Why is your EV so Expensive to Insure?
Electric vehicles are transforming the automotive landscape, but many fleet managers are hitting an unexpected roadblock: skyrocketing insurance premiums. While the long-term benefits of electrification are clear, the short-term insurance costs can be up to 25% higher than for traditional vehicles. So, what’s driving this trend? In our latest episode Marc Spurling from Aon breaks down the complexities:Why is EV Insurance So Expensive? The insurance industry is grappling with what Aon calls "four megatrends"—weather, technology, trade, and people which complicate risk assessment for everyone. For EVs, this creates a few specific hurdles: Limited Historical Data: Compared to petrol or diesel cars with decades of claims history, EVs are still the new kids on the block. With less data to work from, insurers tend to play it safe and set higher premiums. As Marc puts it, "With limited data, trends are amplified into perceived substantial risks."Supply Chain and Repair Complexity: Modern EVs are essentially computers on wheels. A minor bump can damage sophisticated sensors or LIDAR systems, requiring specialist technicians and manufacturer-approved parts, both of which are in short supply. This complexity drives up repair costs and vehicle downtime, which in turn inflates insurance rates.The Hidden Risk: Charging InfrastructureBeyond the vehicles themselves, transitioning to an electric fleet introduces a new layer of risk that many fleet managers overlook: the charging infrastructure. Property insurers are still cautious about the fire risks associated with EV charging, often imposing strict restrictions or hiking up premiums. Many businesses only discover these hurdles after they’ve started their electrification journey, leading to unexpected costs and delays. Furthermore, installing multiple charging points can strain a building’s power grid, and the space needed for a safe setup is often underestimated. However, some forward-thinking companies are turning this challenge into a revenue stream. First Bus, for example, has created multi-use charging hubs that generate income by charging other vehicles during off-peak hours. Is Data-Driven Insurance the Answer? The idea that connected vehicle data would revolutionise insurance with pay-per-use models sounded promising, but the reality is more complicated. Marc offers a sharp insight: "Data is the new oil, but crude oil needs to be refined to be useful, and the same goes for data." Early models that simply tracked mileage were too simplistic, three miles in central London carries far more risk than three miles on a rural motorway. Today, the focus is shifting to behavioural data to create a more accurate picture of risk. What Are Smart Fleet Managers Doing?Leading fleet managers aren’t waiting for the market to change; they’re taking control.Embracing Early Adoption: Businesses already operating EV fleets are seeing the benefits of lower maintenance costs and improved reliability. As they build a positive risk profile, their insurance premiums are gradually coming down.Practising Proactive Risk Management: Top performers work with specialised brokers to create tailored policies. By highlighting proactive measures like advanced driver training and vehicle monitoring, they can secure better terms.Planning Infrastructure Early: A successful transition involves collaborating with property insurers and engineers before installing charging stations to address power, space, and safety requirements from the start.The Road AheadDespite the hurdles, the future for electric fleets is bright. Advances in battery technology are reducing fire risks, and as the market matures, premiums are expected to stabilise.
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