India's data rules may force Tesla to take China route for car insurance plan

Though not officially announced, the EV giant is reportedly in talks with Acko, Zurich Kotak, and Liberty General Insurance to partner for bundled insurance offerings

The much-anticipated Digital Personal Data Protection Act (DPDPA) may force Tesla to abandon its global insurance playbook as it enters India's electric vehicle market with its flagship model Y.

Instead of launching its real-time, telematics-based insurance product, as it has in the US and the UK, the automaker is likely to adopt a limited model used in China and parts of Europe, where it partners with domestic insurers to offer bundled, static policies at the point of sale, sources told Moneycontrol.

Though not officially announced, the EV giant is reportedly in talks with Acko, Zurich Kotak, and Liberty General Insurance to partner for bundled insurance offerings.

An email sent to Tesla remained unanswered until the time of publishing.

Billionaire Elon Musk-led firm's telematics-based model was first rolled out in the United States. Unlike traditional auto insurance, which relies on historical data like age, ZIP code, or past claims, Tesla’s system dynamically prices premiums based on how a person actually drives, with data gathered in real time from the car’s onboard sensors.

Every month, drivers receive a “Safety Score”, calculated using metrics like sudden braking, unsafe following distance, sharp acceleration, speeding, and phone use while driving. Drivers with higher scores, indicating safer habits, are rewarded with lower monthly premiums.

What makes this model unique is that the company controls the entire stack: it designs the car, owns the data, generates the risk score, and even acts as the licensed insurer. This kind of vertical integration lets Tesla underwrite risk within its own ecosystem, with no third-party insurers or brokers needed.

However, India’s data rules may prevent Tesla from deploying this model.

Moreover, the Insurance Regulatory and Development Authority of India (IRDAI) has not yet given a green light for the full-scale rollout of usage-based insurance (UBI), the kind that relies heavily on telematics and real-time driver behaviour.

Data protection law limits Tesla’s options

The DPDP Act, passed in 2023 and expected to be fully operational this year, sets rules for how companies collect and use personal data in India.

Under the Act, Tesla or any company, cannot simply collect and use personal or behavioural data (like driving habits, speed, braking, or location) without first clearly informing the user about what data is being collected, why it is being collected, and how it will be used.

The user must then give explicit consent, not assumed or hidden in fine print. For example, if Tesla wants to collect telematics data to calculate insurance premiums, it must say so upfront, and the user must agree to that specific use.

Moreover, that data cannot later be used for another reason, such as like marketing or product development, unless the user gives separate permission.

Importantly, individuals now have the right to withdraw consent at any time and to ask for their data to be deleted.

This may create compliance obligations for companies like Tesla that rely on continuous behavioural tracking for their insurance models, and telematics-based insurance falls squarely within the scope of this law.

Tesla’s likely workaround

In response, sources say, Tesla is expected to adopt a strategy that mirrors its approach in China and Germany. In China, regulators require that all vehicle-generated data be stored locally and impose strict limits on cross-border data transfers, making Tesla’s direct telematics model unviable.

Similarly, in Europe, the General Data Protection Regulation (GDPR) imposes stringent requirements: real-time data collection for pricing is difficult because consent must be freely given, specific, and revocable. European regulators have also been particularly cautious about allowing behavioral tracking, especially in the context of financial services like insurance.

An official at one of the insurers in discussion confirmed this approach saying, “Tesla is not seeking to implement dynamic pricing yet. The focus is on convenience and bundled insurance offerings. Any telematics integration would require clearances from IRDAI and compliance with DPDPA,” the official added.

In India, insurance offerings would be integrated into Tesla’s online buying journey or showroom experience, allowing customers to choose a policy, the official explained.

These policies will be priced using conventional factors, similar to standard auto insurance in India, including the driver’s age, driving record, geographic location, and the car’s general specifications such as model and safety features.

Besides, Tesla’s decision to rely on domestic insurers in India is the only feasible route, sources further explained.

Tesla skips the risky road, for now

While Tesla’s telematics-driven insurance model has grown rapidly in the US and UK, writing nearly $1 billion in premiums by 2024, it has struggled to turn a profit, according to a report by S&P Global.
In fact, Tesla Insurance posted an underwriting loss of $42 million in the first nine months of 2024 alone, with a combined loss ratio of 121 percent, meaning it was paying out far more in claims and expenses than it earned in premiums.

These persistent losses highlight the challenges of vertical integration in insurance, sources said, when a company owns both the risk and the infrastructure especially when dealing with high repair costs, rising claim frequencies, and evolving data regulations.