Electric cars are popping up everywhere, and it seems that soon you will only see electric vehicles on the roads, but insurance prices are not reflecting this shift in the industry. In fact, insurance costs are higher despite the fact that the Tesla Model 3 has rapidly become the UK’s third most popular car. Electric car sales double in the past year in the United Kingdom. As demand for electric vehicles goes up, the price will decrease. It’s basic economics, but why do insurance prices keep going up?
Insurance for Electric Cars
Drivers of electric cars are facing an annual premium that can go up to £116. Electric cars on average are 14 percent more expensive to insure than similar petrol and diesel models. There are an expected 2 million electric vehicles to be on the roads by 2025, which means insurers will pocket an extra £231 million a year.
Electric cars are cheaper to charge than it is to fill up with fuel, but some indications are showing that zero-emission models may not be as cost-effective as previously thought. This is because of the insurance. Comparing electric car premiums with those on an equivalent model with a traditional internal combustion engine shows the greener choice costs more. Why is that?
Why are Insurance Prices Higher?
According to the specialists at the site MoneyPug, which is used to compare car insurance, costs are higher for plug-in cars because they are much more expensive. Costs to repair the vehicles are higher and there’s a short supply of mechanics to fix them. This is one of the key paradoxes of these cars. While it may reduce costs in the long run, it will significantly increase them in the beginning. But as electric cars get cheaper, you can expect insurance costs to go down.
Paying more to insure an electric car may seem counter-intuitive because they generally have more safety features than traditional fuel-based vehicles. But it is also difficult to measure the insurance risks of these vehicles, especially if they’re like Tesla and have components of the car that are automated. Vantage Leasing compared the costs of electric and fuel-based vehicles and determined that battery-powered cars are around 18 percent more expensive to purchase than a model with a petrol or diesel engine.
In the US, electric vehicles cost about 21 percent more to insure than similar models fueled by petrol or diesel. However, Australian insurers do not differentiate between fueled vehicles and electric cars when they set the premiums for compulsory third-party insurance. Vehicle owners must have this insurance, but insurers who offer comprehensive insurance that includes fire, theft, third-party damage, and discretionary insurance do not differentiate on the basis of whether the car is electric of fueled. Third-party insurance is also cheaper in India.
Tesla Insurance
This has become so expensive for the owners of electric cars that Tesla has created their own insurance. Offering a “competitively price insurance” that offers Tesla owners up to 20 percent lower rate and in other cases up to 30 percent, Tesla’s coverage and claims management is planning on expanding. Some think this a good move because they can more effectively insure their vehicles because they know them better than anyone. With insurance for electric vehicles being so expensive, more car companies may get into the insurance business.
None of this will last forever. Electric cars aren’t going away, and as the world transitions, they will become cheaper and cheaper. There is no beating the efficiency and sustainability of electric automobiles. Now they are expensive but this won’t be for long. Soon even the insurance will be cheaper. Electric cars are selling better than ever and are going to continue to sell and as they do, demand will rise. Prices will fall. There will be more economical electric cars and insurance will continue to go down. This does not mean that insurance companies won’t fight teeth and nails to keep making lots of money off electric vehicles. But, in the end, they will have no choice but to lower their prices and offer more affordable coverage.
