Why insurance companies are likely to shy away from electric cars

Electric vehicles, long praised for their low cost of use and their reduced impact on CO2 emissions, are now at the heart of a financial problem likely to slow down their expansion. Beyond their high purchase price, a new challenge looms on the horizon: the cost of insurance. Recently, concern has been growing among insurers over the costs generated by these vehicles, leading some to reassess their commitment to them. This could well have direct repercussions on consumers.

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Excessive costs

The previously harmonious relationship between the development of electric cars and their adoption by the public is under threat. Indeed, despite a generally lower cost of use thanks to lower maintenance and insurance costs than thermal cars, electric vehicles could soon see these advantages erode.

Insurance, which was more affordable for electric vehicles some time ago, is therefore about to experience a significant increase. This increase in insurance rates could transform the economic attractiveness of these vehicles into a financial burden for owners. The main cause of this phenomenon lies in high repair costs, particularly linked to the battery and bodywork of electric vehicles.

As Numerama indicates, cases where manufacturers require the complete replacement of the battery following the deployment of an airbag, even in the absence of damage, illustrate the extent of the problem. These procedures, although aimed at maximizing safety, generate significant costs for insurance companies.

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Boycotts and alternatives in place

The difficulty of obtaining certain spare parts and the high cost of body repairs (especially in Europe, where labor is more expensive than in Asia) further aggravate the situation. As a result, some electric car models, particularly those from China, are already blacklisted by insurers, particularly in the UK. This situation confronts manufacturers with an imperative to rethink the design of their vehicles to improve their repairability and thus reduce insurance costs.

Failing to find common ground, electric car manufacturers risk seeing the sale of their models slow down, due to prohibitive insurance costs for consumers. The escalation in the price of electricity, a reduced ecological bonus in certain European countries such as France, and falling production on the part of manufacturers add to the fears that potential future owners could have.

In the meantime, some manufacturers, like Tesla, have looked for alternatives. The manufacturer has decided to launch its own insurance so as not to depend on large groups. However, promises of lower premiums and better coverage have not always been kept, as Tesla underestimated the associated costs.

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Although other major automotive groups may consider following this path, it would require significant capital investment and is not considered a priority by the industry. Manufacturers would probably wait for a reaction from historic insurers before embarking on this path, because without such an incentive, there is no real interest in doing so.

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