The Indian electric vehicle (EV) market is expanding rapidly, fueled by rising fuel costs, government incentives, and increased environmental awareness. However, a common concern for prospective EV owners is the higher insurance premiums compared to traditional gasoline-powered vehicles. This article explains the reasons behind this difference.
Car insurance costs are influenced by factors like engine capacity, car model, and usage. Third-party insurance can start from ₹2,000, while comprehensive policies may range from ₹10,000 to ₹20,000 or more.
EV insurance rates are primarily determined by the vehicle’s kilowatt (kW) capacity, with annual costs between ₹1,780 and ₹6,712, or potentially more for longer terms (e.g., ₹5,543 to ₹20,907). The car’s make and model also affect insurance rates.
A key factor in higher EV insurance is the battery. It often accounts for 30-40% of the vehicle’s total cost. Battery replacement after damage can cost hundreds of thousands of rupees.
For example, replacing an EV battery could cost ₹4-6 lakh, while gasoline engine repairs are typically less expensive. This higher repair cost leads insurers to perceive greater risk and charge more.
Limited spare part availability is another factor. Unlike gasoline cars, EV parts aren’t widely available in India.
Repairing damage to an EV’s fender, control module, or battery pack can be expensive.
The limited number of dealerships and service centers also increases repair costs. Insurers adjust premiums to cover these expenses.
EVs often feature advanced technology such as ADAS, smart connectivity, digital displays, and automatic braking. While these enhance safety, they also increase repair costs.
Even minor accidents can lead to repair bills in the hundreds of thousands. Insurers consider these risks when setting premiums.
Instances of EV battery fires have increased risk perceptions for insurance providers. Battery failure or fires can require complete vehicle replacement.
Additionally, specialized training and tools are needed for EV repairs, which are not always available. These factors contribute to higher insurance costs.
The uncertainty around EV resale value also plays a role. The resale market for gasoline cars is well-established, but the future value of EVs, particularly regarding battery life, is less predictable.
Declining battery performance can significantly reduce vehicle value, leading insurers to set higher premiums.
The higher initial cost of EVs, even with subsidies, affects insurance rates. Insurers base premiums on the car’s on-road price, and higher EV prices lead to higher premiums.
The EV insurance market in India is still developing. Insurers have limited data on EV performance, maintenance costs, and long-term damage patterns.
This lack of data leads to higher premiums to manage risk. It acts as a financial buffer for the insurers.
While EV insurance is currently more expensive, this is expected to change. As the EV market grows, premiums should decrease.
Government support for green mobility, potentially through insurance tax breaks, could further reduce costs. Advancements in battery technology, leading to lower repair costs and improved safety, will contribute to more affordable insurance. As the EV network and demand increase, EV insurance is expected to become more cost-effective.
