Car Insurance 4 EV to Rise?

Investment Analysis Clubs Macro Economic Trends and Risks
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In the short run, early data based on insurance claims suggest that contrary to that overall, long-term expectation, EVs can be significantly more expensive to repair, and that affects the cost of ownership.

There were 120 Tesla Model Y electric vehicles listed in two large salvage auction houses recently, and the “vast majority” had under 10,000 miles on them, according to a report from the Reuters news service.
The insurance companies that covered these vehicles decided that even with so few miles on them, these Teslas aren’t worth the $50,000 or so they sometimes cost to repair.

I don’t see how insurers can maintain current rates with such losses. Insurers have to obtain state approval for auto insurance rates. Likely they will increase. Will IC owners subsidize EV owners? Or will insurers just raise rates on EVs?

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I wonder what the repair cost/insurance premium is on a Chevy Bolt or Nissan Leaf?

intercst

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Or they might decline. Your article is a year old - the below, more recent, discussion notes that insurance rates for EV’s have been falling slightly over time:

Part of the reason why repair costs for EV’s are so high (and thus why so many of them get declared a total loss) is that they’re still a teeny-tiny part of the overall fleet. If, as, and when they are more widespread, insurers will have access to more repair resources (parts and shops to do the work) and better data to help them assess and justify repairing rather than “totalling” the vehicle, you might see them move more towards where ICE’s are.

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Check the web site for your insurance company. Many have a quote app where you can compare insurance costs.

Steve

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The Car & Driver article is January 2023 where they talk of insurers totaling low mileage Tesla Ys because of $50,000 repairs.

Any damage to the battery pack means high repair costs.
71 day old article:
https://www.msn.com/en-us/autos/news/minor-ev-battery-damage-in-accident-insurance-company-will-total-car/ar-AA18RQT2
Insurance companies with ever-increasing frequency are writing off EVs involved in minor accidents. Some of these cars only have a few hundred miles on them. This impacts all of us because as insurance companies pay out for the price of a new vehicle, our premiums rise in lockstep.

It was the hope that EV batteries would last for at least a decade or more. Then, they could be repurposed for electric grid power storage or rebuilt to last at least another decade. Especially since an EV’s battery makes up over 50% of its cost, it’s the most expensive component, it goes without saying this is the most important part of an EV.

But that is not what is happening. Once a battery shows damage, it’s more feasible for insurance companies to just total the entire car. And that’s especially true with EVs like the Tesla Model Y. Its battery pack is also a structural part of the car. As a result, most EV repair experts say that the Model Y battery is unrepairable.

However if the battery pack is not damaged the repair cost are much more reasonable but still more than a IC vehicle.
May 17, 2023:

Comparing data from Q4 2022 and Q1 2023, the report also found that EV average repairable severity has decreased to $4,749 in the US and $6,406 in Canada. Despite the decrease, these figures remain higher than the average for internal combustion engine (ICE) vehicles, according to Mitchell.

Earlier this year, insurers warned that premiums for EVs would likely rise unless manufacturers address hurdles related to battery data access and repairing packs after minor collisions.

Mar 22, 2023:

Unless car manufacturers produce more easily repairable battery packs and provide third-party access to battery cell data, insurers and industry experts argued that premiums will continue to increase as EVs become more popular and a growing number of low-mileage cars get scrapped after collisions.

Tesla has been a particular focus of concern, with the company making battery packs “structural” or part of the car’s body.

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You are kidding right? If you crash a Honda Civic front end collision you are likely to be totaled as well. The cars are not ramrods as in the olden days. The cars fall apart so the collision does not impact either driver. The engine in an ICE vehicle can drop out to stop itself from launching into the next vehicle with momentum.

Back thirty years ago a dear family friend was hit head on by an older Lincoln which went through and killed him. The Lincoln was a ramrod that came over the yellow line. The other driver was impaired. It is less expensive for the insurance companies to have the car totaled than pay for the loss of life or limb.

Besides 120 Teslas totaled out of how many in that regional market? Without that data you have nothing.

tj,

Ever hear an insurer argue premiums would drop?(outside of next to zero driving during the pandemic) They only argue premiums will increase.

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Only USAA is honest in that.

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The point is not how many were totaled; it is the high percentage of those Teslas totaled that were low milage (<10,000 miles).

DB2

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Of course the point is how many were in the insurance pool from a given region.

We do not know if the insurers can make a good rational to do business in that region. We do not have their ‘trustworthy’ word for it.

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Not really. Whether the totaled Teslas were from a pool of 2000 or 20,000 the percentage of the total Teslas that had low milage was quite high.

DB2

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Sure. But on the whole, insurance costs were (at that time) declining slightly for EV’s overall - and the folks from CR were expecting that trend to continue. They’re still higher than for ICE cars, in no small part due to the fact that damage to the battery often does result in very high repair costs, if not a total write off. But the expectation is that as EV’s become more prevalent, and there is a better supply chain of parts and a broader pool of servicing facilities, those costs are going to go down, not up.

They may still and always remain higher than ICE’s. But the thread title is asking whether insurance costs for EV’s will rise. They might not. They’re really high already, and probably already fully reflect the very high repair costs and percentage of total write-offs for batteries. That’s not a new thing, nor is it likely to increase over time.

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Not if there were 40k Teslas in the market region. It would be very minor to have 120 totaled. Very minor. You are building perspective of damage without the dominator.

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Do you have a link? :>) 20 characters needed in response

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It was the article I cited upthread. From the article:

Fortunately for consumers, insurance premiums for EV models have been trending downward as insurance companies collect more data and more models come to the market, McChristian says. The share of electric vehicles on American roads, though growing, is still relatively small. According to the International Energy Agency, EV sales were strong in the first year of the pandemic and continued to rise through 2021 and 2022, even as new-car sales began to drop off due to supply chain problems and production delays. Also keep in mind that many manufacturers have announced plans to increase electric vehicle production, and several new electric models are scheduled to appear in the U.S. market over the next couple of years. More EVs on the roads means more data on them, which will enable insurers to have a better idea of how risky they are to insure. It’s also likely to bring down the cost of parts for repairs and broaden the availability of qualified repair technicians.

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The way insurance works (very roughly) is that the price for collision coverage is roughly proportional to probability of loss x average loss amount. It’ll be interesting to see if all the extra tech being added to cars, but especially to EV cars, that avoids collisions might reduce the probability somewhat. And if it reduces it enough, maybe eventually (after parts, competition, etc becomes available for EV repairs) insurance price for those vehicles will begin to trend lower?

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OK fine. It just that I did a quick web search “EV insurance rates are declining” and did not get even one article.

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Yep. I just did the same thing for “EV insurance rates are increasing” and didn’t get any articles, either. All of the articles are about comparing current rates for EV’s and ICE’s (the former are more expensive!), and not about the trends in rates for either product.

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Sure, but what percentage of those 120 had less than 10,000 miles on them?

Copart is a leading car auction company. Here is their site for totaled cars for sale:
https://www.copart.com/content/us/en/landing-page/total-loss
Over the last seven days they have gotten 31,876 totaled cars. Of those 4,518 had less than 10K miles. That equals 14%. That is quite different than the “vast majority” of the totaled Teslas with less than 10K miles.

DB2

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I got to give you that Bob, but as the cost of Teslas come down it wont matter as much.

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That likely true, although insurance is a more important ongoing expense to those of lower incomes (and perhaps the neighborhood you live in).

I was wondering if damage will effect the recycling of the batteries.

DB2

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Someone at work was telling me the batteries can not be recycled. I do not know if that is true. Her profs have her fired up to save the world. I do not trust such professors.