomb.

hshshshshsh• 1 year ago

Well it's you who thinks stock price is correlated with market performance. It's a subjective take obviously as clearly illustrated by Tesla. Stock price like anything else is just a belief.

rsynnott2• 1 year ago

I mean, even if none of that were true, the valuation would still make absolutely no sense. If you, as an investor, have decided to make an investment that makes no sense at all based on the fundamentals, why would you turn around and go "the fundamentals I was previously ignoring have gotten somewhat worse, I should sell this"?

(Interestingly, people _do_ do this to _some_ extent, though. Notably, Trump's joke of a social media company took a significant temporary hit on releasing bad financials, even though of course the financials are completely irrelevant to the valuation; it has revenue of less than a million per quarter and a market cap of over five billion.)

jjav• 1 year ago

If Tesla sales are down, the Cybertruck is an unmitigated failure and now they are losing money on insurance, then why on earth is the Tesla stock not going down?

Great question. Tesla's latest quartely report was very negative across the board. Normally stocks tank after a report even half as bad. But Tesla has been on a wild rally since the report came out. No, I can't explain it.

powerbroker• 1 year ago

I was driving the Model X a few years ago and ended up T-boning a minivan at ~45 MPH. Minivan rolled over. Our airbags deployed. Post accident, I discovered my glasses remained on my face and it seemed that the airbag did not even reach my body -- with the webbing taking the bulk of the impact. Car took months to repair and ~$30,000.

Not bad when you consider we were driving to the hospital at the time, and the accident prevented us from reaching the hospital as well as preventing us from calling on an ambulance.

3 'assists' that the car gave us:

1. Crumple zone is bigger;

2. Battery made our vehicle heavier;

3. (speculatively), the 'crumple parts', crumpled more and costed more -- leading to less (none) bodily injury.

testing223213• 1 year ago

The Model S and Model X were the first two vehicles to get 5 star crash safety in every category from the US and the EU. Supposedly broke the testing machines (leading to Elon saying 5+ stars)

They are among the safest cars on the road.

jeroenhd2• 1 year ago

Supposedly broke the testing machines

That doesn't sound like a good thing at all? Then again, I'm hardly surprised that the guy who tried to build an aluminum tank and sell it as a car would claim it is.

AtlasBarfed• 1 year ago

I remember that when the release versions about 10 years came on the market, but I have not heard those claims in quite a while from any credible sources.

I am certainly not authoritative. My vague recollection is that offset crashes Tesla didn't do quite as well at, so since then Tesla's ironclad safety rating has since waned

Dylan16807• 1 year ago

They are among the safest cars on the road.

Though that needs a bit of salt for very heavy cars since they makes the occupants safer and everyone else less safe.

Still pretty good overall, but not ideal.

qwerpy2• 1 year ago

This is one reason why I got a cybertruck. Tesla safety, now with even better protection! There are some crash test videos of a cybertruck getting T-boned by a metal sled at near highway speeds. Ever since seeing those, we always drive the kids around in the truck.

Main downside is the hostile behavior from the public, but it’s a small price to pay.

ponector• 1 year ago

I bet Volvo had it first, not tesla. And now any new expensive car has 5 star safety rating thanks to progress in car design and EU laws.

mvdtnz• 1 year ago

Sorry how is this story relevant to the article?

_xerces_• 1 year ago

If Tesla Insurance is paying out for parts to fix damaged Teslas aren't Tesla effectively paying themselves and so recouping some of the paid out monies? Sure, it goes on a different balance sheet, but it's all Tesla in the end.

On second thought maybe this loss ratio is based on buying parts at cost from the auto division and so there is still a loss there to Tesla who has to supply them from China or whereever.

analog31• 1 year ago

Some of the traditional insurance companies do this too, by having an ownership stake in the repair facilities, so they also buy repairs "at cost."

zombiwoof• 1 year ago

Hey let’s put Musk in charge of the US Government he’s such a fixer , he gets it

bionhoward• 1 year ago

Looks like the loss is getting closer towards profit over the last few years, maybe they’re just still figuring it out?

Even Tesla's Insurance Arm Is Getting Wrecked

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