Last update: Fri Jun 21 2019
Author – Armin Monajemi
Day after day I hear from my Electric Vehicle owner friends that after the initial costs of acquisition, insurance is the costliest part of EV ownership. On average according to last year’s data, EV premiums are about 19% higher than the national average for similar gas powered vehicles. The main reason behind this gap seems to be the unfamiliarity of the insurers with the EV world. The limited data around electric vehicle drivers show that the EV owners actually tend to be safer drivers than the average gas engine vehicle driver.
When filling out a form for insurance quote, drivers are used to seeing questions like do you own or rent your home? What is your level of education? What is your occupation? Even in some cases, insurers ask for the applicant's household income bracket. Insurers know that more questions, especially at such a personal level, means less submissions and less conversion. So why do they risk losing business? Because these answers are directly correlated with the level of risk associated with the driver. A 2015 Washington Post article shows that while the number of fatalities as a result of car accidents have been declining in the last few decades, the number of accidents involving death have been increasing amongst people with lower level of education and lower income. Our study shows that EV drivers are generally leaning more towards what insurers consider lower risk drivers.
Let’s take Tesla owners demographics for instance. The average household income of a model X owner is more than twice the national average. 88% of tesla owners own their homes, and enjoy higher levels of education. This is more or less the case for owners of other electric vehicles as well.
Car safety features are another major contributing factor to auto insurance risk. Features such as anti-theft systems, advanced brake systems, anti-collision sensors and other situational awareness tools. Electric vehicles are far more technologically advanced and come with almost every possible safety feature out there. According to a DOT study published in 2017, when adjusted for the sample size, Electric vehicles are less likely to be involved in an accident than ICE or Internal Combustion Engine vehicles.
The fact that EVs are less risky to insure seems to be an obvious fact, but why insurers are still charging EV owners such large premiums? The answer is deeply rooted in the nature of the insurance industry. These financial giants survive only by relying on big data to mitigate risk. The unknown is the biggest enemy of an industry that tries not to leave anything to chance.
This is exactly why Elon Musk, Chief Executive of Tesla announced back in April that Tesla is releasing an insurance product. Tesla believes that by relying on the data they receive from their vehicles, they will be able to price their risks more intelligently than a traditional carrier, something that Warren Buffet does not agree with. An article published by The Issuance Journal quotes buffet saying “The success of the auto companies getting into the insurance business is about as likely as the success of insurance companies getting into the auto business.”
Whether Tesla or Berkshire Hathaway, as more data becomes available in this space, the insurance premiums will go down, but in the meantime, EV owners are paying a penalty for their intent to save the world.
While we are waiting for an industry giant to emerge and save the day, companies like Electrade are here to work hand-in-hand with insurance carriers and brokers to help EV owners enjoy the same insurance rates that all other drivers are entitled to.
Get a quote by clicking on the button below or click here to find out why we're different.
Thank you for reading, and thank you for being part of the electification of transport. ⚡️