What led Tesla to enter the insurance market? One of the primary reasons was the lack of historical data on Tesla vehicles, which resulted in traditional insurers charging higher premiums. This, in turn, increased the overall cost of ownership for Tesla cars.

By integrating insurance into its ecosystem, Tesla has managed to lower insurance costs, offering premiums that are 20–30% lower than those of conventional insurers. As a technology-focused company, Tesla utilizes telematics embedded in its vehicles to gather real-time data on driver behavior. Advanced vehicle technology, including cameras and sensors, continuously collects data, which is then analyzed to assess accident risks, estimate repair costs, and enhance key vehicle safety features such as autopilot functionality, stability control, and anti-theft systems. These technological advancements not only help reduce insurance premiums but also provide valuable insights to policyholders under usage-based insurance models.

Currently, Tesla determines insurance premiums based on aggregated data. However, as the program evolves, the company aims to introduce personalized policies tailored to individual drivers. For now, Tesla Insurance remains exclusive to Tesla vehicle owners, but given the company's commitment to innovation, future expansions cannot be ruled out.

In a recent earnings report, Elon Musk indicated that tesla offering insurance could contribute 30–40% to the company’s automotive business. If it reaches 30% of Tesla’s $550.73 billion market cap, Tesla Insurance Services could potentially surpass State Farm to become the leading auto insurer.