Some electric vehicle (EV) manufacturers have created insurance subsidiaries or have partnered with niche insurers to provide tailored coverage for their brands in an effort to support sales. This is occurring where EV drivers face higher premiums and potential denial of coverage due to the high price of EVs and the costs insurers need to incur to repair them.
“Traditional insurers have had to adapt to high repair costs of EVs and the rapid pace of adoption in China, Europe and the U.S., resulting in significant insurance premium rate increases,” researchers state in a new report from Morningstar DBRS, EV Manufacturers’ Bespoke Insurance Solutions Could Create Shifts in the Auto Insurance Landscape. “The auto insurance landscape may change in the future if the new EV brands are able to gain material market share and decide to continue creating tailored insurance solutions to make their cars more appealing to the price conscious mass market.”
Cost of insurance a deterrent to mass adoption
Today there are more than 15 countries, including Canada, which have initiated climate policies mandating 100 per cent zero-emission vehicle sales targets for light-duty vehicles by 2035 or earlier. The cost of insuring the vehicles, however, has been a deterrent to mass adoption, they state. The report also looks at market penetration of EV globally, EV sales, premium rate increases and the trend of EV manufacturers developing their own insurance solutions to support sales.
They also note that original equipment manufacturers (OEM) are also expanding into insurance offerings to help promote sales and increase customer loyalty. OEMs with insurance subsidiaries include General Motors and Toyota.
“We don’t expect this emerging trend to affect earnings or credit ratings of our rated insurers in the short to medium term,” they write. “But we are watching developments in the automobile industry and potential effects on the insurance companies we rate.”
