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Member of top 10 private auto group to become newest Tesla underwriter

Tesla Inc. is introducing its data and analytics-driven private-passenger auto insurance product in a third state with a third different underwriting partner.

Tesla Insurance Services Inc. has laid the groundwork to begin offering coverage to Tesla owners in Illinois, according to a series of rate, rule and form filings obtained by S&P Global Market Intelligence, through policies to be underwritten by Midvale Indemnity Co., a subsidiary of American Family Mutual Insurance Co. S.I.

The Illinois program as described in the filings is substantively similar to the policies Tesla is offering in Texas through Redpoint County Mutual Insurance Co., which incorporates driving data such as speed, mileage, accelerations and time of day collected through Tesla's advanced driver assistance systems, or Autopilot, features to determine a personalized safety score. In turn, that score helps determine the magnitude of a safety discount off of the base rate that a vehicle is eligible to receive. Both programs build upon Tesla's initial foray into insurance through a California program underwritten by Markel Corp.'s State National Insurance Co. Inc.

Echoing the Texas filing, an actuarial memorandum accompanying the Illinois submissions states that the product will "use the technology in vehicles to lower costs and improve the customer experience through automated underwriting, rating, and claims, including direct data feeds with customer permission, that eliminate frictional costs and inefficiencies inherent in traditional insurance processes."

The Texas and Illinois filings include rate symbol adjustments to reflect Tesla's agreement to provide repair parts to accredited body shops at a discounted rate. The factors assume that repair costs will be 15% below those assumed in the Insurance Services Office's symbols for the same Tesla models.

Midvale proposed a Feb. 15 effective date for the Illinois filings. The most recent iteration of the rate/rule filing showed a disposition date of Feb. 16.

Tesla in its Form 10-K said it plans to expand access to the insurance product "as part of our ongoing effort to decrease the total cost of ownership for our customers." The company's insurance website, as viewed Feb. 17, continued to list California as the lone market where the product was available.

American Family referred questions on its participation in the Tesla product to the automaker, which did not provide comment.

The American Family group ranked as the No. 6 writer of private-passenger auto insurance business in Illinois in 2019 based on direct premiums written; the top-tier company and American Family Insurance Co. combined to account for 92.7% of its $345.1 million in production. Midvale had only about $204,000 in Illinois private auto business in 2019. A review of historical product filings funds that the existing Midvale private auto business in Illinois appears to pertain to a program offered through a direct online distribution platform to the customers of certain partner organizations.

Midvale's name surfaced in November 2020 in connection with a new insurance program offered by another original equipment manufacturer, but unlike the Tesla arrangement, it did not require the launch of a distinct program. General Motors Co.'s Onstar Insurance Services Inc. is selling policies to be issued and written by member companies and affiliates of Homesite Group Inc., of which Midvale is one. Filings from Pennsylvania and Ohio indicated that Midvale added Onstar Insurance Services as a qualifying partner to its existing programs in those states.

Nationally, the American Family Group ranked as the No. 9 private auto insurer based on 2019 direct premiums written. In addition to American Family-branded business written through exclusive agents, the group also includes nonstandard auto insurers that do business as The General and the personal lines property and casualty business it acquired in 2019 that now operates as CONNECT, powered by American Family Insurance.