Opinion: Why EV premiums must be kept under control

By Paul Hollick, chair of the Association of Fleet Professionals (AFP)

In the retail sphere, it has been reported that insurance premiums for electric vehicles (EVs) have risen by an average of 79% this year – and feedback from across our membership suggests something similar is happening in fleet.

Now, all motoring premiums have increased substantially in 2023 but at the Association of Fleet Professionals (AFP), our impression is that EVs are being particularly targeted based on what appears to be incorrect and, in some instances, irrelevant information. We want fleets and insurers to collaborate to ensure the degree of risk is better understood.

According to our feedback, there are three areas where problems are arising. 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 certainly has very little relevance to commercial vehicles.

Fleets and insurers need to be working together to create a situation where premiums can be calculated based on relevant and accurate data.

A second issue is that insurers seem unsure of the value of EVs that have been written off in an accident. This is especially the case where the battery may have been damaged as part of the write-off. Some insurers seem to be working on the incorrect basis that the vehicle has no market worth. Again, this needs to be included in the maths behind premiums.

Finally, there appears to be an undue amount of worry about the possibility of EV fires and the potential for damage to then spread beyond the vehicle itself to other cars and vans, as well as surrounding property.

Now, 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 very low.

The AFP is very keen to work with insurers to share their experience of EV operation and provide the information needed to calculate more precise and fairer premiums and is currently in the process of forming an expert panel to tackle this problem.

It’s very much about opening a dialogue that will probably continue over some time, looking at areas such as whether fleets can provide relevant accident data, and whether insurance companies are bearing in mind the wide range of safety devices fitted to the average EV.

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 are much lower than many appear to believe.

Overall, what we are very keen to avoid is a situation where EV premiums for fleets – and for private motorists when those vehicles are remarketed into the used sector – mean buyers are dissuaded from electrification because insurance costs are seen as a barrier. It’s a situation that needs to be resolved quickly and decisively.

Insurance industry defends high premiums for electric vehicles, read more here.