How electric vehicles will affect your premiums
In time an EV could be cheaper to insure than a conventional car
In SA, electric vehicles (EVs) currently command a marginally higher insurance premium. This is largely because, for the time being, insurers do not have enough accident, repair and other claims history on EVs as there are still estimated to be less than 1,500 of them on our roads.
However, as numbers of battery-powered vehicles increase, the cost of EV cover should in a short time align with — and eventually beat — the cost of cover for internal-combustion engine vehicles.
This is according to Christelle Colman, Insurance expert at Old Mutual Insure.
“In the absence of data, insurers globally have tended to default to higher premiums. SA has proved no exception in his regard,” she says.
“With their advanced technology demanding specialised maintenance, EVs currently cost more to repair and maintain that conventional vehicles. As the number of EVs increase, however, the fact that EVs don’t have alternators, clutches, radiators or fuel pumps means that they have fewer things that can go wrong and, in time, as EV servicing skills also become more readily available, EVs can expect to attract similar or even lower premiums than conventional vehicles,” says Colman.
The Nissan Leaf was the first EV introduced into the local market in 2013, followed by the BMWi3 in 2015. Jaguar Land Rover’s I-Pace is the latest while the Porsche Taycan, Audi E-tron and Mercedes Benz EQC are expected to launch locally in the short term.
There are currently over 90 EV charging stations in Gauteng and by the end of the year, SA is expected to have over 200 EV charging stations installed in major hubs and along national routes. The age of electric mobility is certainly here.
While 1,500 cars is a small number compared with the millions of normal internal combustion engine (ICE) vehicles this number is expected to increase significantly in the near future.
“As EVs become increasingly cheaper and battery costs drop below the $150 per kilowatt-hour threshold, Bloomberg predicts that by 2040 one in every three new cars sold globally will be an EV,” says Colman.
This prediction is supported by Merrill Lynch who expect the cost of EVs along with their insurance in the US to be cheaper than their fossil fuel-powered counterparts by as early as 2024.
Since EVs in SA currently retail at more than R500,000, the profile of the people purchasing these vehicles generally attracts a lower premium. More importantly, the risk profile of people who have made a conscious choice to support a greener environment also exhibit a responsibility and care profile likely to attract lower premiums over time, adds Colman.
“In SA we are also not sure about how likely, or unlikely, EVs are to be stolen or whether they will present a different theft or malicious damage risk from other vehicles,” says Colman.
“For now, the lack of recharging points in SA along with the fact that the bulk of existing recharging points are in secure shopping malls and other high-security public spaces, is likely to see fewer electric vehicles stolen. Since electric vehicles generally take several hours to be recharged, however, when people are travelling long distance, they will in all likelihood need to leave their vehicles outside, unattended at service stations or in hotel or B&B parking lots, charging overnight,” says Colman. In these contexts EVs might present a higher likelihood of being damaged or stolen, she adds.
While manufacturers are working to establish standardisation of EV charging equipment to be used across all electric vehicle brands, the numbers on EV theft are likely, in the long run, to be determined by government policy.
“How efficiently, securely and effectively SA’s EV recharging infrastructure is designed, rolled out and supported will be a key determinant of safety and security in the industry,” says Colman.