Tesla Insurance could pose a long-term threat to US auto insurance industry: Morgan Stanley

Analysts at Morgan Stanley have said that in the long-term, Tesla Insurance may pose a threat to the ~$260 billion US auto insurance industry, following the company’s expansion of its new insurance product that uses real-time driving behaviour data.

The insurance offering was recently launched in Virginia, Colorado and Oregon.

It was also reported that the company plans on being a full-stack auto carrier within those three states.

In a recent report, analysts stated that Tesla insurance does not pose a threat to the US auto insurance industry in the near-term, but it quite possibly does in the long-term.

The analysts said that they believe successful long-term market penetration rests on pricing sophistication and distribution strategy.

Furthermore, they added that Tesla will no doubt have superior data on their own cars, but also addressed that the real-time feedback loop on driving behaviour, that the insurance offering contains, could result in safer driving, which could lead to lower premiums and a higher take-up rate.

“We will monitor TSLA’s underwriting results closely as it gains more traction”, the analysts said.

In addition, the report highlighted how direct-to-consumer (DTC) distribution has become a proven strategy in taking market share, and going forward analysts expect DTC coupled with embedded insurance to become the “new wave” of personal insurance distribution.

Meanwhile, analysts said that Tesla as a top 10 auto insurance carrier is not a “wild expectation”, adding that insurance premium forecasts for Tesla yield ~$9.6b by 2031, assuming fairly conservative take-up rates by Tesla car owners.

The analysts said: “Assuming the industry continues to grow by ~3% annually, this would yield a market share of 2.8%, cracking the top-10 in US P&C market share.”

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