As electric vehicles become increasingly popular, drivers are finding coverage to be costly.
Battery electric vehicles have been skyrocketing in popularity as drivers look for ways to reduce their emissions, but high auto insurance premiums are proving to be an unappealing feature of those cars.
Over time, the battery electric vehicles are expected to drive up losses for insurers causing rates to rise.
According to a recent Moody’s Investor Service report titled “Electric vehicles to drive up costs, pricing for auto insurers as they grow more popular,” drivers can expect to continue paying more for their auto insurance coverage if they choose electric cars as their zero-emission vehicle. The report pointed to the high cost of repairing electric vehicles when compared to traditional internal combustion engine (ICE) vehicles. Those high costs will push insurers to raise their rates to provide coverage for those repairs.
This has caused some to ask whether it might open an opportunity for hydrogen cars to take a more prominent place in the automotive market, as some drivers might seek a zero-emission vehicle with potentially lower maintenance and repair costs. As of yet, hydrogen passenger vehicles have not taken off in the United States as there is virtually no refueling network, and the only hydrogen stations to speak of are in California.
It is unlikely that hydrogen cars would ever be the only zero-emission vehicles on US roads, but it might introduce an additional option for individuals seeking an alternative to battery electrics, particularly if that latter technology proves to be an expensive one to own beyond its purchase price.
The auto insurance market is preparing for a shift in which a large percentage of vehicles are electric.
According to the report, Moody’s Investor Service expects that by 2030, about one in three global light vehicle sales will be battery electric vehicles. By 2035, that number will have spiked to almost half of those sales.
Auto insurance prices will be affected by higher electric vehicle costs such as in auto repairs – both in parts and labor – as well as the higher price tag associated with used vehicles. As the number of these vehicles increases on the road, they are also expected to be involved in a rising number of collisions. As electric vehicles are also more likely to be considered a total loss – even in minor collisions, particularly if the battery is damaged – the cost of insuring them will be high, and that is expected to be directly reflected in premiums.
