TESLA Motors is locking into its unique communications with all its cars and its ability to know what is going on behind the wheel of each car in real time as a way of coming up with highly competitive insurance.

By aggregating the driving data the company is able to accurately understand the risk to which its vehicles are being exposed.

But the insurance initiative has had a rocky start in the market with its own Tesla Insurance product.

After launching it at the end of August, the system was then suspended within four hours.

The US car-maker said the product was suspended because bugs were found in the system and customers were being quoted incorrect premiums for the insurance cover.

It is now back in operation but only in California. Tesla plans to move into other US states after trialling it in California.

In a statement, the company said that Tesla Insurance was “a competitively priced insurance offering designed to provide Tesla owners with up to 20 per cent lower rates, and in some cases as much as 30 per cent”.

“Tesla Insurance offers comprehensive coverage and claims management to support our customers in California, and it will expand to additional US states in the future,” the company said.

“Because Tesla knows its vehicles best, Tesla Insurance is able to leverage the advanced technology, safety and serviceability of our cars to provide insurance at a lower cost.

“This pricing reflects the benefits of Tesla’s active safety and advanced driver assistance features that come standard on all new Tesla vehicles.”

The launch comes at a time when the Tesla Model S was this month found to be the most expensive car to insure in the US.

Using data from the US Insurance Institute for Highway Safety, an American commentary firm 24/7 Wall St said the Model S AWD cost $US1789.48 in annual average insurance premiums and $US1310.40 in annual collision insurance premiums.

The prices were regarded as being more expensive than rival brands because of the Tesla’s “abnormally high claim frequencies”, 24/7 Wall St reported.

But in partnership with US insurer State National Insurance, Tesla aims to reduce premiums with discounts based on the vehicle’s driver-assist software and hardware that claims to reduce the risk of collisions.

It will also use driver data that shows a history of accidents and claims, together with its own data from its customers including information from the Tesla’s GPS, onboard sensors and cameras, plus other sources.

Tesla boss Elon Musk said Tesla has an “information arbitrage opportunity” that can capture driving data to give the company direct knowledge of the risk profile of the driver and car.

He said that if customers want to buy Tesla insurance, they might have to agree to “not drive the car in a crazy way”. He later added that they can drive crazy, they’ll just have a higher insurance rate.

Tesla has about 450,000 owners in the US as a base for its insurance business. But it is not seen as becoming a large contributor to profits as the size of premiums is comparatively low. One of the biggest car insurers in the US, State Farm, has more than 83 million customers.

Tesla’s insurance site was launched around 3pm on August 28 but users reported trouble accessing the site within just a few hours. Within four hours, Tesla tweeted that it was “making some updates to Tesla Insurance” and that the service would “be back online shortly”.

It then tweeted 17 minutes later to say there was an “algorithm update in progress”.

Tesla’s Reddit posts and its own owner forums were then filled with posts from owners claiming they received quotes that were higher than expected.

Tesla Insurance is not available for commercial services such as using the vehicle for ride-hailing or car-sharing services, and the product is not yet available to markets outside of the US.

By Neil Dowling