Electric Vehicle – Insurance affordability

A decade ago, Electric Vehicles (EV) were considered as fanciful items and could not be imagined as replacing our traditional vehicles. However, they are now increasingly dominating the global automotive sector because of increasing awareness about the climate change, and the growing focus on the reduction of carbon emissions.

Insurance pricing for electric vehicles is like non-electric counterparts. However, their unique characteristics and specific risks associated with these vehicles, some generic and some country- specific is expected to be reflected in insurance pricing. EV insurance policies typically offer coverage for accidental damage, theft or malicious damage, car battery and auto parts replacement and other charging related risks. Normally the premium rates for electric vehicles are projected to be high due to insufficient infrastructure such as charging stations, spare parts, and specialized repair services etc. The global electric vehicle market is rapidly expanding, and as many more people switch to EVs, the demand for EV insurance is also increasing.

A couple of years back it was much more expensive to insure an EV as compared to our traditional vehicle But the gap is now reducing, and a reverse trend may emerge in the premium rates in future due to the various incentives offered by the governments worldwide.

Global Scenario
In UK, the electric vehicles premium rates are somewhat cheaper as compared to gas powered vehicles. This is because the UK government provides plug-in grant and no vehicle excise duty, thus making electric vehicles more affordable thereby lowering premiums. Insurance companies in UK also have an initiative of offering lower insurance premiums to electric car owners.

In South Africa Electric vehicle premium is about 20% more as compared to non-electric counterparts.

In USA Electric car insurance costs are on an average 20% to 25% higher than for non-electric vehicles.

Indian Context
The premium rates for third-party liability insurance are decided by the Insurance Regulatory and Development Authority of India (IRDAI) as a new initiative to boost the adoption of electric vehicles in India. IRDAI has fixed third-party liability insurance premium rates at a 15% discount as compared to petrol/diesel vehicles.

Be it any country, aim is to encourage the purchase of EVs to combat climate risk and all are committed to it. Insurance premium is one of the important considerations in determining the affordability of maintenance of EVs. The governments and regulatory bodies are incentivizing the purchase of EVs through favourable insurance policies, such as lower premiums and coverage benefits. Advancements in telematics and data analytics are also enabling insurance companies to offer usage-based policies and personalized premiums based on individual driving behaviour. Eventually all the countries are expected to fall in this category to make the maintenance of EV more affordable.