Last Updated: 2/27/2024

Issue: Unlike traditional internal combustion engine (ICE) or gas-powered vehicles, electric vehicles (EVs) are powered by an electric battery. Hybrid cars are powered by a combination of the electric battery and ICE, usually falling back on the ICE when the electric battery runs out of charge. EVs may cost more to insure than ICE vehicles for various reasons. EVs are generally more expensive to purchase than gas-powered vehicles, their batteries are expensive to repair and replace, and a limited number of repair shops specialize in EV repair.

Background: With the number of EVs on the road expected to increase by 21% in 2024, concerns regarding insurance regulations and costs become more pressing. On average, EVs cost up to $44 more to insure per month than gas-powered vehicles, with the most expensive to insure being Tesla’s Model Y and Model 3.

There are several reasons behind this increase in cost, including scarcity of repair shops, costlier repairs, battery fires, pedestrian safety due to quietness, cybersecurity threats, and automated driving features (when applicable). Because EVs have risen in popularity so recently, the replacement part market and availability of specialized labor to repair them have not kept pace with growth. While the fire risk of electric vehicles is lower than that of ICE and hybrid vehicles, the complexity of the fire and repair is more extensive. In short, EVs and their parts are scarcer and more expensive in general, resulting in higher insurance rates. Additionally, electric batteries are dangerous to repair and often require a specialist. In many cases, replacing an electric battery is cheaper than repairing one, despite the battery representing “up to 50% of the EVs price tag.”

Once EVs become more common, parts are more easily accessible, and they gain a more extensive claim history, their insurance rates may drop because they have lower claim frequencies than ICE vehicles of the same make and model. In December 2020, the Highway Loss Data Institute (HLDI) published an article that found the average payments for total losses for EVs are higher than conventional vehicles, but the difference has diminished over time. As of 2019, the difference is $1,810 compared to nearly $14,000 in 2013. As more people purchase and drive EVs, there might be lower claim frequencies, and the difference between average payments for total losses for EVs (while higher than those of conventional vehicles) has diminished over time. However, due to the price tag attached to EVs, public interest/intent to buy has slowed in recent years.

Status: The NAIC's Property and Casualty Insurance (C) Committee is charged with monitoring and responding to issues associated with the property/casualty (P/C) and auto insurance markets in the U.S. The Transparency and Readability of Consumer Information (C) Working Group is charged with updating and developing a web page and mobile content for A Shopping Tool for Automobile Insurance