Electric car insurance: Is it expensive?

Insurers around the world are struggling to provide affordable comprehensive cover for electric vehicles (EVs). But at least it seems to be all upside for Australian EV owners.

Well... not all upside.

Tesla owners offered comprehensive car insurance through 'InsureMyTesla' (underwritten by QBE) were left in the lurch after the insurer withdrew from that sector of the market back in February. According to QBE, as quoted in the Sydney Morning Herald the catalyst for pulling the plug was "a higher-than-expected cost of servicing Tesla policies".

That was after the insurer had raised the premiums by 50 per cent in an attempt to absorb that cost. But Tesla Australia has told carsales that QBE has pulled out of insuring prestige cars generally, not just Tesla EVs.

There are still insurers in Australia willing to take on the risk of covering electric cars. And the premiums do come within cooey of a conventional car priced around the same mark. So in spite of the failed QBE experiment, Australian EV owners find themselves in a better situation than EV owners in other markets.

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According to Reuters, French insurer AXA has determined that some EVs are as much as 40 per cent more likely to sustain damage in a crash than internal-combustion counterparts, because drivers are unused to the performance available from the electric motor.

In the main, AXA insists, it's the high-end EVs – the Teslas of the world so far – that are more likely to be involved in a high-cost prang. Smaller EVs, such as the Renault Zoe and Nissan LEAF are actually less likely to crash than conventional cars. AXA admits that its data is not yet "statistically significant", but there is a trend emerging in the data compiled so far.

Oddly, however, there's no in-theory reason Tesla models should be any riskier to insure than any other high-performance prestige car. If anything, the reverse holds true. The Model 3 has just earned itself a 'Top Pick' rating from America's IIHS, and is deemed five-star-safe in Australia. Euro NCAP has even concluded that with a safety-assist rating of 94 per cent the Model 3 has surpassed all other vehicles tested in this category in accordance with the safety authority's latest test protocol.

After offering a sweetheart deal for Tesla owners in Hong Kong, AXA has been forced to triple premiums in the troubled Chinese territory just two years later.

That cover was also 'InsureMyTesla', the same product underwritten in Australia by QBE and affiliated with Tesla itself. In America, InsureMyTesla is underwritten by Liberty Mutual.

In Ireland, a survey has revealed AXA to be one of three insurers charging EV motorists up to 40 per cent more than the premiums applicable to conventional cars rated as a similar risk. In response, AXA has pointed the finger squarely at Tesla, explaining that the cost of repairing a Model S, for example, is higher due to Tesla's insistence on replacing parts rather than repairing them. The parts have to be shipped from the USA, exacerbating the cost of reinstating a damaged car.

Even in America, Tesla vehicles are reported to be costly to repair. As a consequence, insurance premiums for Tesla owners in the USA have been steep, forcing the manufacturer to announce four months ago that it would introduce its own insurance for Tesla customers, underwritten by another insurer, State National.

Tesla has now officially rolled out the new insurance product in its home state of California, with other states to follow over coming months. According to the company, 'Tesla Insurance' can typically save Tesla owners around 20 per cent of their annual premium, or even up to 30 per cent in some cases.

The company claims that its in-house access to on-board operational data ('Autopilot') provides a clearer picture of the risk, meaning its insurance arm can tailor the premium to suit individual drivers, without charging like a wounded bull.

For the moment, there's no word on whether Tesla Insurance will be sold in Australia. Provided the insured driver is a sound risk, Aussie Tesla owners appear to be well served by the local insurance industry anyway – but probably because there's little meaningful data available for Australian underwriters to assess the true risk of insuring Tesla models. It's all a novelty in Australia, and insurance companies are presumed to be rushing to catch up.

Until they do, the cost of keeping EVs on the road in Australia – particularly Teslas – is likely subsidised in part from premiums paid by owners of conventional cars.

But then, that's the whole point of insurance – sharing the risk.

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Insurers won't sign off on repair and reinstatement of an EV if significant damage has been done and there's a possibility the battery has been damaged, unless the battery is replaced in its entirety.

With figures of up to $30,000 or more commonly bandied around, the cost of a new battery could make the EV a write-off for much lower levels of damage than a conventional car. And a new replacement vehicle will be prohibitively expensive, given the EV's purchase price is higher in the first place; the point where the car is no longer economic to repair is much lower than in the case of a conventional car costing around the same amount to purchase from new.

Batteries for Teslas have to be shipped from the USA to countries like Australia, because airlines won't freight lithium-ion batteries, due to the potential fire risk they pose.

Repairers are said to be anxious that if they work on an EV and it spontaneously bursts into flame at some point down the track they will be held liable for the damage done or not properly repaired. For that reason they'll only take on repair of an EV if there's good money in the job.

Yet Tesla claims that the likelihood of crash damage incurred by the car's battery pack is relatively low. And it's supported by America's National Highway Traffic Safety Administration (NHTSA), which has approved Tesla's engineering changes introduced to the Model S in 2014.

These comprise titanium underbody shielding, aluminum deflector plates and increased ground clearance, to reduce the potential for damage inflicted by road debris. The manufacturer of the Model 3, Model S and Model X is also adamant its current range is extremely safe, the potentially dangerous battery pack being protected by a "rigid, fortified structure".

• Rely on an online comparator service to find an insurer offering an affordable premium,
• Insurers will look more kindly upon customers who are good driving risks – that's still more important than the car in setting a premium,
• Keep the faith with the insurer and make sure to advise any change in your situation that might be material to the 'risk',
• Insurers like to see the policyholder make an effort to mitigate the risk – like keeping the car undercover in a locked garage, for instance,
• Keep your ear to the ground for specialist insurers that understand your car and what sort of 'risk' it is,
• If the underwriter ramps up the premium by more than the CPI at renewal, do shop around for another insurer.

The Insurance Council of Australia (ICA), the body that represents general insurers in Australia, says that insurance companies use all sorts of data to set rates for cars – including EVs – and the issues that inflate the cost of insuring an EV are just part of a larger set of datapoints.

"The factors that determine a motor vehicle premium are the make, model and age of the vehicle, driving history – age and gender – location and type of use of vehicle – business or private" says Lisa Kable, Manager, Communications and Public Relations at the ICA.

But the ICA has also supplied carsales with a raft of specific reasons why insuring an electric vehicle might cost more than a conventional vehicle. These are:

• Electric vehicles, particularly high-end brands such as Tesla are expensive vehicles to purchase,
• The technology and parts in an electric vehicle are more expensive to produce and replace – specifically motor parts and battery,
• Repairing damaged electric vehicles requires importing parts to Australia,
• There are few EV service centres around Australia that can repair electric vehicles; vehicles may need to be transported to a distant location to be repaired,
• Repairing electric vehicles requires specialist tradespeople; at present there are few of these trained people in Australia,
• Dealing with damaged EV batteries is time and labour consuming. It also requires specialised equipment and disposal (recycling) methods,
• The supply chain in Australia is in its infancy leading to higher costs; the situation here will not improve until the demand and then supply increases.

Recently launched business Evee specialises in offering a car-sharing service for electric vehicles. Owners of EVs can sign up with the company and avail themselves of relatively affordable comprehensive insurance cover, the cost of which is offset by sharing the car with other Evee customers to earn revenue from the vehicle while the owner is not actually using it.

"Through three years of continuous work and perseverance, we were able to collect and present real usage data to prove electric vehicles aren’t just a novelty in the motoring industry, and that they’re here to stay," company founder Slava Kozlovskii was quoted saying in a press release. Kozlovskii acknowledges that the high cost of insuring electric cars has been one of the major hurdles encountered establishing the start-up business, but the company expects to move ahead with that wrinkle ironed out.

"No other business within Australia enables owners to rent out their electric vehicles, we are proud that Evee is the first to make this dream a reality. In most cases, the insurance cost will cost owners nothing if they simply rent their car through Evee for as little as several days per year."

It may not be a solution that suits all EV owners, but the idea is out there for consideration. The company plans to offer EV owners insurance cover without entering into a car-share contract, but for the moment the insurance is bundled with the contract. Evee has arranged the cover through a "major underwriter", but is not in a position to disclose the name of the insurer.

Premiums for a range of common electric cars available for sale fall within the mid range of competitor quotes. They're not the most affordable, but the company claims they're closer to that mark than some of the more expensive policies.

Evee pricing versus competitors
Tesla Model 3 Standard Range Plus: $2000 (competitive premiums: $1300 - $3000)
Tesla Model 3 Long Range and Performance: $2500 (competitive premiums: $1500 - $3500)
Tesla Model S and Model X: $2500 (competitive premiums: $2000 - $4500)
Nissan LEAF: $1200 (competitive premiums: $800 - $2000)
Hyundai IONIQ: $1200 (competitive premiums: $800 - $2000)
Hyundai KONA: $1400 (competitive premiums: $800 - $2500)
BMW i3: $2000 (competitive premiums: $1200 - $3000)
Jaguar i-Pace: $2500 (competitive premiums: $2000 - $4500)
Mercedes-Benz EQC: $2500 (competitive premiums: $2000 - $4500)