Published on August 2nd, 2018 | by Andy Miles0
Is Insurance A Roadblock To Electric Vehicle Adoption?
August 2nd, 2018 by Andy Miles
People ditching their diesel and petrol cars to drive shiny new electric vehicles is just what we need to reduce greenhouse gas emissions and keep Space-Ship Earth from going into red alert with a life support system failure. It would be ideal if driving an electric car became a desirable thing for the average driver. When people start talking about electric cars around the water cooler, about how they all want one, we will have passed a major milestone on the road to mass adoption.
Governments seem to be somewhat schizophrenic, handing out trillions of dollars in subsidies to oil companies to keep fuel cheap and plentiful at the pumps. In this time of automotive excess, even the Trump administration is handing out incentives to people purchasing electric vehicles. It would make a lot of sense to instead use the trillions of dollars in subsidies going to oil companies to pave the way for electric vehicles and renewable energy. Taking away fossil fuel subsidies would also put upward pricing pressure at the petrol pump but unfortunately governments these days seem to have been bought out by the oil industry.
However, despite the undersized efforts by governments around the world, manufacturers that are reluctant to build electric vehicles, dealers that are reluctant to sell them, not many buyers interested in buying one, we hear about the icing on the cake. Insurance companies in the UK are now seemingly reluctant to insure electric vehicles. Well, they will insure them, but they will charge drivers a premium to do so.
We have no data to support a direct linkage between higher insurance rates on electric vehicles and lower adoption rates, but the logic is hard to deny. From January to June 2018, sales figures show that pure electric car registrations in the UK are down by more than 3% compared to the first half of 2017. Data from the Society of Motor Manufacturers and Traders in the UK shows that there were more than 1.2 million petrol and diesel cars registered between January and June 2018, yet just 7,441 electric cars left their showrooms over the same six months.
Honest John is a website that champions for fairness to car owners, by publishing expert unbiased information to help consumers make informed choices about their cars. The website was established in 2000, in response to reader questions to the “Honest John” column in the motoring section of the Daily Telegraph. It gives free advice and information to buyers with an aim to help raise standards for the consumer. The site provides easy to read honest answers to direct questions about the best cars and the best deals, for car buyers and potential car buyers.
Honest John flagged the issue with insurance prices for electric vehicles after receiving complaints from readers about the high cost of insurance for electric cars. According to their analysis of the insurance market, pure electric cars carry a hefty premium when it comes to comprehensive coverage, with some models coming in at up to 60% more expensive to insure than their petrol or diesel counterparts. Apparently, it is young professionals who are the most likely buyers for electric vehicles, but they are the most adversely affected, with some insurers demanding more than £1,800 for 12 months’ coverage. Thankfully, as an old codger, I seem to slip through their clutches as I pay less than £250 for my fully comprehensive insurance.
A spokesperson for the Association of British Insurers said:
“While, on the one hand, electric vehicles tend to be smaller, and less powerful, (obviously never heard of Tesla), they also need specialist parts, and skills to repair, (Perhaps they have heard of Tesla, after all), so may cost more to insure in some cases, but drivers can expect pressure on insurance premiums to reduce, as the technology becomes more widespread”
This sounds like an “if unsure, charge them more” approach, and is neither particularly rational nor helpful.
HonestJohn’s Managing Editor, Dan Powell, had this to say:
“If the government is serious about getting more people into genuine zero-emission electric vehicles, rather than plug-in hybrids, then there needs to be decisive action, The government itself holds the key. At present, it takes 12% off, (sic -Think that should be “of”), every motor insurance premium, in insurance premium tax, (IPT). If it removed IPT from pure electric vehicles, then premiums would instantly drop, and this would improve the incentive for buyers to swap their diesel or petrol for pure electric.
“Until people actually live with electric cars, there’s a perception that owning one comes with a compromise. Many of these compromises have already been addressed – EVs have a good range, are quickly, and easily charged, and are getting cheaper to buy, but the government, and insurance industries, are doing the future of electromobility no favours at all, and this is something that requires immediate change.”
There is a lot that requires immediate change, but governments, especially the UK government, are slow moving, and seem to like setting dates to take action that are well into the future. HonestJohn analyzed the market to see what a typical driver can expect to pay for a comprehensive 12-month policy, and the results are stunning.
A test quote on similar models and car manufacturers from Confused.com, a price comparison site, found a female driver aged between 30 and 55, who had no motoring convictions, showed that a petrol car with a comprehensive motor insurance policy was £567. Meanwhile, it was £607 for a diesel car, and £751 for an electric vehicle. Running the same quote for a male aged under 25 revealed that the average annual insurance policy would cost £1,484 for a petrol car, £1,592 for a diesel, and an eye-watering £1,854 for an electric vehicle.
Similar tests at GoCompare, another comparison site, show that a 35-year-old accountant living in a city with 5 years’ of no claims can expect to pay £247 when it comes to insuring a 2015 Renault Clio (petrol), but for a Renault Zoe, the price is £395, which is 60% higher than the Clio, despite the fact that both are similar priced and equipped.
Typical UK Premiums for a used car, based on GoCompare average quotes on a 2015 car and a 35-year old accountant living in Bristol, with five year’s NCB. Quotes obtained July 2018.
Volkswagen Golf GTI
The trend is the same in California too.
More opinion about why electric vehicles might cost more to insure is available here