Tesla could enter insurance market with in-house policies

The manufacturer is considering rolling out its own insurance policies to include insurance and maintenance into the initial cost of its vehicles.

It comes after Tesla extended its deal with Direct Line in order to offer Tesla drivers with insurance.

Elon Musk, CEO of Tesla, said in a recent results call that the company is considering launching its own in-house insurance. "If we find that insurance providers are not matching the insurance proportionate to the rest of the vehicle then, if we need to, we will in-source it," he said.

Tesla policies are underwritten by Axa in Singapore and QBE in Australia, and the company acts as a broker for insurance.

Thomas Hallauer, research and marketing director at Ptolemus, said it would make sense for the manufacturer to roll out something similar in other countries: "Tesla cars are only bought new, there isn't a real second hand market for now, so it make sense for Tesla to sell insurance. In the UK, the Tesla S group rating is 50, the worse, yet it is probably one of the best equipped car on the market for safety.

"Also volumes are not high enough for the risk. As more autonomous cars come to market, it a logical progression to see more manufacturers combining insurance as part of the service."

Tesla has claimed that driverless cars are safer than ordinary cars but insurers are yet to factor this element into their policies and the risks can be difficult to calculate and price.

"If Tesla decides to offer its own policies, this could prompt insurers to respond to the risks of driverless cars," said Laurence Besemer, CEO of the Forum of Insurance Lawyers.

"Currently insurers only offer a 5% discount to customers with driverless cars, despite the theory that they are safer. If Tesla does roll out its own policies, traditional insurers will have to respond.

"It takes a company having a huge capacity to offer insurance, it's uncertain whether or not Tesla has the appetite for this. Tesla is currently offering out insurance policies but the small print says that they are underwritten by Axa and QBE."