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Battery prices, a shortage of mechanics and a rise in write-offs mean that you may find it hard to get cover at all
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Why does electric car insurance cost so much?
Battery prices, a shortage of mechanics and a rise in write-offs mean that you may find it hard to get cover at all
A Tesla Model Y costs on average £1,421 to insure, almost 80 per cent more than the equivalent BMW diesel car, according to Confused.com and Auto Trader
George Nixon
Sunday October 08 2023, 12.03am, The Sunday Times
Drivers are paying up to 27 per cent more to insure an electric car than a petrol or diesel version of the same model. Some firms have refused to insure them because of the difficulty of repairs and the cost of replacements.
Insurance costs in general have risen as car parts and labour have become more expensive, but electric car insurance has gone up the most. The average comprehensive car policy cost a record £511 at the end of June, 21 per cent more than a year earlier, according to the Association of British Insurers. But the comparison site Confused.com said that premiums for electric cars were up 72 per cent in the year to September, compared with a 29 per cent rise for petrol and diesel cars.
Confused looked at the average cost of insuring four popular electric cars and their petrol or diesel versions. Comprehensive insurance for a Jaguar F-Pace cost an average of £801, compared with £1,013 for an electric Jaguar I-Pace — 27 per cent more.
Confused said that it cost £1,421 on average to insure a Tesla Model Y, almost 80 per cent more than the average £799 cost of insuring an equivalent petrol or diesel car, such as the BMW X3 M40d.
The average annual premium for a new electric car was £959, while the average for petrol and diesel cars was £848.
Covéa, the firm that underwrites policies for John Lewis, is no longer offering cover for electric cars. John Lewis said: “Our underwriter has temporarily paused offering new policies and renewals on fully electric vehicles while it analyses the risks and costs.”
Aviva stopped insuring the Tesla Model Y for a few months this year. It did not say why and is now covering it again. Reuters reported in March that car experts had said that the battery pack in the model, the UK’s biggest-selling electric car last year, had “zero repairability” if it was damaged.
Not a smooth journey
More than 267,000 new electric cars were sold in the UK last year — a 40 per cent increase on 2021 and up from 37,850 sold in 2019. They accounted for 16.5 per cent of all new cars sold, according to the Society of Motor Manufacturers and Traders.
But some experts think that this trend could go into reverse as the cost of going green increases. Electric cars are more expensive than petrol. The Vauxhall Mokka electric is £38,985 — 31 per cent more than the £29,880 for its petrol equivalent, according to the car website Auto Trader.
Many of the tax breaks and perks of going electric are being withdrawn. The government scheme that cut the price of a home charger by £350 ended in March and the exemption from road tax ends in April 2025.
Jo Lloyd from the insurer Axa said: “Electric vehicles are more complex than vehicles with a standard internal combustion engine and this means the cost of repairs are often higher, which is a significant factor for insurers when setting premiums.”
Insurers have become concerned about the cost of electric car repairs and a lack of qualified mechanics. Only 16 per cent of mechanics can work on electric vehicles, the Institute of the Motor Industry (IMI) said. It warned that there could be a shortfall of 35,700 mechanics qualified to work with electric vehicles by 2035. A government-funded report by the research company Thatcham said that it expected insurance premiums to rise further as insurers became more aware of the risks and costs of covering electric cars.
The insurer LV said that the average cost of an electric car claim was £2,789 last year, compared with£2,188 for a petrol or diesel car. The Association of British Insurers also said that electric car repairs take 14 per cent longer on average.
Why so much more expensive?
Batteries are a big reason for this. Often located at the bottom of the car, they can be damaged if you go too fast over a speed bump or too hard off a curb.
Thatcham estimated that about 9,400 cars were involved in an accident that resulted in battery damage last year (there are no official figures). This could be 260,000 a year by 2035, it said.
Damaged batteries are hard to repair and usually need to be replaced. Typically the most expensive part of the vehicle, they can cost anything from £14,200 to £29,500.
Because of the rate of depreciation on new cars, the cost of replacing a battery on a one-year-old vehicle could be more than the car is worth, Thatcham said, and so there is more chance of an insurer declaring it a write-off. In that case the firm will offer what it deems to be the market value, minus the driver’s excess.
“There is already a lack of affordable or available repair solutions, inadequate post-accident diagnostics, and limited availability of recycling and reusability options. Without meaningful change, there is a strong likelihood that [insurance] claims costs will continue to rise disproportionally,” Thatcham said.
Insurers are also concerned about battery degradation and how to account for it in their policy costs. Most batteries have an expected lifespan of 10 to 20 years.
Another issue is the weight of electric cars, which are 300 to 500 kilograms heavier than petrol or diesel equivalents. More weight means more force, which means more damage in a crash.
Electric cars also have a higher chance of losing control because they produce instant torque (power to the wheel axles). If a driver pushes too hard on the accelerator and then lifts their foot off, they can lose control.
“This high torque can result in unwanted, jerky acceleration,” Michael Pfaffli from Axa Switzerland said. A study by the insurer last year suggested that electric vehicles crashed 50 per cent more often than petrol or diesel ones because of what it called “overtapping”.
Check the small print on your car policy in case your vehicle does end up in the workshop — your insurance firm may not provide you with a like-for-like courtesy car. According to the financial ratings company Defaqto, some 94 per cent of car insurance policies do not provide an electric or hybrid courtesy car.
An electric car could also have implications for your home insurance. If you have an at-home charger, you may have to declare it on your home policy.
Defaqto said that 51 per cent of car insurance policies either do not cover charging cables or do not clearly define whether they do, while 70 per cent did not cover the charger.
The ABI said: “The motor insurance market remains competitive with cover for electric vehicles available from a wide range of providers. Whether to offer insurance, and at what price, is a commercial decision for insurers based on their risk appetite.”
Should you go electric?
If you are looking to go electric, do your research first. Consider not just the upfront cost of the car but the price of insurance and installing a charger, and how you will charge the vehicle if you can’t do it at home.
Find out whether your company offers electric cars through a salary sacrifice scheme. If it does, check that it offers value for money.
Range anxiety — the worry about running out of charge when you’re driving — puts many drivers off. While car manufacturers promote an “advertised” range, this can be optimistic. Use sites such as WhatCar to get an idea of the real range and remember that factors such as the weather can influence it — both hot and cold weather will drain the battery more quickly.
A hybrid model could be a good option if you’re not sure.