Why electric car insurance costs so much and how to save money there

Tesla has become synonymous with high-end environmentally friendly electric vehicles, and their products are extremely popular everywhere, including Hong Kong. To encourage drivers to switch to this type of electric vehicles, the Hong Kong government has launched a "One-for-One Replacement" Scheme, providing up to HKD $250,000 in tax relief for the Motor Vehicles First Registration Tax. The signs are clear that electric vehicles will become mainstream in the foreseeable future.

If you are new to electric vehicles, and want to know more about their car insurance, our latest electric vehicle infographic provides a concise and easy-to-understand summary, including the coverage of electric vehicle insurance, the reasons such insurance is hard to secure, and how you can lower your premiums.

What does electric vehicle insurance cover?

Both electric vehicle and private car insurance are divided into third-party insurance and comprehensive insurance, and the coverages are the same.

• Third-party insurance compensates third parties for personal injury, death, and property damage and loss in a road accident.

• Comprehensive insurance compensates the owner for damage to their vehicle and their medical expenses, in addition to providing the coverage of third-party policies.

• Electric vehicle drivers can purchase additional coverage for their personal charging equipment.

Electric cars are more expensive and costlier to maintain than petrol- and diesel-powered vehicles. However, as of August 2019, there were already as many as 12,195 electric cars registered in Hong Kong, according to official figures. Although this represented only 1.8% of the total number of private vehicles in Hong Kong, and Hong Kong still lagged behind other cities such as Beijing (2%) and Oslo (36%) in this regard, this was still positive growth. After all, there are only 2,968 electric vehicle charging stations in Hong Kong. The Environment Bureau has made plans to increase the number of electric vehicle charging stations in the future to cope with future increases in demand.

The 'personal charging equipment additional coverage' came about because some electric vehicle owners use their own personal chargers - the original charging plugs are of an older type and take longer to fully charge their vehicle.

When securing electric vehicle insurance, pay attention to whether the 'charger liability coverage' covers only the original charger. If so, you may consider purchasing 'personal charging equipment additional coverage'.

Related article: Tesla's insurance costs, maintenance costs, and charging stations distribution

Why is insurance for Tesla electric vehicles so costly?

Electric vehicle insurance premiums are between 30% to 150% higher than for gasoline vehicles, and there are a number of reasons for that:

1. Expensive parts

Electric vehicles, especially Tesla vehicles, are already expensive themselves, and most parts have to be shipped from the United States, so the choice of aftermarket parts is extremely limited. Moreover, repairs can only be made at designated service centers and authorized body shops. This stands in sharp contrast with gasoline vehicles, the repair jobs on which can be handled by even the run-of-the-mill repair shop. With this lack of competition, replacement parts and labor are often more expensive than for conventional vehicles. Simply replacing the windscreen may set you back by HKD $20,000. Last but not least, Tesla cars have a one-piece body shell made of aluminum alloy, and even a slight collision requires the entire body shell to be replaced.

2. Closed market

Tesla vehicles can only be repaired by authorized auto repair shops, and the high cost of parts prevents new repair shops from entering the market, effectively exacerbating the vicious circle.

3. The better performance of electric vehicles means higher accident risks

Compared with diesel vehicles, electric vehicles are capable of faster acceleration. Even experienced drivers may take some time to get used to the performance of electric vehicles. In emergency situations, this strong performance may actually lead to accidents if the driver fails to stop in time or steps on the “gas” pedal in error. In other words, the stronger performance of electric vehicles may actually increase the risk of accidents.

Will insurance for Tesla electric vehicles become more affordable over time?

Although electric vehicle insurance premiums are rather high now, we are optimistic they will gradually come down for the following reasons:

1. As electric vehicles become more and more popular, more and more drivers will get used to their performance characteristics, and this should lower the rate of accidents;

2. Tesla’s Model 3 no longer uses a one-piece body shell, and this will reduce repair costs;

3. Many garages can repair Tesla vehicles now, and they often charge less than designated repair centers do;

4. Tesla has added a large factory in Shanghai. The production, and the parts and repair costs should come down, and this should cause insurance premiums to come down too;

5. Tesla will sell its own insurance coverage in the future, and monthly premiums will be collected based on "big data" such as the driver's real-time driving behavior.

How can I save on my Tesla electric car’s insurance premiums?

Our infographic also explains why electric car insurance is more expensive, and offers practical tips for reducing your premiums, including

1. Secure third-party insurance only

Although a comprehensive policy offers better protection than a third-party policy does, if you want to save on premiums and are confident about your driving skills, you may consider securing only third-party auto insurance.

2. Drive less

Since electric vehicles can more accurately track the vehicle’s mileage, reducing your mileage can help you avoid having to pay a "high mileage deductible" when claiming compensation (if your Tesla electric vehicle has an average daily mileage of >130 kilometers over the past 12 months, you will have to pay the high mileage deductible when making a claim).

3. Make sure you are entitled to the 60% no-claims discount (NCD)

Saving 60% with NCD can greatly reduce the cost of your electric vehicle insurance.

4. Probationary and inexperienced drivers should be patient

If you are a probationary driving license (P license) holder or have less than two years of driving experience, we suggest that you accumulate enough experience before buying a car. Otherwise, it will be very embarrassing if you cannot get insurance after paying your deposit.

5. Propose a driver restriction clause to your insurer

You may propose a driver restriction clause to your insurer, restricting coverage to only when your vehicle is being driven by its owner or another registered driver, so that there is room for further premium reductions.

6. Shop around

Kwiksure can help you compare the quotations from more than 60 insurers in one go, and find the most affordable and suitable car insurance plan.