With petrol prices out of control and Elon Musk’s Tesla making moves in Australia, Australians have once-again driven up their demand for electric vehicles (EVs).
While this new demand is expected to lower costs over time, at the moment EVs still daunt consumers with a hefty price-tag, limited supply, and eye-wateringly high insurance premiums.
But why is car insurance so expensive for EVs? Is there any way to lower premiums? And is it still worth it to invest in an electric car long-term?
Factors driving up electric car insurance premiums
According to a statement from the Insurance Council of Australia (ICA), there are several reasons why insurance costs for electric vehicles outweigh standard petrol or diesel ones at the moment.
In a nutshell: electric vehicles are just harder to get in the first place.
While most cars/car parts need to be imported into Australia, electric vehicles are a relatively new market with underdeveloped supply chains. This escalates upfront and repair costs, which in turn makes many common car insurance claims (such as damage repairs and hire car rentals) either more expensive or more uncertain to the provider. To compensate for EVs’ added financial risk, providers jack up premiums.
Electric Vehicle Council chief executive Behyad Jafari claims “far less” could go wrong with an EV, therefore making the likelihood of having to file a claim pretty small. However, if something does go wrong, it’s unclear how long it will take to be fixed.
“The unfamiliarity with what could go wrong with EVs means [insurance] companies are unsure. It sounds risky so they pass things higher,” explains Jafari.
As the supply chain for EV parts and models matures, prices will drop long-term. But for now, drivers may be stuck with high premiums.