Far from static – are electric vehicles really more to insure?
The media seems awash with stories on electric vehicle (EV) insurance, with reports of EV owners being outraged at the high cost. But is there any truth in these headlines?
The UK is coming out of a period of higher inflation, during which car insurance prices were particularly impacted. The Office for National Statistics says that the cost of car insurance rose by 39% between January 2023 and January 2024; the Association of British Insurers uses a better methodology that considers renewals and has calculated a figure of 25%. Price comparison website confused.com reports a 58% increase over the same period – and 72% for EVs. It should be noted, however, that confused.com looks only at quotes, not sales. People tend not to buy the more expensive quotes, so while the confused.com number is much higher, it does not necessarily represent the real cost.
During a period of high inflation, we should not be surprised to see price increases above what consumers would expect. The reasons for this high inflation, briefly, are:
- General economic inflation caused by supply-side disruption during the pandemic has increased the cost of car insurance claims, including vehicle repair and bodily injury.While interest rates have been rising, the Ogden rate that determines injury costs has remained steady, meaning there has been no offsetting reduction in present values
- Financial Conduct Authority pricing reforms mean that new business and renewal prices must now be the same, so customers who switch can no longer benefit from lower introductory offers
- Pent-up demand during the pandemic caused a demand-side shock.
Knowing this, it is not surprising to see headlines bemoaning rising prices. However, it is reasonable to ask if those price rises have disproportionally affected EVs.
Is EV insurance more expensive?
The UK Driver Vehicle Licensing Authority releases regular figures on the number of registered vehicles of each fuel type. The most recent, from the end of 2023 and show that battery EVs comprised 4% of total registered vehicles, up from 1% at the end of 2018. Diesel and petrol vehicles accounted for 92%, with the remainder mostly hybrid, although there were numerous other types of fuel.
Anecdotally, I took a quote each month for my existing diesel cars, both Ford Focuses, and for an electric MG4 that I do not own. The MG4 is widely reported to be similar to a Ford Focus. Over 10 months, the insurance for the Fords rose by 21%, while it went down by 3% for the MG4.
I also obtained quotes for several other vehicles to compare the costs. All the other factors are held the same between these quotes and are based on my real details. Only the cheapest quote is shown.
The vehicles are all new except for my actual Ford Focus, which is eight years old:
Ford Focus – £307
Vauxhall Corsa – £245
Vauxhall Corsa Electric – £280
MG ZS – £258
MG ZS Electric – £361
Tesla Model 3 – £524
We can see that each of the electric versions of a well-known car is more expensive to insure – by 14% in the case of the Vauxhall Corsa and by 40% in the case of the MG ZS. The outlier is the electric-only Tesla; we don’t have anything to compare it with, but it is a lot more expensive than the others and 70% more than I currently pay.
Now let’s compare the combustion vehicles to their electric counterparts.
Vauxhall Corsa: The combustion and electric versions have the same external dimensions. The electric version is 50% heavier and 20% more expensive, with 36% more power. It goes to 60mph in nine seconds, compared with 11 seconds for the combustion engine. Given that information, the 14% price difference seems reasonable.
MG ZS: Again, the combustion and electric versions have the same external dimensions. The electric version is 37% heavier and 80% more expensive, with 35% higher power. It goes to 60mph in eight seconds, compared with 11 seconds for the combustion engine. A 40% price difference between the two insurances seems sensible.
Comparing the Tesla Model 3 to my Ford Focus, the Tesla is 27% heavier and 860% more expensive, with 280% more power. It goes to 60mph in 3.5 seconds, while my Ford Focus takes 11 seconds. The Tesla is a high-performance vehicle; to be honest, I was surprised I could find insurance for £524.
Other factors affecting costs
While it seems that EV insurance is higher than combustion vehicle insurance, it also appears that, to some extent, the difference in costs is quite reasonable compared with the differences in weight, cost and performance. There are some other factors involved that may increase or offset the difference.
Repair costs
EVs’ relative rarity means their components are manufactured on a smaller scale than combustion parts, so they are more expensive. The costs of batteries and electric motors contribute to higher repair costs, especially because they contain more expensive materials and are more complicated to make. The basic combustion engine, in contrast, could be manufactured using the technology and materials available in the 1920s. Newer, more complicated manufacture means higher costs.
In addition, repairing or replacing EV components requires specialised expertise and facilities, escalating the risk for consumers and insurers. Most garages do not yet have the skills or equipment to deal with EVs, and they will also need to find ways to pay for the costs of new equipment, infrastructure and training.
Altogether, the higher cost of repairs tends to increase insurance premiums for EVs.
Safety features
EVs boast advanced safety features that enhance driver safety and reduce the risk of accidents. However, they also introduce complexities in repair. Fixing or replacing safety systems in EVs can incur significant extra expenses. This has been quite mixed so far in terms of the impact on safety, and therefore costs. The systems certainly cost more, but there is not necessarily evidence that accidents are fewer or less expensive.
Humans tend to behave in a way that makes safer things less safe – in other words, the safer a vehicle is, the less some people worry about how their own behaviour promotes safety. A car that holds to the lane may encourage a driver to pay less attention, for example. Overall, safety is not actually improved but the vehicle is more complicated and expensive.
Spot the difference
It seems that we can explain the differences in insurance costs between combustion and EVs: the latter are heavier, more powerful, more complicated and more expensive than their combustion counterparts. These factors are themselves some of the most important in predicting the frequency and severity of accidents, particularly bodily injury and the cost of repairs to the vehicle.
Jeremy Keating is co-founder of Price Writers and author of ‘Price Writer: The Nine-Step Method to Become a Highly Successful GI Pricing Leader’
