The Rising Insurance Costs of Electric Vehicles: A Specialized Challenge

Electric vehicles are quickly becoming a mainstay in the automotive industry. However, as their adoption grows, so too does the scrutiny around the cost of insuring them.

While EVs bring advantages in environmental impact and efficiency, they present unique challenges in repairability and parts availability. Those challenges directly impact insurance premiums—premiums that sometimes shock new EV buyers. Claims adjusters and other industry professionals are now wrestling with the nuances that distinguish EV insurance costs from those of internal combustion engine (ICE) vehicles.

Unexpectedly high insurance premiums for electric vehicles are not the result of greed or price gouging. Instead, the factors contributing to the elevated insurance costs for EVs are both real and rational. Understanding the reality and how the insurance industry is adapting involves a dive into the construction techniques, materials and technologies that separate EVs from their ICE counterparts. Once those factors are understood, claims adjusters will be better equipped to answer the consumer questions that are bound to come.

Battery Technology

The heart of every EV is its battery pack, an essential yet extraordinarily expensive component. Unlike an ICE vehicle’s engine, which is rarely damaged in minor accidents, the placement and vulnerability of EV batteries can make them more susceptible in collisions. The cost to repair or replace a damaged battery can often lead to total losses, as these components represent a substantial percentage of the vehicle’s value. For example, a battery pack for the Ford F-150 Lightning can cost upwards of $50,000, which makes many repair jobs uneconomical.

If an ICE vehicle’s engine is damaged or even destroyed it can typically be repaired or replaced for far less than the replacement cost of the typical EV battery pack. So, the elevated cost of batteries might appear to be the biggest culprit in spiraling EV insurance costs. Yet, it’s worth noting that battery damage accounts for less than 1% of claims involving EVs. This statistic highlights a paradox: while battery packs are costly and critical, they’re not the primary factor in elevated repair costs.

Repair Complexity

Electric vehicles are engineered with distinct designs that improve performance and efficiency, but also contribute to higher labor costs during repairs. EVs incorporate high-voltage systems that require specialized training and equipment for technicians to manage safely. Unlike traditional internal combustion engine vehicles, EVs require repair procedures that demand adherence to rigorous safety protocols, increasing both the time and expertise needed for repairs.

For example, Ford requires the removal of the F-150 Lightning’s battery for something as routine as a paint job—a process that alone can add hours of labor costs. These safety and engineering nuances make even minor repairs more time-consuming and costly, increasing the overall severity of repair claims.

Material composition also plays a crucial role. To counteract the substantial weight of their batteries, many EVs use lightweight materials such as aluminum and composites. While these materials improve efficiency and range, they are significantly more expensive and challenging to repair compared to traditional steel. For instance, dented aluminum panels often require replacement rather than repair, driving up costs.

Additionally, EVs often include sacrificial components designed to absorb crash energy, compensating for the lack of a conventional engine block that performs the function in an ICE vehicle. This is evident in models like the Ford F-150 Lightning, where strategically placed crash absorption parts add safety but also complexity and expense.

OEM Parts

When it comes time to repair a conventional ICE vehicle, many parts can be sourced from aftermarket suppliers. The industry has a century-plus history of utilizing non-Original Equipment Manufacturer (OEM) parts that has helped moderate the cost of repairs. But because EVs are still relatively new and rare, non-OEM replacement parts are difficult to find.

OEM parts, typically more expensive than aftermarket and recycled parts, dominate EV repairs due to the lack of alternatives. This reliance on parts supplied by the individual manufacturers inflates repair bills compared to ICE vehicles, where aftermarket and recycled parts are much more readily available.

Further, the interconnectivity of EV’s internal systems compounds the issue. Damage to one component often disrupts unrelated systems, requiring diagnostics and recalibration. For example, a minor side-impact collision might trigger advanced driver-assistance systems (ADAS) faults, adding diagnostic labor and part replacement costs to the total repair bill. These cascading effects are less common in ICE vehicles, which are often regarded as “less sophisticated.” While that notion is debatable, what is not debatable is the fact that EVs feature integrated systems that are efficient when they work but costly to fix or replace when they don’t.

Real World Examples

A look at closely related vehicles demonstrates the factors cited quite clearly. According to analysis provided by Ryan Mandell, director of claims performance at Mitchell, the average total repairable estimate for a Ford F-150 Lightning battery-electric is $7,133, while for the very similar conventional F-150 it is $$6,200. The Lightning repair requires a higher percentage of OEM parts (87.2% versus 73.6%) and the average labor rate for the BEV repair is $63.20 compared to $60.60.

The analysis of battery-electric and conventional Hyundai Konas delivers similar results. The total average repair cost of the Kona BEV is $6,372 while it is just $5,047 for the non-BEV Kona. The Kona BEV also requires a higher percentage of OEM parts (89.3% versus 74.3%), and the average labor rate on the BEV repair is $65.20 compared to $59.10.

Consumer Behavior

Driver behavior plays an understated yet significant role in shaping the insurance landscape for electric vehicles. Renowned for their instantaneous torque and rapid acceleration, EVs offer thrilling performance that can sometimes encourage more assertive or aggressive driving styles in certain individuals. While this characteristic could theoretically influence accident rates, current data does not definitively show that EVs are involved in accidents more frequently than their ICE counterparts. As automakers continue to introduce high-performance versions of their EV models, this could change as EVs emerge as the “hottest” cars on the market.

Rather than performance-inspired reckless driving, the primary culprit causing elevated insurance premiums for EVs lies in repair severity rather than accident frequency. Even relatively minor collisions can lead to disproportionately high costs due to the unique engineering and repair challenges associated with EVs. For instance, and EV involved in a parking lot fender-bender at very low speeds can be much more expensive to repair than a similar ICE vehicle. While spectacular EV crashes generate nationwide headlines, it’s the everyday mishaps that really drive up EV insurance costs.

Narrowing the Cost Gap

Although electric vehicles continue to face unique repair challenges, the gap in insurance costs between EVs and ICE vehicles is steadily narrowing. One significant factor behind this shift is the declining price of EVs. Leading manufacturers, such as Tesla, have aggressively reduced the prices of high-volume models like the Model Y. These reductions not only make EVs more accessible to a broader audience but also lower their average market value, which directly impacts insurance premiums by reducing potential claim payouts.

Improved manufacturing efficiency also plays a pivotal role in this trend. Over time, advancements in battery production have reduced costs, allowing automakers to design new EV models with cost-saving measures without compromising performance. This progress has been further supported by the expansion of EV model offerings. With a growing array of affordable options entering the market, the focus has shifted away from premium vehicles, helping to normalize insurance costs. The diversification of EVs has also provided insurers with a broader dataset, enabling more accurate pricing models.

While these developments have begun to mitigate the pronounced insurance premium disparity between EVs and ICE vehicles, significant differences remain. Repair complexity, limited aftermarket parts availability, and high material costs continue to challenge insurers and consumers alike. However, as the EV market matures, ongoing innovations in manufacturing, design, and repairability may further close the gap, bringing EV insurance rates into line with those of conventional vehicles.

Dicken is director, material damage claims for Mercury Insurance. He has 39 years of experience in the insurance physical damage and collision repair industry.