Nice EV You Got There—Can You Afford to Insure It?

EVs are fast and full of technology. That makes them fun to drive but tougher to insure.

By Telis Demos and Stephen Wilmot of The WSJ. Excerpts:

"In the U.S., the average severity of a claim for a repairable EV was $6,066 in the first quarter, nearly 30% higher than for internal-combustion-engine (ICE) vehicles"

"Part of that cost can be the greater work involved: over three mechanical labor hours on average for a repairable EV claim estimate, versus less than two for ICE vehicles"

"Mechanics sometimes have to de-energize electric vehicles before removing their high-voltage batteries to avoid damaging them during repairs"

"EVs naturally have more torque, which means that their electric motors can instantly deliver power to the transmission. Some insurers worry that faster acceleration from traffic lights could lead to more accidents, though some reviews have also found that EVs are less frequently involved in insurance claims."

"the monthly EV premium cost to be on average 12% higher."

"The so-called combined ratio for U.S. personal auto insurers industrywide hit 112% in 2022 and 105% last year, according to Fitch Ratings. This ratio means an insurer made an underwriting loss, paying out more in claims and expenses than they collected in premiums."

"Time could help alleviate EVs’ repairability problems. As the recycling and secondary parts and vehicles market evolves, mechanics learn and manufacturers adapt. “My belief is that you will see the insurability costs begin to come down as EVs scale,” says Craig Carrington, who runs commercial-vehicle insurance and financing for Ford Motor"

"One complication is the trend toward “gigacasting”—using smaller numbers of larger cast parts to make vehicles. Tesla has championed the technology, and others, including Toyota, are now following. But it could make cars even more expensive to repair. If lower production costs mean higher insurance costs, then drivers won’t actually save money.

More complicated cars aren’t all bad: Whether in EVs or traditional cars, digital technology holds the promise of lowering insurance costs because it generates the kind of driver data that could potentially help underwriters manage risks better. This is one reason carmakers increasingly offer insurance.

Prompted in part by customer complaints that its products were expensive to insure, Tesla launched an insurance business in California in 2019, promising rates up to 30% cheaper than other providers. General Motors and Ford followed suit.

Ford offers a 10% discount on insurance to fleet managers in exchange for consent to use their data, with a view to using it to help them reduce risky driving behavior and hence insurance costs. Vehicle-generated data can identify some driving practices that a smartphone can’t, such as seat-belt usage, says Ford’s Carrington."

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