Do EVs cost more to insure?

Insurance Council of Australia (ICA) CEO, Andrew Hall, has said that Australia’s slow uptake of electric vehicles has created significant challenges for insurers:

Insurers repairing electric vehicles after accidents in Australia face a number of hurdles and repair costs can be higher for electric vehicles in comparison to internal combustion engine (ICE) vehicles for a range of reasons. The challenges surrounding repair of electric vehicles in Australia and the fact that the industry is relatively nascent, creates challenges for insurers and has flow-on effects for consumers.

According to the ICA, factors contributing to the higher average premium cost for insuring EVs compared to ICE cars include:

• EVs are generally more expensive to purchase than ICE vehicles
• EV technology and parts (such as batteries) are more expensive to produce and replace, are often non-interchangeable, and often need to be imported to Australia via limited supply chains
• There are fewer EV service centres around Australia that can repair electric vehicles (particularly in regional areas), so vehicles may need to be transported to a distant location to be repaired
• Repairing EVs requires specialty tradespeople, and there are fewer of these qualified technicians in Australia
• Dealing with damaged EV batteries is time and labour consuming, and requires specialty equipment and disposal (recycling) methods
• Information about EV batteries (such as their expected lifespan) is not always available, which can be a barrier to purchasing and insuring EVs

Adding to some of the uncertainty around EV infrastructure that threatens to push up premiums, according to the ICA there are also questions regarding which type of insurance is most appropriate to cover electric vehicle charging infrastructure in the home (e.g. motor or home insurance).

While more EV models are being introduced to Australia, including some with more affordable price points, the cost to buy and insure these low-emissions vehicles may still be on the higher side. It’s important to compare car insurance quotes to get a better idea of which policies may better suit your needs as well as reduce the impact on your budget.

Also, an EV’s fuel cost savings is not to be sneezed at. According to Transport NSW, EVs can prove significantly cheaper to run, with fuel savings of up to 70% and maintenance savings of around 40%. For an average car travelling 13,700 km per year, this could amount to an annual fuel saving of $1000, or $1200 if the EV is able to charge overnight on an off-peak tariff.

Of course, the savings in running costs on an EV could vary based on a range of factors, including the prices of electricity and fuel in your area. You may be able to estimate an EV’s fuel cost savings using a calculator like the NRMA’s, and compare this to your insurance quotes to get a better idea of if you’ll be better off with an EV.   

You may also be able to compare car financing options to buy an EV. Green car loans often have stricter eligibility criteria than standard car loans, but may also have lower interest rates, which could help make your EV purchase that little bit smoother. Be sure to compare the available options to get a better idea of which car loans may best suit your needs.

Be sure to ask the lender for information about how it determines a vehicle to be ‘green’ or ‘eco’, and how it contributes to emissions reduction and environmental responsibility, before considering a green car loan.