Tesla turns insurance industry on its head

Insurance. It’s tempting to think that it’s a relatively new concept, but no - it's been around quite a while now. About 5000 years, in fact. As long ago as 3000 BC, the Babylonians dealt with risk with agreements called bottomry contracts, under which a loan would be granted to a merchant with the provision that if the shipment was lost at sea, the loan didn’t have to be repaid – the interest on the loan covered the insurance risk.

From then on, the concept of insurance, based on risk sharing, grew in sophistication. But it remained pretty unscientific. It wasn't until 1654, when the mathematicians Blaise Pascal and Pierre de Fermat discovered a way to calculate probabilities, and thereby quantify risk, that modern insurance was born. After the Great Fire of London, in 1666, Nicholas Barbon introduced the first-ever fire insurance policy and, within a few years, the practice of underwriting (formally evaluating risk), had become established.
Even so, it was still a fair while before car insurance emerged. This was for the fairly obvious reason that cars didn’t exist. But even when, in 1886, Karl Benz patented his Benz Patent-Motorwagen, recognised as the first modern car, another decade was to pass before the first car insurance policy was sold in the UK. By 1930, though, it had become illegal to drive on public roads without third party insurance – drivers were required to buy policies which, as well as damages, covered hospital treatment (to the third party) up to the value of £25.
Now, all of this may be interesting enough, but there’s a fair chance it’s left you wondering: so what? Why all this talk of insurance in the first place? Well, the answer is that, for the first time since it was established over 120 years, ago a major change is about to shake up the motor insurance industry. And that change is being initiated by Tesla. Let us explain.
Until now, you see, the cost of a motor insurance policy has been based on the concept of shared risk. In other words, you (the policy holder) are lumped in with a (large) group of others, based on factors such as your demographic and where you live, etc. If your group makes lots of claims, then it is considered ‘high-risk’ – a label which is also applied to you as an individual, and which plays a big part in shaping the size of your premium. Anyone in a high risk group will tend to pay a higher premium, even though they may be a very safe driver. They are, in effect, paying for the misdeeds of others.
Of course, as you know, some insurance companies have attempted to address this by introducing a black box telemetry system, which tracks driving behaviour and enables ‘good’ driving to be rewarded by lower premiums. It’s essentially a way of individualising risk. This may be a good idea in principle, but not everybody wants a black box in their car. So. . .
Enter Tesla. The company has introduced a new scheme which could not only save motorists hundreds of pounds, but is great for the environment, too. That’s because Tesla’s new By Miles insurance policy is aimed at motorists who drive less than 7,000 miles per year. The fewer miles you drive, the less of a risk you are, so the less you pay. What’s more (and critically), the scheme is totally trackerless: data is taken directly from Tesla vehicles without the need for any extra hardware to be installed.

Users of the Tesla scheme will benefit in several ways. Not only will they save, according to MoneySupermarket around £600 on cover for a new Tesla 3 model, but a fully comprehensive policy includes guaranteed repairs from official dealerships for five years. Furthermore, the scheme lets policy holders spread the cost, by checking how many miles have been driven each day (via the By Miles app) and paying for what they’ve driven monthly. It’s a great way to avoid charges spiralling!
One car-related activity which is quite definitely high-risk is browsing our used cars section – you’re at very high risk of finding a great-value used car - anything from a used Vauxhall Astra to a used BMW 4 Series. Why not have a browse right now!