Volatility Increases in Electric Vehicle Car Insurance Market Amid Rising Energy
Spiraling energy prices could slow down growth of the electric vehicle (EV) and insurance market going forward as the savings from charging this type of vehicle compared to filling a tank with petrol or diesel are narrowing. In addition, consumers also face having to pay more expensive premiums to insure their EV compared to traditional petroleum-fueled ones.
EVs have rapidly proliferated over recent years, with GlobalData forecasting that the global EV insurance market will be worth $507.3bn (GBP470.3bn) by 2033, up from $49bn (GBP45.4 bn) in 2020. Government-led initiatives around the world have focused on the transition towards net-zero emission targets, favoring the greener EVs over their combustion-engine predecessors – petrol and diesel cars. With a ten-fold growth projected, understanding and pricing the risk profile of these new vehicles without decades of data and experience has become a pressing need for insurers. However, unprecedented energy price hikes at a time when inflation has shot up will bring volatility in the shift towards the electrification of vehicles.
EVs are more expensive to buy than traditional petroleum-fueled ones, but drivers would typically make savings on the cost of driving as charging them was significantly cheaper than running a petrol or diesel car. According to our 2021 UK Insurance Consumer Survey, EVs are also more expensive to insure, with someone with a petrol or diesel car typically paying in the range of GBP200–299 to insure their car, while those with an EV are paying an extra GBP100. Claim costs are higher for EVs owing to expensive batteries, advanced in-vehicle technologies, and constrained supply chains – all of which drive premiums up.
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