Tesla Insurance, which last month began underwriting its own policies in three states, could pose a challenge to traditional auto insurers in the long term, according to analysts at Morgan Stanley.

As reported by Reinsurance News, analysts said that Tesla becoming a top 10 auto insurance carrier is not a ‘wild expectation,’ adding that insurance premium forecasts for Tesla yield about $9.6 billion by 2031, assuming fairly conservative take-up rates by Tesla vehicle owners.

‘Assuming the industry continues to grow by ~3% annually, this would yield a market share of 2.8%, cracking the top-10 in US P&C market share,’ analysts said.

They said that Tesla Insurance’s future market penetration will depend on pricing sophistication and distribution strategy. Tesla’s telematics-based data gathering, used to help determine premiums, could encourage safer driving, leading to lower costs, they added.

‘We will monitor TSLA’s underwriting results closely as it gains more traction’, the analysts said, using the ticker symbol under which Tesla shares are traded on the stock market.