Insurers are facing huge challenges in handling electric vehicles (EVs), experts have warned today, which could block consumers’ transition away from polluting petrol and diesel rides.
Uncertainty over the rising cost of repairing EVs, particularly damaged batteries, has caused some insurers to back out of providing policies for electric car makes over the last year.
Last week, John Lewis’s underwriting partner Covea halted customers renewing or taking out new policies for battery-powered vehicles amid a review into costs.
Earlier this year, major insurer Aviva rowed back on insuring the Tesla Y Model. A spokesperson told City A.M. the group was “no longer able to offer a policy at renewal” after reviewing its underwriting criteria.
Mark Andrews, insurance director at Altus Consulting, told City A.M. on Monday that John Lewis’s move was “worrying” and shows that “car insurance and particularly EV insurance repairs are becoming so costly that insurers are looking to focus on other markets”.
He argued that EV insurance costs and premiums potentially rising higher than fossil-fuel based cars would create a “barrier” to consumers seeking to move towards cleaner, greener options.
A host of major insurers contacted by City A.M. including Aviva, Direct Line, and Admiral insisted they were committed to helping customers transition to EVs.
Jo Lloyd, customer and propositions director at AXA UK Retail, said that while the cost of repairs – a significant factor for insurers when setting premiums – were higher for EVs, the company believes prices will come down as the electric market expands.
But other experts told City A.M. the industry was facing a “myriad of issues,” and that further shifts away by providers are likely.
Andy Moody, car insurance expert and founder of broker Go Shorty, said it is likely “we’ll see more insurers move away from other segments in the next 12 months to compensate” for rising costs.
Moody highlighted repair costs and limited supply of spare parts, due to the EV market’s smaller size, which can prolong fixes and jack up associated costs for things like courtesy cars.
Kevin Pratt, car insurance expert at Forbes Advisor, told City A.M. that despite rising costs across the board, EVs are being “particularly badly hit by spiralling inflation in the auto repairs sector” as well as a shortage in the supply of mechanics skilled enough to work on the vehicles.
On John Lewis, Pratt said the question was now whether the temporary halt would “become permanent, or will it look for a more obliging underwriter if Covea’s review of EV insurance says the game isn’t worth the candle.”
He added: “Either way, it seems EV drivers will be paying substantially more for their insurance in the future, with all that implies for the EV market in general.”