A new report suggests drivers could see higher premiums for their electric vehicles as the insurance industry adapts to the shift from gasoline-powered cars to electric alternatives.
Expensive electric vehicles and higher repair costs will likely lead the insurance industry to adjust premiums, similar to a trend in the United Kingdom, according to the Morningstar DBRS report.
Electric vehicles are computers on wheels and batteries are at the heart of their operations, said Victor Adesanya, co-author of the report and vice president of insurance in Morningstar DBRS’s global financial institutions group.
“If the battery is damaged, the potential for replacing the car is very high, because it is very difficult to repair and is quite expensive,” he said in an interview.
Although maintenance costs for electric vehicles may be lower than those for gasoline-powered cars, costly repairs and a lack of qualified technicians can drive up overall costs, impacting insurance claims.
“Insurance is a one-year contract,” Mr. Adesanya said. This means that each year at renewal, the insurance company re-evaluates premiums based on its experience with theft, cost of repairs, inflation and claims.
More gradual in Canada
But high insurance premiums for electric vehicle owners are not yet a problem in Canada, in part because of slow adoption by drivers.
Zero-emission vehicles accounted for 8.9% of light car sales in 2022, up from 5.6% in 2021, according to Transport Canada’s analysis of S&P Global Mobility data.
As more people switch to electric vehicles, Adesanya stresses that insurers will adapt to the trends and could increase premiums.
Until now, insurers have sometimes chosen to completely replace an electric vehicle rather than pay for costly repairs. As an example, the Morningstar DBRS report cites British Columbia insurance company ICBC’s decision to write off an electric vehicle because the cost of replacing the battery would be the same as purchasing one. new.
However, electric vehicle owners are unlikely to see a price shock, Mr Adesanya said. Instead, increases will be more gradual due to government regulations.
The auto insurance industry in Canada is heavily regulated by provincial governments who review and approve requests for premium increases.