• Tesla’s insurance arm is taking a beating by paying out more than it earns from premiums, according to data from S&P Global.
• This is significantly higher than the national average loss ratios calculated for other insurance companies.
• It could mean that not even Tesla can repair its own cars affordably after an accident.

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In 2019, Tesla set out to lower insurance rates for owners of its electric cars. The goal was simple, at least in theory: fix the broken cost of car insurance. Instead, Tesla may have broken its own calculator trying to make sense of repair costs.

See, Musk’s vision of Tesla’s insurance product was that traditional companies just didn’t “get it.” Tesla’s data claims that its Full Self-Driving software has fewer accidents than a human driver. Plus, its cars are rolling computers that can collect copious amounts of data on its drivers and adjust risk based on their driving. So why wouldn’t drivers get a lower rate for putting around with FSD enabled if they also happen to be a safe driver? Tesla quickly found out that despite these assumptions, it’s still taking a bath on claim-related losses.

The data comes from S&P Global and shows that the automaker’s insurance subsidiary took a loss ratio of 103.3 in 2024. The loss ratio, for those who don’t know, is the amount of money that Tesla pays out per claim versus the money it takes in from premiums. The lower the number, the better, and break-even is a flat 100. In 2024, the rest of the industry averaged 66.1.

Tesla generated around $992 million through the sale of insurance premiums in 2024 across the U.S. So if its goal was to net neither a profit nor a loss on insurance annually, the automaker has almost achieved that. But Tesla isn’t quite there yet.

Even if you also factor in the revenue that Tesla could be making from sales of components and generalized repairs—the actual figure is unknown since Tesla lumps it into the $10.5 million “services and other” revenue line item in its earnings report—the close-but-not-enough discrepancy likely still isn’t slim enough to make the insurance loss make sense.

 

Now, Tesla’s margin has gotten better, but a loss is still a loss. In previous years, Tesla has continually lost way above the national average. For example, its loss ratio was 114.7 in 2023 while the rest of the industry sat at 75.4. And in 2022, it hit nosebleed levels at 116.6 versus an industry average of 80.1.

Another issue has been customer satisfaction with Tesla’s insurance. Owners online have sounded the alarm since the company first started offering to cover cars. The internet is peppered with horror stories about long repair times, poor communication, hours on hold waiting to talk to a human (the highest I’ve seen online is nearly 7 hours) and frustrating claim processes. Tesla might promise a streamlined process to insurance, but the actual execution once a payout is needed seems to be about as efficient as a traffic jam.

So what’s the fix here? Tesla insurance rates keep rising. In fact, the cost to insure a Model Y has gone up as much as 30% year-over-year across the U.S. And the only major premium car brands that are more expensive to insure are Rolls-Royce, Lamborghini, Bentley, McLaren, Maserati, and Aston Martin. Woof.

Tesla doesn’t appear to have much room for cost-cutting in the customer service department. Its insurance premiums have already gone up, and its cars are still expensive to fix, with an average collision repair cost being 32% higher than an ICE car. If something doesn’t give, Tesla’s insurance might either need to continue being a loss-leader, or it could go the way of the Cybertruck Range Extender.