40% of Tesla crashes in US are total losses due to high repair, labour costs, says former insurance VP

A new interview with Tesla’s former vice president of insurance has shed light on just how much of a liability its cars – and potentially other electric vehicles as well – are to insurers. A snippet of it tweeted by investment research house In Practise revealed that as much as 40% of crashed Teslas insured by the carmaker in the US ended up being total losses.

This high ratio has allegedly caused Tesla Insurance to run at a 150% loss ratio (the ratio of losses to premiums earned), said the former exec. However, the company was making money off salvaging parts “because I was getting such high returns,” although there were issues with salvage companies like Copart and IAA mishandling batteries, either by not charging them or damaging their casings with forklifts.

Now, this shouldn’t necessarily be taken to mean that Tesla vehicles are being involved in more accidents, even though crashes do end up being more publicised due to the company’s high profile, as well as greater scrutiny being placed on its semi-autonomous Autopilot and Full Self Driving functions.

Instead, the cars are being totalled due to high labour rates at repair shops, likely due to the increased expense of fixing an electric vehicle, especially through costly battery replacements. In addition, the Model S and Model X are made from aluminium (which is more difficult to repair than steel), which could be another factor that drives up repair costs. It should be noted that labour costs in the US may be higher than what they are in Malaysia, so what constitutes as a total loss there might not be applicable here.

The high repair costs and insurance premiums were what spurred Tesla to set up Tesla Insurance in 2019. The company promised 20% lower premiums compared to rivals, later basing them on a “safety score” determined by tracking real-time driving behaviour, including how often collision warnings were triggered.

Last year, Reuters reported on issues faced by Tesla Insurance customers, including long waits for repairs and payouts and high premiums due to false collision warnings. Earlier this week, it was revealed that Tesla hired longtime Geico exec Allen Laben to help drive down premiums, according to Electrek.

Looking to sell your car? Sell it with Carro.

Bought a new Tesla? You need to make sure it has an insurance cover note 7 days before delivery day. You can use our Tesla Insurance service to get it insured.