Last update: Thu Jul 30 2020
After I published my previous article on the Electrade blog, I received a lot of comments stating that the reason behind higher insurance costs for electric vehicles is primarily due to higher repair costs. That spun up a few weeks of research and I thought my findings would make an interesting follow up to the previous piece. In this article, we will look into the repair costs associated with electric vehicles, the contributing factors to those costs, and whether or not the higher repair costs warrant higher insurance premiums for EVs.
The first thing that comes to mind when it comes to post-collision repair costs for electric vehicles compared to internal combustion engine (ICE) vehicles is that repairing a Tesla requires specific expertise that not all mechanics and auto body shops possess. This goes back to the age old question of supply and demand. Yes, there are fewer electric car mechanics available, but on a relative ratio basis (# of EV mechanics to # of EVs on the road VS # of ICE mechanics to # of ICE vehicles on the road) the point is moot.
The next major factor that experts worry about is the battery pack. Battery packs can be expensive to replace if damaged. Even if the battery pack is not damaged,, it needs to be carefully removed and secured after a major accident. Additionally, expert mechanics would need to assess the battery pack during the course of repairs,which adds to labor costs.
With that being said, the majority of auto insurance claims are for minor collisions not involving major vehicle damage, bodily injury, or loss of life. According to ISO, a Verisk Analytics company, the average auto liability claim in 2013 was $3,231 and the average collision claim was $3,144. This means that in most cases, the damages are not severe enough to warrant a major repair expense. The majority of insurance claims paid out are either bodily injury or fatality related. Generally speaking, 14% of auto accidents lead to a total loss of the vehicle.
Given the data points above, we see that higher auto insurance premiums for EVs are not warranted due to the low rates of total vehicle loss. In fact, minor repairs, which are much more common, are cheaper and easier to perform on EVs (i.e. headlight repairs).
The data suggests that the overall repair costs associated with EVs are on average 5 - 8% higher compared to ICE vehicles in the same price range while insurance premiums are 19% higher compared to ICE vehicles. Insurance is a game of predictability and the lack of data is still the main contributing factor to higher insurance premiums. Electrade helps our members save 40% on insurance premiums through partnership with leading digital-first insurers like Clearcover, Root and Metromile – Request a quote today to see how much you save on your car insurance.
Thank you for reading, and thank you for supporting the electification of transport. ⚡️