Why EV Damage Leads To Significantly Higher Insurance Claims

The electronic vehicle (EV) technology makes repairs costly and insurance claims heavier. Recent data showing the average EV repair now costs around Rs 39,000—far higher than petrol or diesel cars.

We take a look at why this happens and what customers should keep in mind.

EVs are relatively expensive, have faster acceleration, lower body weight, and make less noise on the road. Further, there are differences in the vehicle components and their manufacturing costs, for example heavier battery cost and the use of more plastics, specialized repair procedures, etc., which impact the average size of an insurance claim following an accident and thereby impact the premium.

Why EV Repairs Cost More 

“Our data shows that EV repair costs can be 22 per cent to 29 per cent higher than repairs for comparable petrol cars. Its high-voltage battery is the most expensive component. Additionally, EVs often have advanced technology like ADAS features, complex sensors, and high-end electronics that require huge repair bills and specialised labour,” says Paras Pasricha, head- motor insurance, Policybazaar.com.

We anticipate EV premiums will decline after production scales up, repair infra would expand, and battery parts become modular and affordable.

“Considering these factors and the probability of making a claim, this makes insurance policies for EVs relatively costlier than insuring an ICE Vehicle. The difference in premium of the same model of ICE and EV would primarily depend on the IDV of the vehicle and further underwriting factors like location, experience, etc.,” says Dinesh Mosamkar, senior VP - consumer underwriting, TATA AIG General Insurance.

The number of claims in EVs is relatively lower than that of an ICE vehicle. However, when it comes to the severity of an EV claim, i.e., the amount per claim, it is comparatively higher than that of an ICE vehicle. This is mainly due to high repair costs, as repairs require specialized expertise and professionals trained specifically in handling EVs and their components. “EVs are often declared a total loss even after minor accidents, as the insurer is forced to pay the full, high IDV. This inflates the average claim size,” says  Pasricha.

“EVs have intricate electrical systems, high voltage batteries that require specialized expertise and safety protocol,s which lead to higher repair costs compared to an ICE Vehicle,” says Mosamkar. Moreover, key components like the traction battery cost about 50 per cent of the overall vehicle, replacement cost would be significantly higher.

Add-Ons You Should Consider 

Battery protect is a must-have add-on cover as it is the heart of the EV vehicle. In the absence of this cover, if there is water ingress due to heavy rains, the normal policy may not cover.

“There may also not be warranty protection from the vehicle manufacturer. The customer ends up shelling out money from his or her pocket. Other than this, standard add-ons such as zero depreciation, return to invoice, roadside assistance, consumables, key and tyre protect, etc., can be opted for,” says Radhakrishnan.