Elon Musk shall rule all.
Back in April, Tesla CEO Elon Musk told shareholders in an earnings call in April that Tesla would be launching its own auto insurance product. Promptly, Warren Buffett criticized the move, predicting the company expanding into auto insurance would be a struggle and dismissed it as a significant threat to existing insurers, including his own Berkshire Hathaway company.
Tesla has ignored all that, and on Wednesday announced that the company is now offering Tesla Insurance to customers in California. Tesla also says it plans to expand to more states across America later.
According to Tesla, customers in California can get a quote in as little as a minute and those who have cars on order can request a quote with their vehicle identification number. Tesla Insurance can be also be canceled at any time.
The auto-insurance industry is due for disruption, and a "competitively priced insurance offering designed to provide Tesla owners with up to 20% lower rates, and in some cases as much as 30%," will certainly do that if the plan actually works. How exactly Tesla has put together its insurance service is unclear, but we suspect there's an advantage to having a tight demographic and ton of data on driver's habits when it comes to underwriting.
When Musk first talked about going into insurance, Warren Buffett pointed out: "The success of the auto companies getting into the insurance business is probably as likely as the success of the insurance companies getting into the auto business." However, it's worth pointing out that the his company is building cars and Musk history is as a web technology entrepreneur. That's an even further removed business from building cars.
However, Tesla has a history of over-promising and under-achieving, so we're not going to get too excited just yet. If Tesla can set a precedent for other automakers though and force the auto insurance industry to become more competitive, then we will give Tesla its due. What we worry about is the privacy issue if Tesla plans to bring the rates down using information about driving habits pulled from the cars.