Electric vehicle insurance premium increases 'based on bad data'

Insurance premiums on electric vehicles (EVs) are being hiked by some firms based on ‘incorrect and irrelevant’ information, according to the Association for Fleet Professionals (AFP).

The trade body is calling for fleet decision-makers to work with their insurers so that they understand the degree of risk surrounding EVs better.

Paul Hollick, AFP chair, said: “We’re hearing of issues in certain areas. The first is the repair data that insurers employ to calculate premiums.

“Many are using information based entirely on experience with Teslas and applying this across the board to all EVs, even to vans.

“Clearly, this is problematic. The repair profile of Teslas is applicable only to Teslas, in the same way as any other manufacturer, and has very little relevance to commercial vehicles.”

Hollick believes that fleets and insurers need to be working together to create a situation where premiums can be calculated based on much better and directly applicable data.

He also highlighted how some insurers seemed unsure of the value of an EV that had been written off in an accident.

“This is especially the case where the battery may have been damaged as part of the write-off,” he said. “Some insurers seem to be working on the incorrect basis that the battery has no market worth. Again, this needs to be included in the maths behind premiums.”

Electric vehicle fire risk

The fire risk of EVs also appears to be a concern for insurers, with the potential for damage to then spread beyond the vehicle itself to other cars and vans, as well as surrounding property.

However, Hollick said: “EV fires, when they occur, are a serious issue, but experience so far shows that they are very rare – substantially less likely than fires in ICE vehicles – and we are unaware of cases where there has been a fire and a significant amount of harm has been caused in the immediate vicinity. The risk is just not that high.”

Research by the Swedish Civil Contingencies Agency, published in report in May 2023,  revealed that internal combustion engine (ICE) vehicles were 20 times more likely to catch fire than EVs in Sweden

Sweden recorded 106 fires in various electrified modes of transport in 2022. More than half were in e-scooters (38) and e-bikes (20).

Out of Sweden’s 611,000 electric vehicles, 23 fires (0.004%) were reported. The fleet of 4.4 million petrol and diesel vehicles recorded 3,400 fires (0.08%).

Separate global research from EV FireSafe found that 0.0012% of electric passenger vehicles caught fire from 2010 to 2023.

While it was difficult to find similar global statistics for petrol and diesel vehicles, EV Firesafe used a range of country reports and found a much higher 0.1% risk of catching fire, more than 80 times the rate EV Firesafe found for EVs.

The AFP is keen to work with insurers to share their experience of EV operation and provide the information needed to calculate more precise premiums.

“At this point, it’s very much about opening a dialogue that will probably continue over some time,” continued Hollick.

“We understand that insurers want to be conservative when it comes to new technology and that this approach applies to EVs but we also believe that fleets are in a position to provide the operational evidence to show that the risks and costs associated with EVs are much lower than many appear to believe.”