Electric Vehicles – What They Mean for Insurance Premiums

In recent years, the United Kingdom has witnessed a surge in the adoption of electric vehicles (EVs), driven by advancements in technology, environmental concerns and government incentives. As EVs become increasingly mainstream, risk factors and consideration for insurers will inevitably shift, so what are the implications of electric vehicles on insurance premiums?

Lower operating costs, different risks

One of the primary attractions of electric vehicles is their lower operating costs compared to conventional vehicles. However, this does not necessarily translate to lower insurance premiums. While EVs may have fewer moving parts and require less maintenance, their repair costs can be higher due to specialised components and technology.

A recent report by Thatcham discovered that the cost of repairs to an electric vehicle is about 25% more than those with internal combustion engines, and that EVS will spend, on average, 14% more time in the garage – with repairs taking longer.

Insurers are therefore having to adjust their risk models to account for the unique characteristics of EVs. It is also worth noting that premium costs may discourage drivers from investing in an EV in the first place.

Safety features and autonomous technology

Electric vehicles often come equipped with advanced safety features and autonomous driving capabilities. While these features can reduce the likelihood of accidents, they also introduce new complexities for insurers, in the event of system failures or accidents.

Conversely, EVs can often be more powerful than drivers are used to, and this accelerated performance can lead to a higher risk of collision for inexperienced drivers - and increased premiums.

Battery concerns and depreciation

The battery is a crucial component of an electric vehicle, and its health and longevity significantly impact the vehicle's value and insurability. Insurers may need to consider factors such as battery degradation, replacement costs and depreciation when determining premiums.

Additionally, uncertainties surrounding battery technology and resale value need to be worked into premium assessment.

Charging infrastructure and ‘range anxiety’

‘Range anxiety’ is the fear of running out of charge mid-journey and becoming stranded. The availability and accessibility of chargers play a crucial role in the adoption and use of electric vehicles.

Insurers need to consider factors such as the proximity of charging stations and the charging habits of EV owners when assessing the risks associated with EV ownership.

Government incentives and policy changes

Government incentives and policies aimed at promoting electric vehicle adoption can influence insurance premiums. Incentives such as grants, tax credits and reduced congestion charges may lower the overall cost of EV ownership, including insurance.

Conversely, changes in government policies, such as adjustments to vehicle tax or regulations impacting EV technology, could also raise them.

Data and telematics

Telematics systems in EVs provide insurers with access to real-time data on driving behaviour, vehicle performance and potential risks. Using this data effectively can enable insurers to offer more personalised and dynamic insurance policies tailored to individual driving habits and risk profiles.

However, concerns over data privacy and security must be addressed to ensure the ethical use of telematics data in insurance pricing.

The rise of electric vehicles presents both challenges and opportunities for the insurance industry in the UK. Insurers must adapt to the changing landscape of mobility and technology to effectively assess and mitigate risks and land on the right premiums for EV drivers.

By considering factors such as vehicle technology, charging infrastructure, government incentives and data analytics, insurers can develop innovative insurance products that meet the evolving needs of electric vehicle owners while ensuring financial sustainability and risk management.

As electric vehicles continue to reshape the automotive industry, collaboration between insurers, policymakers and industry stakeholders will be essential in navigating the roads ahead.

Read more blogs from Ascend:

Electric cars and what to consider

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Any questions? Please don’t hesitate to contact one of our team.

Matthew.Collins@ascendbroking.co.uk  | Office: 01245 449060