You're About to Be Screwed if You Drive a Tesla


AAA is planning to raise insurance rates for Tesla drivers by a whopping 30 percent because they are tracking 40+ percent higher claims and twice the average damages. Now, given 40 percent (the increase in the number of claims) x 2 (reflecting double the amount of the claim) is 80 percent and not 30 percent, this could be the beginning of some huge surprises for Tesla owners. This is especially true in Tesla rich Silicon Valley, which already has some of the highest insurance rates in the country (Around $3,500 a year with a $1,000 deductible, which is about to jump to $4,500 if the 30 percent increase becomes common).   Tesla is pushing back, arguing that AAA is comparing the cars to things like station wagons (does anyone still drive those?) and that Tesla’s are far safer to be in than a normal car (which is true; they are pretty much the car version of a tank).  

What everyone seems to be missing is that there is a huge “Why?” related to these statistics. Teslas have advanced accident avoidance capability (granted, one of the key features isn’t working at the moment and is apparently turned off), they are no harder to see than any other car in their class, and, as noted above, they are built like tanks.  Oh, and they are built in modules, which should make them less, not more, costly to repair. 

What Tesla should be doing, given that it captures more information on people driving its cars than any other car company, is figuring out why its stats are so bad and fixing the real problem, not arguing with AAA (which probably won’t end well). 

The Problem with Tesla

Teslas have a number of things that differentiate them from other cars.  They are full electrics and they have performance like a supercar.  They tend to be driven by people who like technology and they are built very differently than other cars. 

Breaking this down, that likely means you have a combination of a car that is extremely quiet, so other drivers, bike riders, and pedestrians can’t hear it, and one that is often being driven fast. Combined, that should suggest that one of the core issues is that if someone is driving badly— which is likely, given that these accidents are being charged to the Tesla driver— there is a higher probability that at least some of the other drivers won’t be able to dodge the accident because they can’t hear the car coming.   

We have a serious problem with people using their electronics while driving, and, not only does the Tesla appeal to folks like this, it has a huge screen that can be very distracting in the center of the dash.  This suggests that drivers are more likely to be driving distracted in a Tesla both because of who they are and because of that huge screen.  I know from personal experience that this screen can be an issue because when I was driving a Tesla S, my wife, messing with it, damn near tossed me into the back seat (apparently the automatic seat controls on that car didn’t disable while the car was in motion). 

Finally, while the modular nature of the car should make it easier to repair, building modular cars means the sub-structure the modules connect to is both more expensive and more critical than a normal car’s frame.  In a normal car, if the frame is damaged, it may be totaled. However, I expect, in a Tesla if the frame is damaged it is almost always totaled because the frame carries much of the cost of the car. In addition, unlike other cars, I don’t think there are any third party parts makers building knock off parts, which keeps the cost of repairing your car down (though at some risk to you, I might add).   

The Fix

Given how aggressively Tesla captures statistics, it could have an opt in program where driver behavior is shared with insurance companies. Therefore, drivers who drive safely can be rewarded, pushing the extra charges only to those that deserve them.  If it is a sound problem, then adding sound to the car is pretty easy; BMW does this with its i8 (largely because a 3-cylinder engine in a supercar would otherwise sound stupid), and Fisker had in plan a system where you could have your car sound like anything from an F1 race car, to a Jet, or even the Jetson’s flying car (which, sadly, would have been my personal choice).  

Next, you could look at the design of the car and re-adjust the module nature of it so that it becomes far cheaper to repair and replace parts if it’s in an accident. The firm is basically run by engineers anyway and they’d likely love the challenge.  Oh, and they could fix the automatic breaking system and turn it back on. 

Finally, you could disable parts of the central control for the car by default when the car is moving. And you could put in an eye sensor to raise an alarm if the driver starts texting while driving, forcing them to use one of the hands-free alternatives.  

Wrapping Up:  Autonomous Driving

Given Teslas are likely to be the first autonomous driving cars on the road, this issue should resolve itself once that technology is available. But, up until then, there are a number of things Tesla could do to address their bad accident stats that would change their cars from having an insurance rate problem to having an insurance rate advantage. It just seems a shame that the company doesn’t seem to want to take that better path.    

Edited by Alicia Young
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President and Principal Analyst, Enderle Group

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