When Samuel Lessard decided to replace his Ram pickup with an electric equivalent, he determined the new Ford F-150 Lightning was just about the perfect vehicle.
“I wanted an EV for many reasons,” says Mr. Lessard, who lives about an hour north of Montreal. “When a full tank of gas in the Ram costs $200-250, it becomes expensive week after week. Also, I was tired of the noises and vibrations of the transmission. I wanted a better equipped vehicle, too; the Ram was pretty basic in Sport trim. Finally, I wanted to reduce my greenhouse gas emissions.”
And, as many EV proponents like to say, fewer moving parts means lower maintenance costs.
But repairs can still be pricey. A major part of an EV is the large battery pack, typically found covering a large area under the floor and built into the structure. This helps with lowering production costs and driving dynamics, but means the battery is costly to fix or replace and is in a somewhat vulnerable position to be scratched if the car is in a crash. When EVs are damaged, they can be enormously expensive to repair or replace, owing to a smaller market for the parts compared to those for gas cars, and also fewer mechanics with expertise in fixing batteries and other EV components, according to Britain-based price comparison site MoneyExpert. Parts availability has also been an issue, and while that’s not specific to EVs, it still adds up to substantial repair bills and long wait times to get the car back.
As a result of higher repair bills, EV drivers in some places around the world are starting to see massive increases to their insurance premiums.
A recent Reuters analysis found an abnormally high number of low-mileage Teslas being totalled or “written-off” by insurance carriers in the United States, the majority with less than 16,000 kilometres. Many of them had retail prices between US$60,000-US$80,000. Tesla chief executive officer Elon Musk has said that insurance rates for Teslas can be “unreasonably high,” and that the company is working to minimize the cost of repairing their cars.
In Britain, where BEVs (battery-electric vehicles) accounted for 16.6 per cent market share in 2022, nearly double that of Canada, things are more troubling. Some insurance carriers there are refusing to insure electric cars, citing high repair costs, and are taking a wait-and-see approach to underwriting EV policies. Many other drivers in Britain are facing skyrocketing premiums, according to an article in The Guardian. One insurance-quote comparison site pegged the average increase for EV insurance at 72 per cent in a year. That is compared with 29 per cent for gas-powered cars.
Canadians might not be seeing this happening yet, but as EV market share rises in this country, dramatic premium increases could become a reality here too.
“Auto insurance premiums are developed using many factors, especially the driver’s record, experience and location,” says Rob de Pruis, national director of consumer and industry relations at the Insurance Bureau of Canada (IBC). “Premiums would be calculated in the same way, whether it’s an electric or combustion-powered vehicle.”
“Based on our ‘how cars measure up’ [data], EVs do have a high score for the cost of repairs, which influences the overall premium cost as well,” he says.
A closer look at the IBC’s insurance claim index, which includes data on a large cross-section of vehicles from 2003-2021, shows that Teslas have some of the highest claim costs in Canada.
Where a rating of 100 is the average, and a lower score is better, the IBC index shows Teslas rate from 168 to 414 on collision claims, and 237 to 644 for direct compensation property damage (DCPD covers damages to a vehicle and its contents when you are deemed not at fault for the accident). That 644 rating is for a 2016 Tesla Model S. It tops the list for highest DCPD claim rating of all vehicles in IBC’s study.
This data directly affects the price of insurance premiums in Canada and is also indicative of what’s already happening in the United States with low-mileage Teslas being totalled. And as EVs become more common in Canada, it’s inevitable that the number of claims will rise.
While some Canadians are receiving discounts for insuring EVs, many EV drivers, including Mr. Lessard, are noticing their insurance premiums are already higher than anticipated.
“[Insurance rates] went up. The first year they were twice as high as the Ram,” he says. “For the second year of Lightning ownership, I had another increase of $700.”
Mr. Lessard admits the Ford is newer and more expensive than the Ram, which also affects premiums, but he says to have his initial rates more than double and then go up again the following year seems excessive.
We reached out to the insurance carrier that provides the policy for Mr. Lessard’s F-150 Lightning to find out whether it does in fact charge a premium to insure EVs, but the company instead directed our questions to the IBC. When contacted, IBC said it wouldn’t comment on specific cases and that each policy will vary based on the driver, adding that the rate doesn’t have to do with the vehicle being electric.
At least one expert agreed that, gas or electric, the price of a policy depends on the circumstances.
“There’s a couple of insurance companies there right now that have lists of the most stolen vehicles in Ontario and are applying a $500 surcharge for those vehicles specifically under the comprehensive section of the policy,” says Daniel Ivans, an insurance expert with Ratesdotca. All of the vehicles on the list are gas-powered.
“Relative to gasoline-powered vehicles, we’re not really seeing any discrepancies of rates because we’re not really seeing any discrepancies in claims,” he says.
“Down the road, when consumer habits change and we start to see more EVs on the road, will things change? Sure. And it depends on what’s observed. If it turns out [EVs] claim less, then you’ll probably see [policies] come in cheaper. And if turns out if we see them having more severe claims and more money is being paid out because of those particular vehicles, then [EVs] will be surcharged.
“What is boils down to, is the average loss per vehicle.”
For now Mr. Lessard says insurance premiums are less of a concern when everything else is taken into consideration.
“Considering that [the F-150 Lightning] is less expensive to run, has better handling, less noise, more comfort and more power, insurance premiums are secondary to me,” he says.