Why electric car insurance is rising
EV drivers are facing hefty premium hikes by insurers 'wobbling about the cost of net zero'
Drivers trying to renew their electric car insurance may be in for a nasty shock as prices for premiums soar.
One of the "main upsides" of an electric vehicle (EV) is the running costs, said CompareTheMarket, as electricity is generally “cheaper than both petrol and diesel”, plus there are discounts on vehicle tax.
But those savings are being wiped out by climbing insurance costs as providers hike up premiums amid worries about batteries, a shortage of technicians and the rising costs for vehicle repairs.
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How much does insuring an electric car cost?
The cost will depend on "your driving history, experience and what car you're insuring", said GoCompare, and some models are "significantly more expensive" to cover than others.
According to latest data from Admiral, the average annual price in August to insure an EV was £1,175, "7% more than the national average across all car types".
But “affordable electric car options are available", said the insurer, which reported that the cheapest insurance premium was for the Peugeot 208, at £713 a year, followed by the Volkswagen ID (£758.14) and BMW i3 (£833.26).
At the other end of the scale was the Porsche Taycan, at £1,955, followed by the Tesla Model Y (£1,461.39) and BMW IX (£1,317.24).
Some drivers are finding that insurers, like the government, are "wobbling about the cost of net zero", said The Guardian's consumer affairs correspondent Zoe Woods. On social media, EV owners are sharing "stories of horror renewal quotes", she reported, with increases ranging from 60% to "a staggering 940% (a jump from £447 to £4,661, according to a screengrab shared by one driver)".
Why are electric car premiums rising?
Demand for electric cars has steadily increased in recent years, with sales of battery electric vehicle (BEVs) hitting a record level in the second quarter of 2023, according to the Society of Motor Manufacturers and Traders. A total of 30,645 changed hands, the trade association reported, "representing 1.7% of the market", up from 1.0% last year.
The shift to electric cars started as a "drive to help the environment", said MoneySuperMarket, but has brought "financial, performance and social benefits too", including lower running costs, tax and parking exemptions and reduced noise pollution.
However, EVs are posing a host of problems for insurers. The more "intricate technology" and "advanced components" present "challenges in terms of crash repairability", said Hodgson Insurance Services. Insurers also have to factor in the "substantial" cost of replacement batteries.
And the high market value of EVs makes them an "attractive theft target".
The Telegraph reported last week that John Lewis Financial Services had "put a temporary pause on customers taking out cover or renewing existing policies on battery-power vehicles while its underwriter, Covéa, analyses risks and costs".
Will EV ownership get less or more expensive?
EV owners are by no means the only drivers being hit with insurance price hikes, with premiums for petrol and diesel cars also climbing.
The cost of car insurance across the board is "at its highest since records began", said MoneySavingExpert. Whatever car you drive, "insurance quotes have skyrocketed".
Drivers looking to buy an EV may face other cost barriers though, after Rishi Sunak scaled back the government’s net zero aims. Announcing that a ban on new petrol and diesel cars would be pushed back from 2030 to 2035, the prime minister said the delay would "enable families to wait to take advantage" of "falling" EV prices "over the coming decade".
But the ban delay could have a "knock-on effect" on the used electric car market, according to Marc Palmer, head of strategy and insights at car trading website Auto Trader. Drivers could be "less likely to buy a new electric car now", he told the The Telegraph, "which will lead to fewer used electric cars" in the future.
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Marc Shoffman is an NCTJ-qualified award-winning freelance journalist, specialising in business, property and personal finance. He has a BA in multimedia journalism from Bournemouth University and a master’s in financial journalism from City University, London. His career began at FT Business trade publication Financial Adviser, during the 2008 banking crash. In 2013, he moved to MailOnline’s personal finance section This is Money, where he covered topics ranging from mortgages and pensions to investments and even a bit of Bitcoin. Since going freelance in 2016, his work has appeared in MoneyWeek, The Times, The Mail on Sunday and on the i news site.
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