2022 looks set to be an important year for the electric car. Electric vehicles (EVs) are on track to set a sales record, according to recent reports as interest surges. Whether you’re a consumer or a business with a fleet looking to invest, you may not yet have given much thought to insurance. But Elon Musk has. He is planning to use telematics data from Tesla vehicles to build a new insurance operation. Musk recently announced his strategy in an earnings call with investors. And that has left many asking how insurance for an EV might differ to the traditional car.

If you go ahead and buy an EV, your insurance policy will likely look much the same as before but with some notable differences. Whilst this trend has many advantages, its gradual increase in popularity will likely come with insurance implications as indicated by our recent survey. FWD’s research showed that 90% of brokers who place motor insurance believe that EVs, new energy and technology will have a significant impact on insurance policies for their clients.

With the growing need to reduce carbon footprint, and the continuous development of alternative technologies, an increasing number of drivers are now considering making the switch. But it’s important for both consumers and businesses alike, to know the ins and outs before making decisions.

What to consider when it comes to EV insurance:

• Does your current insurance provider have EV insurance in place currently? If not, you may need to consider switching companies.
• Many EV cars are smaller and less powerful than traditional vehicles, but their parts are inherently more complex. Be sure to ask your adviser how much of an impact this will have on your policy.
• As EV technology is still a new phenomenon, and the cars are expensive, the cost to repair or replace specialist parts, or service the vehicle, tends to be higher – resulting in higher premiums. For example, these vehicles are significantly heavier than their combustible car counterparts meaning their weight places additional strain on their tyres. Research by Goodyear shows that traditional tyres can wear out up to 30% faster on EVs, so optimum performance requires specialist tyres.
• Data shows that there is an increased risk of collisions, as electric engines make little to no noise, so pedestrians and other road users may not be aware of the car’s presence.
• Another challenge is the yet to be confirmed quantity of battery hiring or leasing. Some manufacturers initially only sold EVs with the option of leasing batteries. This was useful as it gave consumers and businesses peace of mind that, if the car’s battery were to drop below three quarters of its capacity, the manufacturer would be liable for providing a replacement. But again, this also could change the complexity around insurance.
• Where internal combustion engine cars get energy from petrol or diesel, an electric vehicle is powered from a big pack of batteries. Picture a scaled-up version of the battery in your mobile phone. When it comes to replacing an EV battery, many manufacturers provide a warranty of up to 8 years or 100,000 miles. But in the event of an accident, this might not be the case, so it is important to check the terms and conditions of unexpected events such as a collision.
• Charging infrastructure is still a work in progress. As EVs need to be plugged in with cables for relatively long periods, often from roadside charging points, drivers and fleet drivers must be aware of their duty of care for members of the public who might be inhibited in some way or injure themselves on the charging cables. Some policies may not cover this as standard, so it is important to do the right due diligence.

A senior broker at motor specialist wholesale brokerage, Broking Now (FWD’s research broker panel) said:

“Insurers use approved repair networks. With EVs, this is in a complete state of disarray. Your approved insurer can place breaks and suspension etc. They are not specifically qualified around electric vehicle needs. Insurers need to get with the times. Pretty much all manufacturers have soft or EV capabilities, Insurers need to get up to date with technology and security advancements, driver enhancements, safety features and consult with government etc.”

The future of EV insurance

One reason for optimism is, as alternative vehicle technology becomes more mainstream, maintenance, parts and therefore insurance costs will most certainly decrease. Drivers and businesses are already being offered discounts and specialised packages as the marketplace becomes more competitive.

And of course, going electric is already seen as a better option both in terms of long-term cost and for the environment.

Put simply, there are some key differences to traditional motor policies when taking out electric vehicle insurance so whether you’re an eco-friendly driver looking to make a purchase, an SME or a fleet owner be mindful that things are still evolving in this interesting sector.