Tesla Insurance lost more money in the second quarter of 2024 than in the first quarter. Its loss ratio — the metric insurance companies use to measure profitability — increased from 99.8% in the first three months of the year to 107.4% in the second quarter, P&C Specialist reported.
The losses are due, in part, to the high cost of repairing electric vehicles. The average cost to repair an EV after an accident is $6,066, while the average for gas-powered vehicles is $4,703.
Customer dissatisfaction may also be a factor.
A Reuters report from last November cited common Tesla Insurance customer complaints, like long claim and repair times and the inability to contact adjusters. Some Tesla drivers reported making loan payments on totaled vehicles. The company currently has a Better Business Bureau rating of “F” for failing to respond to complaints.
Tesla Insurance struggles to live up to its vision
Insuring a Tesla Model Y, the company’s most popular, costs on average $319 per month for full coverage, according to Insurify data based on premiums from other mainstream insurers.
Tesla owners experience high premiums for a few reasons, including higher labor and part prices, limited part availability, and a shortage of Tesla automotive technicians.
Tesla Insurance’s goal was to revolutionize the industry with affordable coverage, estimating 20%–30% cheaper premiums for Tesla drivers. The company was also going to focus on quick service, including “same-day” collision repairs, according to P&C Specialist.
Instead, Reuters found that some customers waited for months to hear from adjusters, get repairs, and receive payouts.
Customers also struggle with the insurance company’s variable premiums. Tesla Insurance uses a vehicle-embedded telematics-style format to track driving behavior and set rates accordingly. The Tesla “Safety Score” tracks collision warnings, braking, turning, tailgating, speed, time of day, seat belt use, and more.
The Safety Score subsequently affects premiums, which can fluctuate from month to month, according to Tesla.
But a proposed class action lawsuit filed in September 2023 alleges Tesla Insurance is charging inflated premiums based on false collision warnings. So far the case is moving forward despite Tesla’s attempts to get it dismissed.
What’s next for Tesla Insurance and drivers
Despite the company’s poor loss ratios and reviews, it reported extreme growth — $497 million in written premiums earlier this year.
But Matteo Carbone, founder and director of the IoT Insurance Observatory, told P&C Specialist that the company’s rapid premium growth doesn’t indicate success.
“To grow, when you sell the same product at a half of the price (or less) than what is charged by the market, isn’t too difficult,” he said. “But then Tesla is underpricing the risks in order to reduce the cost of ownership of the vehicle.”
While Tesla Insurance doesn’t publicly list rates, users on Tesla forums report rapid and inconsistent rate increases. One Redditor claimed their rate increased by 45% after six months despite having no claims or incidents.
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