Electric car insurance premiums set to soar
Electric vehicle insurance premiums are set to soar under a regime shake-up, it has been warned.
Insurance premiums for EVs and Chinese-made cars in particular could skyrocket after a new Vehicle Risk Rating (VRR) system was rolled out last month, an expert said.
VRR will eventually replace the group-based system of insurance, which bands vehicles into 50 separate premium categories.
Five key categories go into the VRR rating, including performance, damageability, safety, security – and “repairability”.
It is this last category that will send EV premiums soaring, Chris Rosamond of Auto Express magazine said, because the insurance industry lacks the information it needs to offer lower premiums on EVs.
Five key categories go into the VRR rating, including performance, damageability, safety, security – and ‘repairability’ – Monty Rakusen
Mr Rosamond said: “If the data does show… as many or most of us expect, that there is this increased risk around batteries, then it’s likely that will emerge in, or be reflected in, premiums down the track.
“If you get a golf ball-sized dent in the battery casing of your new EV, for example, there is no sort of technical reference available for insurers to be able to say with 100 per cent certainty that a repair has fixed that and returned it to, effectively, its original condition.”
Professor David Bailey of the University of Birmingham told The Telegraph that Chinese EV manufacturers are struggling to keep up with the demand for spares for repairers.
“So they’ve entered the market [but] not necessarily set up a distribution system in terms of parts for the vehicles, which has meant that actually getting them repaired at all has proven to be quite difficult,” he said.
“Especially on the EV side. I mean, there’s a combination of things there anyway. One is repairers’ knowledge in general of repairing EVs; not all repairers can do that.”
The insurance industry is lacking the information it needs to offer lower premiums on EVs – Monty Rakusen
Ben Townsend, head of automotive at Thatcham Research, the data company behind VRR, insisted that not all EVs would be more expensive to insure than ICE vehicles, pointing out the average EV has around 20 moving parts, compared to “more than 2,000” in a petrol or diesel car.
“The repairability assessment was created to highlight repair challenges transparently into the insurance workflow and by doing so, help manufacturers gain granular visibility of the various factors that can drive insurance cost and in turn encourage them to take proactive corrective measures,” he said.
“An aspect of an EV’s battery cost will be a feature of the Vehicle Risk Ratings repairability assessment, but EVs are not fundamentally less repairable,” Mr Townsend continued.
“Repair challenges currently affecting the cost of insurance are not isolated to EVs. All collision-damaged vehicles are experiencing longer repair times, an issue driven by skills shortages and parts supply.”
VRR will eventually replace the current insurance groups system which assigns cars to more or less expensive premiums depending on how risky they are for insurers.
Group 1 is the cheapest, including cars such as the Fiat Panda and Nissan Micra, while Group 50 is the most expensive because it covers vehicles such as the Ferrari F430 and Ineos Grenadier, according to valuation site Parkers.
Insurance comparison site Confused.com said the average EV premium in May this year was £910, compared with £790 for a hybrid car and £670 for a petrol or diesel car.
Corporate fleet insurer QBE has previously said that settling claims brought over damage to EVs can be up to 25 per cent more expensive than for internal combustion engine (ICE) cars and vans.
“We expect insurance premiums in the short-term to continue to increase, reflecting the higher cost of repair – but the UK’s sophisticated insurance market can play a role to make substantial investments in understanding EVs, mitigating risks, and reducing costs in the longer-term,” said the firm’s director of motor underwriting, Jon Dye, at the start of the year.
The Association of British Insurers was contacted for comment.
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