The availability of EV and hybrid vehicle insurance may have come a long way, but can still cost more than insuring vehicles with internal combustion engines

Eight years ago, the chairperson of Drive Electric struggled to find an insurer who would insure electric vehicles (EVs). In contrast today there’s no shortage of insurance providers in New Zealand willing to insure EVs.

Kirsten Corson is the chair of the EV advocacy organisation Drive Electric. She says when she was trying to organise insurance for 100 electric vehicles in a previous job during 2016, it was hard work.

“We struggled to get insurance, no one wanted to insure our fleet,” she says. 

“And we paid a fortune when we did finally convince someone in New Zealand. So we've come a long way from there.”

EVs back then were seen as “too new” for insurers.

“They didn't understand them, they didn't understand the parts and the supply chain. They were really worried that no one would be able to repair them,” Corson says.

“There wasn't a network of repair and maintenance providers that understood them as well. Everyone was a little bit nervous about them in the mainstream world, but now we've got over 100 ,000 EVs on our roads, so, you know, that fear has largely dissipated.”

Now, car insurance for EVs “has improved and the gap has narrowed.”

In interest.co.nz’s car insurance survey undertaken during March, 10.7% of respondents said they owned an EV and 8.4% owned a hybrid.
 
Of the province base of EV and hybrid owners across the country, 36.7% of EV owners in the survey and 36.2% of hybrid owners were based in Auckland.

Interestingly, Canterbury had a slightly higher percentage of fully EV vehicle owners than Wellington but Wellington had more hybrid owners. 

In Christchurch, 16.7% of responses were from EV owners, with 10.6% coming from hybrid owners. In comparison, in Wellington, 15% of responses were from EV owners, while 17% were from hybrid owners.

'Seems to be excessive for EVs'

Some survey respondents who were EV or hybrid owners said they’d been surprised to find insurance for their vehicles more expensive than their previous petrol vehicles.

One person said they had purchased an EV in March 2023 and anticipated the insurance cost would increase compared to their previous 2008 ICE vehicle. But while the old car's insurance was $759 per year, the new EV's insurance currently stands at $1,548.73 annually, more than double the previous cost.

“Seems to be excessive for EVs,” another person commented.

Corson noted the Clean Car Discount had led to “significant” EV growth after its introduction in 2021.

Five years earlier in 2016, the then National Government had announced an Electric Vehicles Programme with a goal of increasing the number of 64,000 electric vehicles on New Zealand’s roads by the end of 2021.

In July 2021, the Labour government introduced the Clean Car Discount which provided a refund to purchasers of low-emission vehicles and was financed by levying a charge on purchasers of high-emission vehicles.

At the end of 2023, the coalition government of National, Act and NZ First which was formed after the 2023 general election, ended the Clean Car Discount for all vehicles registered after December 31st, 2023.

The electric vehicle education website EVDB said at the end of March 2024, there were close to 74,300 fully electric light vehicles and around 31,600 plug-in hybrids, and the first three months of the year had been quiet for the EV market in NZ 

Only 1,083 fully electric vehicles were registered in the March quarter compared to the 7,978 registered in the December 2023 quarter. 

Owners of EVs and hybrids have had to pay road user charges from the beginning of April.

Owners of light EVs are being charged $76 for every 1000 kilometers traveled, which is inline with the costs for equivalent diesel-powered vehicles, while plug-in hybrid vehicle owners now have to pay a reduced rate of $53 per 1000 kilometers. 

Transport Minister Simeon Brown said in January this rate for hybrids had been set to prevent people from being “double taxed” when paying Fuel Excise Duty. 

This partial rate accounts for the average petrol consumption of plug-in hybrids, estimated to be just under 3 liters per 100 kilometers.

Corson told interest.co.nz just over 27% each month of new car sales were electric last year, and we've seen that drop significantly this year because the clean car discount was disestablished on the 1st of January.

This year, EV sales have averaged less than 10% per month due to the discontinuation of the Clean Car Discount, she said.

“The market has decreased significantly,” she said. “We've also seen road user charges come into place as well this month. Unfortunately, the way that the government chose to structure it, pure EV drivers, so fully electric vehicles [are] paying 23% more than petrol drivers.”

On the rise

Ron Mudaliar, Tower's Chief Underwriting Officer, said the insurer has noted “a number of trends” around EV insurance in recent years and in the 2022 year, new policy sales of EVs grew by around 60%. This growth held steady in 2023.

“However, sales of new policies for EVs have reduced from these highs by around 30% since January 2024 in line with the reduction of EV sales in New Zealand,” he said.

“For EVs the cost to repair damaged parts is often higher than for vehicles with an internal combustion engine due to the complexity of the electronics as well as the specialist nature of many of their parts. This means EV insurance can be more expensive than traditional car insurance in some instances.”

Vero NZ, a subsidiary of Australasian insurer Suncorp, said over the last three years, its EV book across all brands had grown by 139%. 

Vero said it had found that while EV policyholders tended to make more claims as newer customers, the severity of these claims was lower than non-EVs in comparable segments with over 100 claims.

“Due to the age and size of Vero New Zealand’s EV portfolio it’s hard to make deep comparisons against our existing motor book.”

AA Insurance’s head of pricing Chris Taylor said the insurer had also seen a steady rise in EV owners seeking cover.

“It is important to note that technology in EVs and other late model cars (such as sensors and radar equipment) carry higher repair costs and complexity. This requires repairers to invest in specialised tools and training so they can carry out quality repairs on these vehicles. These costs can have a flow on effect on the total cost of claims, which in turn can impact customer premiums,” he said.

Taylor added that post-pandemic, one significant supply chain challenge persists: the cost and availability of parts, exacerbated by the rapid expansion of fleet technology. 

This surge in costs and complexity directly impacts repair expenses, leading to escalating claims costs and potentially higher insurance premiums for customers, he said. 

'Vehicles that cost more to repair will have premiums that reflect this'

Alex Geale, IAG New Zealand’s executive manager of sales and service operations, said there was no difference in the way the insurer prices for electric and internal combustion engine vehicles.

“In the last two years, the number of electric and hybrid vehicle policies has doubled. Our data also shows that claim frequency is higher for electric and hybrid vehicles compared to internal combustion engine vehicles,” she said.

Geale said car insurance premiums were affected by external factors such as inflation, part costs and vehicle repair costs, which have increased significantly in recent years. 

“Vehicles that cost more to repair will have premiums that reflect this.”

*This is the third story from our car insurance survey. Thanks to all those who participated in our survey. The first two stories can be found via the links below.

Here are some of the things we learnt from our car insurance survey

‘Up, up and up’; How much premiums have been rising according to our car insurance survey