Tesla Inc.(Nasdaq: TSLA) is losing money on its insurance business, paying out more in claims than it collects from customers, according to new industry data that raises questions about the electric vehicle maker’s expansion beyond car manufacturing.
The company’s insurance subsidiaries reported a loss ratio of 103.3% in 2024, meaning Tesla paid $1.03 in claims for every dollar collected in premiums, according to S&P Global Market Intelligence as reported by InsideEVs earlier this month. The industry average was 66.1%.
Tesla’s performance has improved over three years, but still is nowhere near industry standards. In 2023, the loss ratio hit 114.7% compared to an industry average of 75.4%. In 2022, it was 116.6% versus 80.1% for the industry.
The figures indicate that in 2023, Tesla’s insurance division had an extremely high payout rate of 92.5%, leaving minimal funds to cover operational costs like employee salaries, marketing and administrative expenses.
Traditional insurers typically target loss ratios between 60% and 80% to remain profitable after covering overhead costs.
Tesla Insurance is available in 16 states. The company uses real-time driving data from Tesla vehicles to set rates. It assigns drivers monthly “Safety Scores” based on their driving behavior. Tesla adjusts premiums based on these scores.
Related: Tesla Insurance Dings You For Driving After 10 PM
Some Tesla drivers report frustration with the scoring system, saying their rates increase even when driving carefully. The company has not provided detailed guidance on how drivers can improve their scores.
Tesla claims its technology gives it advantages over traditional insurers because it knows more about its vehicles and drivers than competitors do. The company integrates data from its Autopilot and Full Self-Driving systems into risk assessments.
However, Tesla vehicles can be expensive to repair due to specialized parts and a limited network of certified repair shops. These factors may contribute to higher claim costs.
Related: Tesla EVs Are So Expensive to Repair, Insurance Companies Are Just Writing Them Off
The insurance business is part of Tesla CEO Elon Musk’s strategy to create an ecosystem of products beyond vehicles, including solar panels, batteries and charging networks.
Information for this story was found via the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
