Attempt to understand high EV insurance cost

[4myr]

A few articles on Thai and China EV insurance markets give insight into why at the moment EV insurance costs are higher than ICE equivalents. The EV (insurance) market is more mature in China. The trend of increasing insurance premiums for EVs is not unique to China and Thailand; similar patterns have been observed in markets like Australia, US and the UK.

 

"Thailand's EV insurance struggles with high costs, rapid depreciation"

https://www.reccessary.com/en/news/th-market/ev-insurance-loss-rate-hit-over-90-percentage-attery-is-main-challenge-thai-insurers-commented

 

The article highlights a complex landscape for EV insurance in Thailand, characterized by high loss ratios driven by battery costs and competition among insurers. While there are significant challenges, including stricter lending practices and complicated insurance requirements, government incentives and advancements in local manufacturing present opportunities for growth. The future of the EV market will depend on how insurers adapt to these changes and address the specific needs of EV owners.

 

Overview of EV Insurance Challenges

• High Loss Ratios: The Thai General Insurance Association (TGIA) reports that the loss ratio for EV insurance has surged to over 90%. This means that for every 100 baht insured, insurers are incurring losses of 90 baht or more. This high loss ratio is attributed to several factors, including the rapid depreciation of EVs and increased maintenance costs, which are 50-60% higher than those for internal combustion engine (ICE) vehicles.
• Battery Costs and Risks: Batteries represent about 70% of an EV's price and pose significant risks, such as fire hazards and high replacement costs. The rapid pace of technological advancements can also render parts obsolete quickly, complicating long-term insurability.
• Impact of Competition: The intense competition in the insurance market has led some companies to modify their premium structures. For example, Tokio Marine Insurance's Thai branch has adjusted its premium calculation method, particularly affecting new customers or those transferring policies.

 

Factors Affecting the EV Market

• Cybersecurity Risks: The increasing connectivity of EVs raises cybersecurity concerns, further complicating risk assessments for insurers.
• Government Policies: Despite these challenges, there is optimism about the growth of the EV insurance market due to government incentives aimed at promoting EV adoption. These incentives are part of a broader push for sustainability and environmental awareness among consumers.
• Local Supply Chain Development: The establishment of production facilities by various manufacturers in Thailand is enhancing the local EV supply chain. This increased capacity is expected to drive down production and maintenance costs, making EVs more affordable.

 

Recommendations for Insurers
Separate Policies for Key Components: Industry experts suggest that insurers consider offering separate policies specifically for batteries and electric motors, potentially with higher premiums for these high-value components. This could help address the unique risks associated with EVs while providing clearer coverage options for consumers.

 

"High Insurance Premiums Are the Latest Thing Weighing on China’s EV Market"

https://www.insurancejournal.com/news/international/2024/04/05/768245.htm

 

The article highlights the growing challenges faced by electric vehicle owners in China regarding insurance costs and availability. As the EV market evolves, insurers are grappling with issues related to pricing accuracy, claims history, and repair costs. These factors contribute to rising premiums that may deter potential buyers and complicate the transition from traditional vehicles to electric ones. The situation underscores the need for improved data collection and risk assessment methodologies as the market continues to develop.

 

Overview of Rising EV Insurance Costs in China

• Increased Premiums: Many electric vehicle owners in China are experiencing significant increases in their insurance premiums. Reports indicate that some drivers are paying up to 8,000 yuan (approximately $1,100) annually for EV insurance, which is about 2,000 yuan more than what they would pay for a comparable fuel-powered vehicle. Some drivers have noted that their renewal premiums increased despite having no accidents.
• Rejection of Applications: Insurers are reportedly rejecting applications from EV owners who have high mileage or long commutes, viewing them as elevated risk factors. This trend has led to dissatisfaction among consumers, who have taken to social media to express their frustrations.

 

Factors Contributing to Higher Premiums

• Repair and Maintenance Costs: The higher premiums for EVs can be attributed to their increased repair and servicing costs. EV parts are generally more expensive and harder to source, which raises the overall cost of insurance.
• Lack of Claims History: The insurance industry faces challenges in accurately pricing and assessing risks due to the relatively short claims history associated with electric vehicles. This lack of data complicates risk assessments for insurers.
• Shortage of Qualified Technicians: There is a limited number of qualified technicians capable of servicing EVs, which further contributes to the higher costs associated with insuring these vehicles.

 

And finally, one of those China and EV bashing youtube channels funded by Falung Gong, and critical of the CCP, has this time a surprisingly balanced report on this topic. Just ignore the click baiting title and watch:

 

 

[BritManToo]

Neta V (430kbht) 1st class insurance from most companies 20,000bht (380kbht), insurance from Roojai 9,000bht (but only for 200kbht). The government minimum is still the same as an ICE car 800bht(ish).

 

No real need for more than government minimum, pay any more and your fuel savings have gone.

 

 

[proton]

14 minutes ago, 4myr said:

And finally, one of those China and EV bashing youtube channels funded by Falung Gong,

 

Where is the evidence? sounds like something the CCP would say to hide the numbers of EV cars exploding. Would not touch one, Japanese made cross maybe, but a pure EV from China never.