Surge in Demand for Electric Vehicle (EV) Insurance Policies Boosted the Growth of EV Insurance Industry

To reduce environmental pollution electric vehicles have been introduced in recent years to replace conventional modes of transportation. Due to numerous technological advancements, such as higher fuel efficiency, reduced engine noise, smoother drive, low carbon emissions, and maintenance, it has grown significantly in importance. Also, due to expensive lithium-ion batteries, electric vehicles are currently much more expensive than their gas-powered analog. The cost of various repairs, battery replacement fees, and other damage repairs is significantly higher than the cost of repairs for conventional cars. For example, the cost of replacing an EV battery can range from US$ 2,500 to US$ 20,000, depending on the EV model and battery capacity. And purchasing an EV does mandate insurance indeed. Therefore, a rise in the use of EV insurance to avoid such a high cost of repairs is propelling the market's expansion.    

According to a recent study by Allied Market Research, the ev insurance market is projected to grow at a noteworthy CAGR from 2022 to 2031.   

Most insurance companies offer auto insurance coverage for electric vehicles. For instance, the Mitsubishi (i-MiEV electric car) is the cheapest vehicle available, with a starting price of US$ 22,995. With an average yearly cost of US$ 1,474, the Mitsubishi (i-MiEV electric car) is also inexpensive to insure. Insurance companies are highly customer-oriented and aim to create and offer programs and policies that meet the needs of their clients. Insurers are taking the initiative to address the impacts of changes related to the risks associated with different types of electric vehicles and new driving practices. The collision, comprehensive, liability, and physical injury coverage offered for EVs is almost identical to that of the regular auto insurance policies. Additionally, some insurance companies provide steep deals for electric vehicles. For instance, Allstate, an insurance provider, offers special discount rates on electric vehicles and provides liability coverage, medical payment coverage, collision coverage, and personal injury protection, among other things. 

On top of that, several EV manufacturers have begun providing EV insurance for their models. For example, Tesla, the biggest manufacturer of electric vehicles, has begun to offer Tesla Insurance, their brand of electric vehicle insurance. The availability of these insurance policies from the major players are promoting market growth.   

Companies are focusing on introducing new insurance services that are specifically made for electric vehicles to broaden their portfolio of insurance services. Furthermore, to increase consumer and EV sales significantly, companies are also concentrating on forming partnerships with top EV manufacturers. For instance, in August 2022, Liberty Mutual Insurance Co. (LMIC) introduced a digital monthly auto insurance plan for EV owners in collaboration with Autonomy, an EV subscription company. Through this partnership with Autonomy's DigiSure, users would be able to digitally sign up, estimate, and approve a subscription for monthly auto insurance. In addition, the collaboration with Autonomy will make it simple and seamless to access EV.  

Aviva launched standalone insurance products for EV charging points in September 2022. As the demand for electric vehicles (EVs) rises in the United Kingdom, insurance products now offer coverage for Operational All Risks (OAR) and Erection All Risks (EAR) specifically for EV chargers. This type of insurance is aimed at business clients, including car park operators, local government authorities, asset managers, contractors, and forecourt operators, among others. The policies will be available for single chargers and will cover businesses against malicious or accidental damage, flood, and risk of fire.  

COVID-19 Impact on EV Insurance Market-    

The COVID-19 pandemic had a negative impact on the entire automotive industry due to the rising cost of raw materials. Lockdown measures implemented by governments disrupted transportation systems, further adding to the market slowdown. However, the factors that fueled the sales of electric vehicles included an increase in the demand for private transportation to avoid needless social interactions, which further accelerated the demand for EV insurance worldwide. Additionally, because of lockdowns and travel restrictions enforced by the government, there have been fewer accidental damage and repair claims, which has increased the profitability of the auto insurance industry. As a result, insurance companies have been able to provide special discount premiums to draw in new clients, which has helped the market restore fast.  

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