Why Are Insurance Rates for Electric Vehicles Higher Than for Traditional ICE Vehicles?

Electric vehicles (EVs) are often associated with higher insurance costs, but is this a fair assessment? The data and logic behind these higher premiums can be quite nuanced and varied. In this comprehensive article, we'll delve into the reasons why insurance for EVs often costs more than for traditional internal combustion engine (ICE) vehicles.

Understanding the Cost Disparity

When comparing my 2022 Y (Electric Vehicle) with my 2018 Ford Focus and 2010 F-150, I notice a significant difference in insurance costs. The 2022 Y costs about $150–200 every 6 months more than the cheaper and non-electric Ford Focus and F-150. This discrepancy isn't due to insurance companies skewing the data but rather reflects the underlying risks and costs associated with EVs.

Repair Costs and Battery Issues

Repair and spare parts for EVs aren’t as numerous as those for traditional cars, but when something does go wrong, the costs can be substantial, especially as they age. The battery, in particular, poses a significant risk. When the battery is worth the same as or more than the car, it often leads to an automatic write-off. This is akin to a situation where the car’s most valuable component becomes non-functional, leading to a total loss.

To illustrate, consider the analogy of laser printers. The battery can be seen as the cartridge. Just as a new printer may come with an empty cartridge leading to the need for frequent replacements, the battery in an electric car serves a similar purpose. When the battery needs to be replaced, it often necessitates an entire vehicle replacement, making the repairs inordinately expensive.

Insurance Premiums and Risk Assessment

Insurance premiums are based on risk and the potential for payouts from covered losses. To better understand the discrepancies in insurance rates, let's consider the following hypothetical and actual examples:

Hypothetical Example: I checked two vehicles, a 4-door Tesla and a 4-door compact sedan. The Tesla’s insurance was $150 more than the ICE car, a difference of less than $10. Real Examples: Comparing an insurance quote for an EV and an ICE car of the same value, with identical drivers, and in the same city, reveals that the EV still incurs higher premiums.

Arguments Against Higher Premiums for EVs

Some argue that batteries and electronics wear out faster in EVs. However, standard insurance policies typically do not cover mechanical breakdowns, which many argue is a leading cause of increased repair costs in EVs. Additionally, a higher number of accidents involving Tesla vehicles does not inherently mean that higher liability and collision premiums for EVs can be attributed to the model’s nature. Instead, it could be tied to the higher exposure to repair or replacement costs associated with certain models.

Crash test data comparing similar-sized modern compact cars—one EV and one ICE—could provide further insight into these claims. However, the higher frequency of minor collision damage for Teslas may stem from the fact that repair costs are higher for these vehicles, not because they are inherently more prone to accidents.

The Role of Vehicle Weight in Insurance Costs

EVs typically need to be built lighter to maintain optimal range. This design philosophy can make them more susceptible to damage in accidents compared to traditional cars. For example, the Porsche 550 race car, known for its lightweight design, crumpled like paper in impacts. Similarly, modern compact cars with a similar weight to EVs might face similar risks during crashes.

However, it’s important to note that crash test comparisons haven't been widely published for similar-sized EVs and ICE vehicles, making it challenging to draw direct conclusions about the safety and insurance implications of EVs.

In conclusion, the higher insurance premiums for EVs are a complex issue rooted in various factors, including repair costs, the cost of replacement parts like batteries, and the design philosophy of lightweight EVs. To make informed decisions about insurance, it’s crucial to consider these factors alongside the actual cost comparisons of different models.