Electric vehicles: The rising risk for insurers

Electric vehicle sales in the U.S. saw an increase of 60% year over year from 1 million in 2022 to 1.6 million in 2023. By 2030, the National Renewable Energy Laboratory predicts there could be 30 million to 42 million EVs on U.S. roads.

But EVs cost more to insure – an average of $44 per month more than an internal combustion engine vehicle, according to the National Association of Insurance Commissioners.

What’s behind those higher car insurance rates was the topic of a recent webinar by the Society of Insurance Research.

One reason for the higher rates is the severity of EV auto claims, said Xiaohui Lu, vice president, global business development with LexisNexis. The severity of EV auto claims is 34% higher than that of ICE vehicle claims, he said. In addition, those who switch from the ICE vehicle to an EV have a 31% higher post-switch loss cost than those who switch from one ICE to another. Those who switch from an ICE to an EV have a higher collision risk, with a 14% greater severity and frequency of claims.

Driving an EV is different from driving an ICE, and that is one factor in higher auto insurance claims for EV drivers said Jonathan Atteberry, Lexis Nexis senior director, data science.

Electric vehicles are generally wider than ICEs, and have a higher torque/weight ratio. EVs also have an immediate and strong acceleration. All of this adds up to a higher collision loss cost.

“It takes time to adapt to the distinctive driving experience of EVs,” he said. “The vast majority of those who are buying EVs are buying their first EV – drivers have to get used to them and adapt to them.”

Research shows that the greatest collision risk for an EV occurs in its first six months of ownership, as the driver adapts to a new way of driving, Atteberry said. The risk declines over time as people learn how to drive their EVs safely.

Lu said auto insurers need to “act now to learn the distinctive risk profiles of EVs and incorporate them into your rates so you can capture the growth of EVs.”

© Entire contents copyright 2024 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].