General Motors (GM) is following Tesla’s lead and launching its own auto insurance, OnStar Insurance. I have plenty of thoughts about this, but first, let’s dive into the details.
GM noted in its press release that it “aims to transform the auto insurance industry” with a “new digital insurance experience that aims to be secure, fair, personalized, and easy to use.” The company announced that it would have a “relentless focus on safety” with OnStar Insurance. Its new insurance agency, OnStar Insurance Services, will be the exclusive agent for OnStar Insurance.
Andrew Rose, president of OnStar Insurance Services, said in a statement, “OnStar Insurance will promote safety, security, and peace of mind,” adding that, “We aim to be an industry leader, offering insurance in an innovative way. GM customers who have subscribed to OnStar and connected services will be eligible to receive discounts, while also receiving fully-integrated services from OnStar Insurance Services.”
The insurance service will start with Arizona residents and offer its new insurance to GM employees in Q4 2020. GM plans to expand this to additional customers and the general public in early 2021.
Back in September, Ford also made plans to sell its customers car insurance by the mile, claiming it could save them $700 annually. Ford is partnering with Metromile, a VC-backed startup that was launched less than 10 years ago, for this.
Metromile’s CEO, Dan Preston, shared his thoughts in a company blog post. “For us, Ford will help us rapidly evolve how we price insurance, measure real-time risk, and put drivers in control of an individualized pay per mile rate based on how and how much you drive. Connected vehicles like Ford’s — packed with sensors and safety features — open up myriad opportunities for us to leapfrog ahead in each of these areas.”
He also noted that Metromile and Ford may be an odd couple but that the two companies are “fiercely passionate about the future of mobility. We’re both committed to delivering meaningful experiences to vehicle owners, and we’re both eager to use connected vehicles to create new ways to save on insurance and reduce the cost of ownership.”
The Auto Insurance Industry Is On Double Or Triple Notice
It should be noted that I am a Tesla shareholder and am a firm supporter of Tesla. However, I also think it’s great that we have legacy automakers paying enough attention to Tesla to incorporate the company’s ideas into their own business practices.
I think it’s way too soon to jump on the “competition is coming” bandwagon that is sure to follow this news of more automakers now launching their own insurance platforms. Tesla is innovating continuously, and insurance is one of many ways the company is enhancing its brand and customer experience.
Now that Tesla, Ford, and GM are all creating insurance as a service for their customers, there is a growing threat to the conventional auto insurance industry.
During Tesla’s Q2 2020 earnings call, Tesla’s CEO, Elon Musk, put the insurance industry on notice. “We’re building a great, major insurance company. If you’re interested in building a revolutionary insurance company, please join Tesla. Especially if you want to change things. This is the place to be. We want revolutionary actuaries,” he said during the call.
Tesla is a growing leader in the automotive industry. Now about to be added to the S&P 500, Tesla has the largest market value of any automaker, topping Toyota in June of this year. So, it stands to reason that other automakers are paying closer attention to what Tesla is doing. Insurance today, mining tomorrow?
RK Equity’s Howard Klein and Rodney Hooper have spoken to CleanTechnica several times about this, and Klein has also been interviewed a few times on the EV Stock Channel, where he pointed out the effect Tesla could have on the lithium market if it bought a mine. “Tesla is the leader in so many things and everybody is trying to copy them to some degree. If VW or GM saw that Tesla got into lithium mining, all of a sudden there would be a rush,” Klein said. Indeed, even without buying mines, Tesla is breathing new life into the manganese market and the nickel market.
For now, with Tesla, GM, and Ford entering the insurance industry, they are forcing companies such as All State, Progressive, State Farm, and others to evolve or die. Stay tuned.