Why insurance for electric cars (like Tesla) is so expensive

It's not just Tesla anymore; with a range of new EV models from brands like Polestar, BYD, BMW, Hyundai, Lexus, and plenty of others hitting the roads, it's clear that the demand for EVs in Australia is growing.

But why is car insurance so high for Teslas and other EVs? We’ll explore the reasons behind it, and also share some positive news that will offer some reassurance if you’re considering an electric vehicle.

There are a few reasons why insurance premiums can be higher for EVs. Here's why:

• Repair costs. EVs contain a lot of high-tech gear and specialised components like the battery and high-tech safety features. These can cost a lot to repair or replace due to underdeveloped supply chains, lack of specialised repair centres and other factors. 
• Limited market data. A lot of what determines your premium is based on risk analysis of historical data, including driving habits and accident rates. There’s simply not as much data on EVs, so the safest bet for insurers is to expect the worst.
• Higher initial vehicle value. EVs are simply more expensive than the average vehicle, which means a much higher expense for insurers should you total your vehicle.
• Specialised training and equipment. This ties in with repair costs. Currently, there aren’t nearly as many EV repair centres as there are for regular cars. This means those EV specialists can charge your insurer a pretty penny.

Now you have some idea why it generally costs more to insure a Tesla or other electric vehicle. But here's the silver lining: as more people adopt EVs, we should see prices start to drop. With stronger supply chains, more repair centres, and better data, the future looks promising.

We don’t have a crystal ball, but it’s safe to say that as more and more EVs hit the streets, a number of factors should start to put downward pressure on the prices. 

For example, if we start to see more and more repair centres upskilling their staff and offering EV servicing, those repairers currently charging a premium will be forced to make their prices more competitive. This will translate to lower costs for the insurers, who in turn will need to stay competitive by passing those savings onto you.

One insurer has already started to develop some efficiencies. KOBA insurance is Australia’s first dedicated EV insurer, offering a number of unique features EV owners have been missing out on. It’s too early to say whether the introduction of their EV policy will bring prices down; there are a lot of macro and micro forces that determine prices, including your own unique circumstances.But it’s efficiencies like these that should start to have some impact.

We believe that as the industry evolves and our understanding of EV-specific needs grows, these efficiencies will become increasingly evident in terms of cost-effectiveness," said KOBA’s chief executive Andrew Wong.

So we’ll have to wait and see, but KOBA is definitely one to keep an eye on.

Despite the bigger bill, there are ways you could lower car insurance costs for your electric vehicle.

• Opt for a higher excess. Opting for a higher excess could reduce your car insurance premiums. Just be aware that when claim time does come around, you’ll have to pay more out of pocket.
• Shop around. Comparing car insurance quotes seems like a no-brainer, but you’d be surprised at how many customers buy the first policy they read. Head over to our car insurance comparison hub to get started.
• Drive safely. If you can prove you’re a reliable driver, car insurance providers will often offer a “no claims discount” to reward your safe driving. 
• Bundle your insurance coverage. Taking out multiple policies from the same provider, such as car and home insurance, could net you good savings. 
• Drive less. EVs particularly suit city drivers who may only need to go limited distances. This reduces the amount of time on the road (as well as how often you need to recharge), which reduces your overall risk in the eyes of the provider. Pay-as-you-go car insurance policies often offer special discounts to drivers who only range between 1,000-15,000km per year.

If you’re looking for more inspiration on how to keep car costs down, check out our complete guide to cheap car insurance.

Ultimately, the best car for an individual person will depend on their needs, budget, and circumstances. However, there are enormous cost benefits to owning an electric vehicle, let alone the benefits to the environment.

According to the Electric Vehicle Council (EVC), the average petrol car costs about $14 per 100km, while the average EV only costs $4 per 100km. That's an almost 75% difference in price!

Customers with solar panels installed in their homes could find the cost of their recharges virtually free if they charge during daylight. Complimentary recharge stations at some grocery stores also makes it fairly easy to stay on the go.

Meanwhile, the simplicity of EV engines compared to internal combustion engines (20 parts vs. over 2,000) means repairs are both far less likely to happen and far simpler to execute in practice, even if parts may take a while to get here.

Looking forward to the future, EVs present a promising alternative to petrol cars. As demand, knowledge, and infrastructure around them grows, drivers could be rewarded for their eco-friendly purchase.

Curious about car insurance? Compare a selection of policies below.