Insurance premiums on the rise for electric vehicles
The Canadian firm Morningstars DBRS a rating provider, particularly for insurance companies, unveiled a report earlier this week which suggests that auto insurance rates will increase as the transition to electric vehicles increases in Canada.
According to the firm, EV buyers should expect to pay more for insurance as insurers will adjust their pricing models as more EV-related claims data is generated.
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A higher total loss rate
According to the data collected, repairs and replacement parts for electric vehicles are very expensive, prompting some insurers to treat damaged vehicles as total losses rather than attempting to repair them.
The most expensive component of an electric vehicle is the battery, often integrated into the vehicle’s chassis and floor. This makes the batteries susceptible to impact and shock, which could lead to damage. Batteries are difficult and expensive to repair or replace, leading some insurers to consider newer electric vehicles with low mileage a total loss, rather than attempting to repair or replace the battery.
The report cites an example from British Columbia where insurer ICBC declared an entire electric vehicle a total loss because the cost of replacing the battery was the same as buying the same vehicle new.
Adjusted pricing
Insurers will also need to adjust their pricing models as more EV-related claims data is generated. This could lead to rate increases partly because EVs are more expensive and partly because they are more expensive to repair.
According to the report’s authors, electric vehicles have fewer repairable parts compared to internal combustion engine vehicles, suggesting that maintenance costs should be lower. However, other factors, such as the cost of replacing batteries, the availability of replacement parts, and the scarcity of qualified technicians, will impact the price of repairs and, ultimately, insurance rates in the short term.
Data based on those from other countries
The firm’s findings Morningstars DBRS also draws on data from other countries. As an example, electric vehicle owners in the UK are already facing higher premium rates and, in some cases, denial of cover as insurers adjust their pricing models. This trend may occur in Canada over time, but since auto insurance rates are heavily regulated in Canada, potential rate increases may be less rapid.
Our opinion
It is not uncommon to meet people surprised by the premiums requested by certain insurers for electric vehicles. It is therefore very important to shop carefully, because the differences in premiums required are sometimes very significant from one insurer to another. It is still possible to get away with it.
