Electric Cars Cost More Than Twice as Much to Insure: Broker

A customer prepares to charge his Tesla electric vehicle (EV) after parking in a bay for electric vehicles at a supermarket in north London on November 18, 2020. - Britain will ban petrol and diesel vehicle sales from 2030 as part of a 10-point plan for a "green industrial revolution" to be unveiled Wednesday by Prime Minister Boris Johnson. The British premier has earmarked £12 billion (13.4 billion euros, $15.9 billion) for the wide-ranging plans, which he hopes will secure up to 250,000 jobs and help meet a target for the UK to become carbon neutral by 2050. (Photo by DANIEL LEAL-OLIVAS / AFP) Photo by DANIEL LEAL-OLIVAS/AFP via Getty Images

A report by car insurance brokers has revealed that average premiums for electric vehicles are substantially higher than for traditional cars.

Britons, driving electric cars, saw the average electric vehicle (EV) premiums increase 50 percent across 2023.

Last year, the price for EV premiums climbed from £896 to £1,344. Meanwhile, the cost of insuring a traditional car still remained some £668 less expensive per year.

The increase in rate for EV drivers was attributed to higher claims frequency and higher average cost per claim. The claim frequency on electric cars was 26 percent higher than on petrol and diesel cars, according to data provided by Howden Insurance Brokers.

Higher cost of repairs, higher frequency of claims and a higher average cost per claim drove the price increase, the group said.

It reported that average cost per claim for accidental damage was 35 percent higher for EVs than for internal combustion engine (ICE) cars.

Electric cars generally have more safety features and driver assistance, resulting in less frequent injury claims, the group said. However, EV batteries are very expensive and prone to damage, requiring repairers with specialist equipment, it added.

“You’ve got length of repair times going up, you’ve got the cost of the component parts going up, and you probably see more EVs written off because residual values are particularly low at the moment,” Carl Shuker, the broker’s UK and Ireland head, told Bloomberg.

When EVs break down owing to accidental damage, it typically costs the drivers 35 percent more per claim than it would for owners of traditional cars.

British breakdown cover and car insurance company the RAC explained that EVs are equipped with technology that usually costs more to fix or replace.

“Also, if you have an accident, it’s more likely to need a specialist repairer,” the RAC added.

Zero Emission Vehicle Impact

With new zero emission zones and the 2030 combustion engine ban on the horizon, the pressure is high on drivers to switch from traditional cars to electric.

The zero emission vehicle (ZEV) mandate, set out by the government, requires 80 percent of new cars and 70 percent of new vans sold in the UK to be zero emission by 2030, increasing to 100 percent by 2035.

Car manufacturers who fail to abide by the mandate will be fined £15,000 for every ICE car they sell above the limit, which rises incrementally every year.

Last year, Prime Minister Rishi Sunak pushed the ban on petrol and diesel cars back until 2035. The government said that its decision will make the transition for consumers easier and will allow more time to develop charging infrastructure.

In the meantime, consumers already burdened by the high cost of living are facing higher insurance costs for EVs, which could add hurdles to making the switch from traditional cars.

The end of last year saw a drop in demand for EVs, with their market share going down from 16.6 percent during the previous 12 months to 16.5 percent.

The Society of Motor Manufacturers and Traders (SMMT) has called on the government to slash VAT on electric car purchases for three years. This would help consumers with costs and the requirement to meet the new government targets, said the head of SMMT, Mike Hawes.

The pressure of the ZEV mandate is likely to lead to more competitive prices this year, as sellers look to win over retail buyers.

Last week, a report by Auto Trader said they expect a price war in the UK electric car market, with Chinese brands looking to expand their car exports. Chinese brands hold power over prices in the British market, owing to a gap in domestic and overseas prices as high as £19,000 for some models.

The pricing gap gives Chinese entrants the upper hand “to take on established Western brands in the UK,” the vehicle marketplace said.

Despite the possibility of lower prices on EVs in the UK market in the future, consumers and industry experts continue to raise safety concerns when it comes to electric vehicles.

These include fire risks related to lithium batteries that power EVs, as well as questions about whether EV software is hacker resistant.