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What Insurers Can Learn from Tesla’s Master Plan

August 18, 2016

Adoption of autonomous vehicles seems to be an inevitability. Boston Consulting Group forecasts that by 2035 more than 12 million autonomous vehicles will be sold per year globally. But there also is skepticism about the benefits and risks of self-driving vehicles, and there continues to be considerable debate about issues such as vehicle safety, hesitation on customers part to embrace the technology, and likely new regulation to control the adoption of autonomous vehicles.

These are valid concerns. But one business leader who is putting these current concerns into the context of a long-term strategy is Tesla Motors co-founder and CEO Elon Musk. Far from having second thoughts about the autonomous vehicle business, he is all in just read Master Plan, Part Deux, the blog Musk posted recently on Teslas website, to learn more about his commitment. The blog is a progress report on where Tesla Motors is 10 years after Musk wrote the companys first master plan. As he explains, the first plan included these goals: Create a low-volume car, which would necessarily be expensive; use that money to develop a medium-volume car at a lower price; use that money to create an affordable, high-volume car; and then provide solar power.

Beyond traditional industry definitions
The blog not only provides a vision of where Tesla Motors goes from here, but also Musks views on Teslas role in the world that it is more than simply a car manufacturer. It is this perspective that is particularly important for insurers, not only because they are potential players in the future transport ecosystem that Musk envisions, but also because it provides possible guidance in rethinking business models a necessity for the successful insurance company of tomorrow.

Part Deux of the Tesla master plan includes the following: Integrate energy generation and storage; expand to cover the major forms of terrestrial transport; autonomy; and sharing. Each element has significant implications for insurers. For example, the concept integrate energy generation and storage is about creating ecosystems that enable efficiency, speed, and superior customer experience. Musk envisions “… one ordering experience, one installation, one service contract, one phone app … we need to combine and break down barriers inherent to being separate companies.” Insurers could (and should) be part of that ecosystem (or could be involved in comparable ecosystems that include other manufacturers).

Musks desire to “expand to cover the major forms of terrestrial transport” can create opportunities for new types of insurance coverage for new types of vehicles. These vehicles would be produced in a new kind of highly automated factory, which also will need different kinds of coverage, with likely consequences for many aspects of commercial insurance (workers comp, liability, and so on).

Musks ideas that electric vehicles will advance the sharing economy and become income-generating for owners when the cars are not in use show how he is prepared to redefine the automobile business. Again, this will create a need for new types of insurance coverage. But if you think of this only in terms of new products, you could be missing out on more significant and lasting opportunities for reinvention.

Playing the long game
Musk’s long game — his ultimate goal — is about sustainability, saving civilization by eliminating dependence on fossil fuels. Its not about building the biggest car company or anything specifically around vehicles. The point of all this was, and remains, accelerating the advent of sustainable energy, so that we can imagine far into the future and life is still good, he writes. Innovating in areas such as electric vehicles and solar-gathering roofs are ways to get there.

Similarly, as insurance shifts from protection to prevention and life expectancy increases, the insurance business inevitably will change (it already is changing). But rather than thinking strictly about, How will we sell insurance in the future? and What will be the insurance products of tomorrow? insurers should be figuring out their roles in a society that is becoming increasingly automated, that is ever-more diverse in terms of demographics and income, and where it is easier than ever for new competitors to challenge established businesses and industries.

Whats your master plan?

Katherine Burger is a Practice Lead with the Insurance and Healthcare unit at Tata Consultancy Services. She is a thought leader and communicator in the area of business technology, with a particular focus on analyzing the ways technology enables financial services organizations to be more productive, competitive and profitable. She served as Editorial Director of Insurance & Technology from 1991-2015 and Bank Systems & Technology from 2003-2015. At I&T and BS&T, in addition to directing the editorial strategy of both brands, Kathy handled both digital- and print-medium publications, spanning from new products and editorial supplements to live and online events, including summits, forums, webinars and roundtables. Kathy has been a frequent speaker and/or moderator at financial services industry conferences, and also has presented at a number of technology company user group and sales force events. She is a graduate of Carleton College.