^{Why is your EV so Expensive to Insure?}

Electric vehicles (EVs) are reshaping the automotive world, but there’s a hidden challenge troubling fleet managers: skyrocketing insurance premiums. Traditional risk models haven’t kept up with the evolving technology, making EV insurance costs up to 25% higher than for conventional vehicles.

As Marc Spurling from Aon explains in a recent Auto Futurecast episode, this volatility stems from deeper market dynamics. However, proactive fleet managers can navigate these challenges effectively.

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Why EV Insurance Costs Are Rising

The insurance industry faces what Aon calls "four megatrends" weather, technology, trade, and people, complicating risk assessment. For EVs, this leads to specific challenges:

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Limited Historical Data

Compared to internal combustion engine vehicles with decades of claims history, EVs lack a robust data set. Coupled with rapid technological advancements, insurers err on the side of caution—resulting in higher premiums.

"Insurance companies rely on data to predict risks," Marc notes. "With limited data, trends are amplified into perceived substantial risks."

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Supply Chain Constraints

Advanced technology in EVs makes repairs more complex. Even minor collisions can damage sensors or LIDAR systems, requiring specialized technicians approved by manufacturers, who are in short supply. This drives up repair costs and vehicle downtime, contributing to higher insurance rates.

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Technology Complexity

Modern EVs are essentially computers on wheels. Repairs that were once straightforward now involve intricate technical work. This complexity increases both repair expenses and insurance premiums.

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The Overlooked Risk: Charging Infrastructure

Beyond vehicle insurance, transitioning to electric fleets introduces new risks tied to charging infrastructure. Many fleet managers are unprepared for the insurance implications.

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Property Insurance Challenges

Property insurers remain cautious about fire risks linked to EV charging, often imposing restrictions or higher premiums. Businesses frequently encounter these hurdles only after starting fleet electrification, leading to costly delays.

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Power and Space Requirements

Installing multiple charging points can strain building infrastructure, while space requirements for safe setups are often underestimated, significantly impacting overall costs.

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Innovative Solutions

Some companies are turning challenges into opportunities. For example, First Bus uses multi-use charging hubs, leveraging off-peak hours to charge other vehicles and generate extra revenue.

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Data-Driven Insurance: A Work in Progress

Connected vehicle data promised to revolutionise insurance through pay-per-use models and real-time risk assessment. Yet, the reality has proven more complicated.

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Refining Data

"Data is the new oil" is a common refrain, but Marc offers a twist: "Crude oil needs to be refined to be useful, and the same goes for data." While modern vehicles generate vast amounts of information, only certain data points meaningfully predict risk.

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Beyond Mileage Tracking

Early insurance models relied heavily on mileage, but this proved overly simplistic. Three miles in central London pose different risks than three miles on a rural motorway. Insurers now focus on behavioural data to assess risk more accurately.

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What Smart Fleet Managers Are Doing

Forward-thinking fleet managers are taking a structured approach to address insurance challenges:

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Early Adopter Advantage

Businesses already operating EV fleets report lower maintenance costs, improved reliability, and gradually lower insurance premiums as their risk profiles improve.

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Proactive Risk Management

Top-performing managers work with specialised brokers to create tailored policies. They highlight proactive measures like driver training and vehicle monitoring to secure better terms.

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Infrastructure Planning

Successful transitions involve early collaboration with property insurers and engineers to address power and space requirements before installing charging stations.

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The Road Ahead: Turning Challenges into Opportunities

Despite current obstacles, fleet electrification offers significant potential for long-term gains.

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Advances in Battery Technology

Improved battery chemistry is reducing risks like catastrophic failures, which should eventually lower insurance premiums.

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Market Maturation

As insurers grow more comfortable with personal EV risks, these trends are expected to extend to commercial fleets, stabilizing premiums.

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Shared Charging Networks

Shared infrastructure is helping reduce range anxiety and improve asset utilisation while lowering upfront investment for businesses.

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Making EV Insurance Work for Your Fleet

To succeed in this transition, fleet managers must adopt a sophisticated approach to risk management.

The key is partnering with brokers who understand EV technology and its unique risks. Tailored policies that reflect specific operational needs, rather than standard EV loadings, are essential.

Most importantly, insurance should be seen not as a compliance necessity but as a strategic enabler of electrification goals. Businesses that adopt this mindset will not only navigate the change but also gain a competitive edge as the market matures.

The electric revolution is here, and though insurance presents hurdles, it’s just one of many challenges in this transformation. By understanding the dynamics and planning strategically, fleet managers can thrive in the electric future.

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