Everything, it seems, is getting more expensive. If you had hoped that electric car insurance might buck this trend, you might need to think again.
It would make perfect sense for drivers of gas-gazzlers to be lured into switching to an electric vehicle (EV) with the promise of cheaper insurance. However, at present, many EV owners are finding their premiums are rising at a faster rate than drivers of petrol or diesel cars.
Electric car insurance vs. petrol
According to the latest Consumer Intelligence Car Insurance Price Index, car insurance rose by 61% in the year to August 2023. This is for all insurance policies and doesn’t differentiate between electric models and those that run on fossil fuels.
Unfortunately for current EV owners and those considering going down this route, the news is not great.
Many owners of electric vehicles have recently reported sky-rocketing insurance premiums. Drivers have expressed shock at price hikes of anywhere between 50% and 1000%. Putting that into pounds and pence, if you were already paying £650, you might now need to find between £975 and £7,150 per year. That’s an eye-watering increase, particularly at the moment when the general cost of living is squeezing household budgets from all angles.
Why are electric cars more expensive to insure?
There are several factors at play here.
Individual claims for EVs are higher in value than petrol or diesel models so it makes sense that insurance premiums are higher.
One of the possible reasons cited for claims being higher is that replacement parts are more expensive to come by. As the market is relatively young, the supply chain for these parts is not always as efficient as for other fuel types either.
EVs can only be fixed by mechanics and technicians who have invested in the correct training, technology, and equipment. Therefore, the number of specialist centres currently available for their repair is limited.
All of the above means waiting times for EV repairs are longer. For insurers who offer their customers a courtesy car, an extended period of time with a rental car is required.
Insurance companies also seem quicker to write off EVs, even when a car only appears to have cosmetic damage.
After an accident or damage to an EV, it can be hard to diagnose whether all internal parts of the battery are still fully functioning. With repairs being expensive, complex and time-consuming, it’s often the more efficient option for insurers to write off the whole vehicle. This tends to only occur in the more extreme cases for petrol or diesel vehicles.
EV insurance is a relatively new product
In truth, car insurers are still adapting to this new market. Many insurers claim to want to do their bit for the planet, however, having to pay out more than anticipated in EV claims, may have started to impact their profit margins. This has led to some insurers pulling out of the market altogether.
As any economist will tell you, when demand increases and supply decreases, prices go up.
There’s currently no shortage of EV insurers in the UK, but some major names have temporarily pressed pause. This means that there’s less competition and those insurers who are left, have more ability to set prices.
So what can you do about rising EV insurance prices?
Don’t panic! If your insurer is about to pull out of the market, they’ll have to write and tell you. In most cases, your insurance policy will still be valid for 12 months from the date you took it out.
As with any type of vehicle, it always pays to shop around. Use price comparison sites and cross-reference 'cheap' insurers with comments and ratings left on review sites like ours.
You may find that the policy doesn’t offer long-term value for money or the insurer is repeatedly letting customers down. If that’s the case it might be worth paying a little more A higher premium for a company that is easier to deal with, has a lower excess, or swiftly pays out claims is usually worth the money.
Don’t forget, that price comparison sites receive commission and advertising fees from the companies that they list. Some insurers therefore actively choose not to be on these sites in order to keep their prices to a minimum.
It’s impossible to negotiate with a digital quote. If you don’t get anywhere by shopping online, it can be worth picking up the phone and discussing your situation with a real person. If you’re the type of customer they want to insure, you may find that they’ll offer you a better deal on a call.
All of the other usual tricks apply: park safely on a drive, reduce your mileage where you can, increase your excess, and pay annually. Always think carefully before adding less-experienced drivers to the policy too.
If you already own an EV, it may just be a case of damage limitation as far as your insurance premium goes this year.
If you’re considering owning an EV at some point in the future, then make sure you factor in the cost of insuring it.
As the market develops and insurers become more experienced at dealing with EVs, insurance premiums are likely to reduce in price. However, there are a lot of different pieces of the jigsaw that need to come together for that to happen. For now, EV drivers need to brace themselves for increased prices.