Electric Vehicle Owners Hit by Soaring Insurance Costs
Drivers who made the switch to electric vehicles (EVs) to save money and reduce their environmental impact are now encountering a different kind of shock: soaring insurance premiums. Some insurers are even refusing to cover electric cars altogether.
One such driver is Alex Gerlis, who was unable to renew his electric car insurance with John Lewis. His experience highlights a growing trend in the UK.
David*, an EV owner, faced a dramatic increase in his Tesla Model Y insurance premium upon renewal. His annual cost jumped from £1,200 to over £5,000 after Aviva declined to renew his policy and other insurers either refused coverage or offered exorbitant quotes. “I spent weeks on every comparison site as well as trying individual insurers and specialist brokers, but either they wouldn’t cover the car or the quotes were £5,000 or more,” David explained.
This issue is not isolated to Tesla owners. Gerlis, who owns a Smart EQ Forfour, also found himself unable to renew his policy with John Lewis Finance, which cited a decision not to insure electric cars.
Industry Trends and Challenges
Motorists across the board are experiencing higher insurance costs, with prices reportedly at an all-time high. However, electric vehicle owners are facing disproportionately large increases.
Social media is filled with stories about high car insurance renewal quotes, such as the one above.
According to Confused.com, insurance premiums for EVs are 72% higher than last year, with the average cost reaching £959. In comparison, petrol and diesel car insurance premiums have risen by 29%, averaging £848.
Louise Thomas, a motor expert at Confused.com, says that because EVs are still a minority on UK roads, insurers have less experience setting premiums for them. She also noted that the more expensive features and upgrades now standard on electric cars contribute to higher repair costs, which in turn impact premiums.
Industry analysts attribute higher claims costs for EVs to the expense of their components. Claims costs are 25% higher for EVs, and they also take about 14% longer to repair than a diesel or petrol car.
Paul Baxter, chief executive of the Green Insurer, explained that the cost and availability of parts, particularly for batteries, is a significant factor. He also highlighted concerns about the technology and skills of repair networks:
“They’ve not got to the stage they are with traditional cars in terms of expertise. If you dent a door, that’s straightforward, but if something has damaged the battery, in particular, they haven’t caught up with that.”
Insurers React and Future Outlook
Insurance companies cite several reasons for these changes. Aviva stated that it regularly reviews its underwriting criteria and made changes to its acceptance criteria for the Tesla Y Model. However, it is now possible to get cover through its Aviva Direct brand and on price-comparison websites. John Lewis said its underwriter has temporarily paused offering new policies and renewals for fully electric vehicles while analyzing risks and costs. Direct Line Group, which owns the Privilege brand, states that it is committed to the electric vehicle market and offers insurance for popular EV models.
Alex Gerlis found himself with an unexpected, non-renewal from John Lewis.
Despite the challenges, the electric vehicle market continues to grow. Almost 270,000 new EVs were registered in the UK last year, representing a 40% increase. However, the combination of rising insurance costs and limited coverage options poses a hurdle for both current and prospective EV owners.
* Not his real name.
