Tesla just started selling auto insurance

Tesla Model 3
Tesla may sell insurance nationwide in the future.
(David Zalubowski / Associated Press)

Tesla Inc. just jumped into auto insurance. The unconventional automaker is selling policies to owners of its vehicles in California, in what may be the company’s first step toward providing coverage for a fleet of driverless taxis.

The expansion announced Wednesday came four months after Tesla Chief Executive Elon Musk told analysts that his company would branch into insuring its own electric cars for people who buy or lease them.

Musk believes Tesla has learned so much about its cars that it will be able to offer rates as much as 30% lower than traditional insurers’ rates. That probably will appeal to Tesla owners who have been complaining about being charged too much for coverage.


Tesla is selling the insurance only in California to start, but it plans to offer coverage nationwide in the future.

The current policies cover only personal use of the Tesla cars. The Palo Alto company said it wants to eventually offer commercial policies too.

Tesla may have to make that move if Musk is to deliver on his promise to start selling Tesla vehicles that can navigate roads without a driver behind the wheel within the next 16 months. Self-driving-car experts doubt that timeline will be met, but Musk has promised to have a fleet of driverless Tesla vehicles operating as part of a ride-hailing service by the end of next year.

To make his vision a reality, the driverless cars will need commercial insurance — something no company but Tesla may be willing to provide, given that dispatching a fleet of fully autonomous vehicles to pick up passengers is basically uncharted territory.

Selling insurance also provides Tesla with a new source of revenue as the company tries to prove it can consistently make money. Tesla was profitable during the last half of last year — the longest stretch of prosperity in its history — but lost $1.1 billion during the first half of this year. If Tesla miscalculates the risks of selling auto insurance, though, its losses could balloon.

Tesla’s disappointing financial performance and escalating doubts about its future prospects have caused its stock to plunge 35% so far this year.


Tesla has said it has learned so much about the technology, safety and repair costs of its cars that it will be able to figure out the proper prices to charge for each insurance policy. Its electric vehicles are equipped with so many sensors that it theoretically could monitor whether the drivers of individual cars are prone to chronic speeding or habitually engaging in other risky behavior, but Tesla said it won’t do that.