The insurance industry has always been surprisingly stable and lucrative. Even following the events of a global pandemic, people still needed home and auto insurance. As such, it is never a surprise to see a new company breaking into the industry.
What may be more surprising is learning the companies most interested in doing so. While it isn’t unheard of for a car manufacturer to also try and dip into auto insurance, it isn’t necessarily typical.
Tesla (TSLA) and Insurance
This makes Tesla’s move an interesting one. TSLA announced the opening of its insurance division in 2019, with high expectations of the future income it would generate. It is likely that they are/were hoping that insurance sales would spike alongside their elective vehicles.
Currently, the insurance company is only available in three states (California, Illinois, and Texas). The plan will likely result in further expansion, but at the moment, options are limited. This means that funding is limited.
There are two significant boons for Tesla entering the market. The first concern is addressing the insurance of their cars. According to reports, the Tesla Model S is the most expensive car on the market to insure. Having Tesla provides the insurance would naturally allow a cost reduction.
Since the cost of the Tesla Model S is already prohibitive for many, cutting prices where possible impacts the second concern: sales. If one could reduce costs, including insurance costs, it would become a more lucrative venture for interested parties.
Porsche and Insurance
While Tesla may be the standout manufacturer offering insurance, they are far from the only ones to do so. In 2019, Porsche embraced the idea of providing auto insurance alongside its luxury models. As with Tesla, the states they’re currently working with are minimal: Illinois and Oregon.
The significant benefit to Porsche’s insurance model is that they have an innate understanding of luxury cars. More importantly, they understand that these cars are not on the road year-round. As such, they offer options that take miles driven into account instead of more traditional methods.
Mercedes Benz Deal
Mercedes Benz is another company considering auto insurance expansion, though they are doing things differently. They partnered with Liberty Mutual with discounted rates for their customers.