With registrations of new battery electric vehicles (BEVs) still growing strongly, the transition to zero-emission mobility is well underway. According to the European Automobile Manufacturers’ Association (ACEA), the market share of BEVs expanded to 12.1% in 2022. Meanwhile, new hybrid cars have an average market share of 22.6%, and in countries like the Netherlands and Norway, as many as 70% of all new vehicles are electric only.
Nevertheless, electric cars still appear to have somewhat of an image problem when it comes to insurance. They are widely regarded as being more expensive to insure than classic combustion vehicles, and some people even seem to believe that they are uninsurable. So is this true, or is it just a myth? To find out, I spoke to Eelco van de Wiel, an international expert in fleet and mobility insurance.
Why is there so much negativity surrounding electric vehicles and insurance? Isn’t a car just a car, whether it has an electric powertrain or a classic combustion engine? It’s true that electric vehicles are still often perceived as being expensive in general – in terms of both the high purchase price, and also the high cost of repairs due to all the electronics inside. If people think about insurance, they assume that a higher purchase price equates to a higher premium. To some extent this is true, because an EV typically weighs more than a comparable car with a classic combustion engine, and the investment value is often higher. In addition, the design of some electric vehicles means that the powertrain is more vulnerable in the case of an accident, and it is costly to replace. Besides this, the technological sophistication means that not all repair shops can handle EVs, plus they take longer to repair, meaning that the insurer may have to fund a rental vehicle for a few extra days.
But hybrid/electric vehicles are actually insurable, right? Yes, they are! Insurers have come a long way over the past few years, when getting insurance for electric vehicles wasn’t always easy. Nowadays, they have developed a different insurance risk profile for electric vehicles than combustion engines because of the abovementioned factors.
What does the different risk profile for electric vehicles mean for companies who are electrifying their fleets? There are two aspects of insurance for fleet managers and their colleagues to consider. The first is that an EV cost more to repair than a classic combustion vehicle, so they can expect to have to pay a much higher premium for ‘own damage’ insurance. In contrast, third-party liability claims costs are much lower for hybrid/electric vehicles. This goes some way towards compensating for the higher own damage costs. All in all, however, the insurance costs for electric vehicles will be somewhat higher than for traditional cars.
So how do the higher insurance costs for hybrid/electric cars impact on the total cost of ownership (TCO) of a company car?
Well, the higher claims costs associated with electric vehicles are only part of the story. On the flipside, there are various benefits that have a positive impact on the risk profile by reducing the likelihood of accidents and therefore the frequency of claims and the total claims costs. For example, today’s electric cars have numerous safety features such as adaptive cruise control, autonomous braking, parking and lane-keeping assistance that remove some of the risks associated with human drivers. Similarly, although repairs are more expensive, the frequency of repairs is much lower due to electric cars having fewer moving parts. Considerations such as these mean that the TCO of an electric vehicle is often lower than people realise and can also be reasons for a reduced insurance premium.
What steps can companies take to reduce their insurance costs for electric vehicles?
Many companies already run driver-awareness programmes. Even if they don’t, it’s wise to do so for electric vehicles because they require a slightly different driving style due to their noiselessness and faster acceleration. Supporting drivers through the initial transition can help to mitigate potentially higher damage claims costs. Additionally, EVs offer excellent telematics capabilities and companies shouldn’t be afraid to collect and monitor the data and use it to stimulate safe behaviour. As the electrification trend continues and operational costs such as maintenance and refuelling decrease, the insurance costs will gain in significance within the fleet budget. Therefore, although insurance is a complex topic, it makes financial sense for companies to pay more attention to it to improve their bottom line. As in any competitive market, there are various ways to influence the insurance costs to your advantage, but the right solution always depends on your specific organisation and vehicle portfolio.
Contact Eelco van de Wiel for more information and advice on how to optimise your insurance costs for electric vehicles (including a scan of your current insurance policy), or Saskia Harreman for guidance during the transition from a traditional company car policy to offering alternative and sustainable forms of corporate mobility.