Elon Musk's latest scheme is a bit more down-to-earth than space travel, but still a huge challenge. Musk believes he has the manpower and expertise to bring a profitable, Tesla-branded insurance product to market "within a month."
While Musk and his team at Tesla have consistently pushed the boundaries of battery technology, chip engineering, and autonomous vehicle capabilities, they have also struggled time and time again to hit deadlines and, more importantly, reach profitability.
Tesla's own-brand insurance product is likely to bring more of the same: a delayed product launch and more cash burnt for the auto manufacturer.
Insurance is a hard business to make money in. Tesla's vast pool of real world driving data will certainly confer an advantage in measuring and pricing risk; however, Tesla cars are still incredibly expensive to repair when they do crash. Creating a product that is both cheaper for the customer and profitable for Tesla could take years of fine-tuning.
Tesla will be shielded from any losses while they figure out pricing, as State National are providing capacity for Tesla's product. Tesla's informational edge only gets them part of the way to building a successful insurance product - what about marketing? Claims processing? Customer service? These functions may be overlooked, but require a significant amount of resources to get right.
This kind of horizontal expansion seems bold from a company that is struggling to achieve operational excellence in its core market.
Although there are often delays in reaching Musk's milestones, they eventually do come to fruition. Even if Tesla can stand up a product within a month, we don't expect to see it generating profits for Tesla next quarter.
Tesla is about to launch a new insurance program in order to reduce costs for its owners and some details are starting to leak through a new partner behind the program. For years now, Tesla has been increasingly more involved in building insurance products especially designed for its vehicles. Last year, Tesla hired Alex Tsetsenekos, a former exec at Liberty Mutual, Tesla’s partner for InsureMyTesla in the US, and several other insurance companies, to lead what he described as a ‘Customer Centric Insurance Company’ for Tesla.