Philip Small had never paid more than £1,000 a year to insure his electric car, so was shocked when he was quoted £8,932 this month.
The 55-year-old had never had an accident and the terms of his policy for his Tesla Model year.
“I can’t see how these increases can be justified,” says Philip, who owns and runs London catering and events company Philip Small Ltd and drives about 12,000 miles a year.
All motorists have noticed an increase in the cost of insuring their car. But electric car owners are being hit the hardest, with many seeing higher-than-average increases.
According to price comparison site Confused, premiums for petrol and diesel cars have risen by 29 per cent, rising by an average of £192 to £848. However, insurance premiums for electric vehicle deals have risen by an average of £402 to £959 – a rise of 72 per cent.
Premium price: Philip Small faced a ninefold increase in insurance costs
Difficulties sourcing parts for electric cars and a shortage of repair shops and technicians who can repair these vehicles have driven up premiums, according to Andy Moody, founder of temporary car insurance website GoShorty.
According to Thatcham Research, a motor vehicle research group, premiums tend to be higher because electric vehicles tend to be more expensive to repair, costing on average a quarter more than a petrol or diesel vehicle.
Moody says: “Crucially, not all repair centers are equipped to handle these vehicles.” Because of the fire hazard posed by vehicle batteries, they often need to be repaired using specialized equipment and away from conventional vehicles.
“Due to the smaller market size, parts supply can be limited and costly compared to traditional cars – which can increase repair times and associated costs.”
But Philip Small says that doesn’t justify the sudden, dramatic increase in his insurance offerings.
The Tesla owner’s insurance bill was £700 a year when he bought the car in 2019, rising to £1,000 last year. But when Philip went to renew his annual policy with his insurer LV this month, he was told his annual premiums would rise to over £2,000. Philip looked around on comparison sites but couldn’t find a better deal. One offer from Tesco was a staggering £8,932 a year.
He says: “With an electric car there is a battery and some electrical components.” Unlike petrol or diesel vehicles, where there is an engine and exhaust, there is little that can go wrong. And it’s under warranty anyway. “Tesla gives you a four-year warranty. “So if something goes wrong, the problem will be fixed and you won’t have to make a claim.”
When Philip asked LV why it had doubled the price of its policy this year, he was told that it was difficult to get parts for Teslas and that only Tesla-approved workshops could carry out repairs. There are only six licensed repair shops in London.
But insurance costs for electric vehicles are rising across the board. At the same time, his wife’s electric Mini was due for replacement and her insurance bill rose from £450 to £732 – a 63 per cent increase.
Philip feels the benefits of owning an electric car are fading.
“The tax advantages will be canceled and the city toll for electric cars will come from 2025,” he says. “Rising electricity prices mean that billing is also becoming more expensive.”
GoShorty’s Moody says rapid technological advances have meant that older cars are now worth significantly less than their original value. This can result in more write-offs being taken in the event of a claim, increasing potential losses for insurers.
Darryl Bowman of Cuvva, another car insurance website that specializes in temporary coverage, says the battery can account for 20 to 40 percent of the car’s total value. Damaged batteries may not always be replaceable, resulting in total vehicle loss.
John Lewis has stopped offering insurance for electric cars as repair costs have skyrocketed. The store’s financial arm, John Lewis Financial Services, has temporarily suspended sales to provide coverage for battery-powered vehicles for both new customers and those renewing existing policies. A spokesman said the group’s underwriter, Covea, had enforced the sales ban while it analyzed risks and costs.
Moody warns that further bans could lead to price increases as remaining insurers respond to reduced competition in the industry.
“With so many insurers withdrawing from certain sectors, those that remain are now insuring a greater proportion of the high risks and costs of these vehicles.” This will result in premiums rising significantly again over the next 12 months, potentially leading to More people are selling their electric cars – which further reduces the value.”
Expensive: Rising insurance costs and the high price of electric cars still make them unaffordable for many households
Rising insurance costs and the high price of electric cars still make them unaffordable for many households. However, insurance costs will fall as used car inventory eventually increases, says Cuvva’s Bowman. He adds: “As electric vehicles are relatively new and there are fewer of them on the road, replacing parts can be more challenging, unlike traditional cars where parts are readily available.”
Steve Smith, 65, has been driving electric cars for eight years. When he bought his first Tesla, a Model S, in 2015, he paid £500 a year towards insurance. Last year he was offered £422 for his Tesla Model 3 Performance, which he bought in 2019, when he renewed his contract.
However, this year Steve’s insurer paid him £1,531 – even though his circumstances had not changed. He was able to get a £962 policy from another provider, but the shocking jump prompted him to sell his Tesla.
Instead, he bought a Toyota bZ4X – also an electric car. His premiums have now fallen to around £760 a year. Steve was now retired, had been a police officer for 30 years and had advanced driving skills. He later worked as an insurance fraud investigator, investigating “cash for accidents.” He says: “The insurance industry is taking little notice of developments in electric cars.” Getting repairs is easy, but insurers believe it will be difficult and costly.
“I made a claim a few years ago when I was hit by an uninsured driver, but all repairs were completed within seven days.”
Thomas Winstone, a firefighter from South Wales, was told his Tesla Model 3 Long Range insurance bill would rise from £650 to £1,100 a year when his policy was up for renewal in September.
Thomas, 44, searched comparison websites but received quotes for between £2,000 and £3,000 – much more than if he stayed with his existing insurer, Privilege.
Thomas called Admiral, the company that provides his home insurance, and was able to negotiate cover for his car worth £600. He says: “Because of inflation, premiums should always go up.” But every insurer seems to increase the amount differently, so you feel like you don’t really know what you’re actually being sold.”
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