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Tesla is on a mission to revolutionize the car insurance customer experience. Given that this is a sector that’s viewed as relatively impermeable to change, it’s impressive to reimagine and rebuild the business model from the ground up. Last week during an earnings conference call, Tesla CEO Elon Musk shared his vision for Tesla Insurance as it expands to additional U.S. states. But what Musk is trying to do reflects the broader trend of companies putting the insurance customer experience first. Other insurers would do well to learn from this model.

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Tesla Insurance Expands Its Reach

Car insurance rarely makes it on the list of consumers’ most beloved products. But Tesla’s Elon Musk is on a mission to change that, or as he says, “trying to turn a nightmare into a dream.”

During a recent earnings conference call, Tesla CFO Zachary Kirkhorn said while it was too early to reveal any financial results of the insurance program, it is already having a big impact. Tesla Insurance takes customer road data on a number of parameters, including forward-collision warnings, hard braking, aggressive turning, unsafe following, and forced autopilot disengagements. It then assigns customers a Safety Score based on the driving behavior collected in real-time. An estimate of customers’ next premium is shown based on changes in their Safety Score.

Customer premiums are then determined by the Safety Score. This incentivizes customers to drive more safely, as their driving is directly tied to how much they owe.

According to the conference call, Tesla Insurance intends to be the largest insurer of Teslas in Texas by the end of 2022. The real-time insurance product will now also be offered in Oregon, Colorado, and Virginia. Tesla wants to give 80% of its U.S. customers access to Tesla Insurance by the end of the year, too. Afterwards, Tesla plans to expand its insurance offering aboad. Currently, Tesla Insurance is available in eight states, but rapidly expanding.

This expansion across the U.S. (and eventually the world) means that Tesla is now the underwriter holding the risk, as opposed to an MGA model. In the new states that have authorized Tesla Insurance, the company is considered a “fully vertically integrated provider.”

The are hiccups in California, though. While Tesla Insurance is available in the state of California, state regulations don’t authorize the collection of real-time driving behavior. This has been a matter of considerable friction for Elon Musk, who clashed with California Regulator Ricardo Lara over the privacy limitations. This is a significant roadblock given that the primary differentiator and appeal of Tesla Insurance is its real-time driving data collection. Besides safe driving, other factors that go into calculating the premium include car model, miles driven, policyholder address, and type of coverage. But it’s the real-time element that’s the real game-changer, not just in terms of Tesla’s bottom line but in terms of being a leader in customer obsession, road safety, and innovation.

What the Tesla Insurance Customer Experience Means

P&C insurers stand to gain a lot from taking a leaf out of Tesla’s playbook. It’s a good idea to consider whether there might be more accurate and forward-thinking ways of calculating premiums beyond gender, age, and the usual.

There are also many other cutting-edge insurance providers to learn from. Like Tesla Insurance, many insurtechs are customer-obsessed companies that enter the insurance sector, taking advantage of new technologies to provide coverage to a more digitally savvy customer base. In some locations, regulatory barriers have been lowered.

In Australia, Singapore, and the UK, for example, insurtechs have been encouraged to test their innovative business plans on specific client segments without the need to conform to the full regulatory frameworks that apply to incumbents. Like fintechs, insurtechs are extending innovation throughout the sector, creating a competitive threat to incumbents but also potentially valuable opportunities for partnering on the changing terrain.

Customer expectations of instant digital transactions sustained seamlessly across digital channels are increasingly the norm. While insurtechs haven’t come even close to replacing incumbents, they are growing fast and stand to capture a meaningful market share within a few years.

Insurtechs can transform the insurance customer experience. Insurtechs are able to go to market in inherently different ways than incumbents can. One advantage insurtechs have is the absence of legacy products, processes, and IT systems. They are able to design digital processes, products, and systems from the ground up, relying on the latest technology. More streamlined operations translate into less investment for faster returns.

Crucially, insurtechs rely on a fully automated approach. This allows them to cut costs and accelerate processes to meet customer expectations. For example, SnapSheet offers end-to-end automated claims management, and the Claim Di mobile app uses “shake and go” technology to help claimants interact with their insurers on the accident site just by shaking their phone.

Meanwhile, Lemonade, a US-based peer-to-peer insurer has attracted significant funding from top-tier investors, as well as significant traction in their quest to “Uberize” insurance. The company boasts a minutes-long, paperwork-free claims process and delightful online sign-up. It also has a modern UI/UX that allows customers to breeze through insurance interactions.

The Promise of Technology for the Insurance Customer Experience

Tesla Insurance, along with insurtechs such as Lemonade are transforming consumers’ relationships with their car insurance. Lightico’s Digital Completion Cloud is another platform that allows traditional consumers to quickly increase ROI by digitizing customer transactions.

Lightico automates P&C insurance sales and claims cycles through digital ID verification, eSignatures, eForms, and document collection. The results are nearly immediate, with Lightico having:

  • Delivered major roll-outs to tier 1 insurers globally
  • Driven up Net Promoter Scores by 35%
  • Reduced call handling time by over 20%
  • Reduced customer touchpoints by 10 to four for insurance sales
  • To learn more about Lightico’s Digital Completion Cloud, visit Lightico.com.

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