A Tesla Insurance Company will make the term ‘niche’ seem gargantuan.
However, as a researcher, it will be interesting to read about the losses, loss ratios, and combined ratios as they mount up in this extremely small auto insurance segment. The Loss Development Triangles will be extremely interesting reading. And the IBNR: more than ‘extremely interesting.!’
Perhaps Musk is launching (sorry about the pun) Tesla Insurance Company because of his frustration with Markel (who I believe is the carrier behind Tesla Insurance [not to be confused with the Tesla Insurance Company to emerge in the insurance industry.]
If that is the case, being upset with an insurance company that understands what the issues are of insurance commerce, then Musk is due for one heck of a surprise: absorbing the financial realities of the auto insurance segment himself via his Tesla Insurance Company.
He could create an insurance company without humans but instead consists entirely of robots / androids (calling Commander Data but you better not bring your ’emotion’ chip), models / algorithms, and delivery of administrative and/or claims service through virtualization (i.e. virtual assistants, chatbots).
None of that will ‘save’ Tesla Insurance Company from having to face the customer and market dynamics of the auto insurance industry. None of that will ‘save’ Tesla Insurance Company from the very real high costs of repairing Tesla vehicles. None of that will save Tesla Insurance Company from the high likelihood of Tesla vehicles being welcome areas-of-opportunities for cyber hackers.
Auto insurance business objectives don’t disappear because of the technology an insurance carrier uses to go-to-market. The requisite mandate to meet the profit requirements of the auto insurance line of business don’t disappear because of the technology an insurance carrier uses to go-to-market.
But again, watching what happens to this extremely small, nichey-niche of providing auto insurance to only Tesla vehicles will be very entertaining. Sort of like a movie that shows a train crash in slow motion …..