How Hybrid and Electric Vehicles are Transforming Auto Insurance

Gas prices are higher now than they’ve been in a long time, and they only seem to be going up. Many people are making the shift to hybrid and electric vehicles, in part thanks to their “trendiness,” but also their fuel economy, their environmental-friendly features, and their advancements in performance over conventional gas-powered vehicles.

So, as you can imagine, there’s very little question as to why many drivers nowadays are choosing to swap out their old gas-powered vehicles for their hybrid or electric variations.

People will always need insurance. That’s sort of the beauty of the insurance industry – its stability, but also its ability to evolve with the trends. As the world shifts its sights over to electric and hybrid vehicles, the auto insurance industry may have to change to reflect the new change. Let’s dig into how this transition might look.

What are hybrid cars and electric vehicles?

An ordinary car, or at least the type of vehicle you see most often on the roads nowadays, is propelled by a gas-powered engine. Gasoline-powered cars will typically use spark-ignited internal combustion engines, where fuel is pumped into a combustion chamber, and then combined with air. This mixture is then ignited by a spark from the vehicle’s spark plug.

For the longest time, gas-powered vehicles were the main means of getting around. But, things are changing. Electric vehicles and hybrid vehicles (which are combinations of gas-powered vehicles and EVs – a popular middle ground) have been quietly evolving in the background since their inception in 1996 and 1997, respectively.

Electric vehicles, on one hand, are vehicles that are entirely propelled by an electric propulsion system, with all intents to achieve better fuel economy than your standard vehicle.

A hybrid vehicle, on the other hand, is a vehicle which combines both a gas-powered car and an electric vehicle, using an electric propulsion system that allows the vehicle to propel itself until its battery has drained, at what point the car will switch to its internal combustion engine.

The whole point of hybrid and electric vehicles was to cut down on CO2 emissions from regular vehicles. There’s no technology that exists in this day and age which can eliminate CO2 emissions, so the best we can really do is try to reduce our emissions. Hybrid and electric vehicles might one puzzle piece of a larger solution.

How do you insure an EV/HEV?

Besides their means of propulsion, there’s actually very little difference in EVs and hybrid electric vehicles, so insuring them works pretty much the same way. Now, due to their novelty, some hybrid and electric vehicle variations are a little more expensive than their gas-powered alternatives – (a Tesla Model X averages $150,000 per unit!) – so drivers may choose to purchase add-ons to enhance their coverage and aptly insure their fancy vehicles, but otherwise it’s no different.

Insurance premiums are reflective of a driver’s risk, and a hybrid or electric vehicle isn’t driven any differently than a gas-powered vehicle. Some fancier models might pose a higher risk of theft or vandalism, but that comes down to the individual model and make, and not electric vehicles or hybrid vehicles as a whole.

What is a green vehicle discount?

One key difference to note with electric or hybrid vehicles is that many insurers will incentivize customers to “go green” by offering a green vehicle discount. In other words, insurers will discount drivers who own electric or hybrid vehicles by up to 5-10%. This isn’t a tremendous discount, but it’s certainly worth noting. For some higher-end electric vehicles, this won’t offset the upfront cost, but for average-priced HEVs and EVs, a small discount can go a long way.

What will auto insurance be like in 10, 20, 30 years?

With many countries jumping ship from gas-powered vehicles in favour of electric/hybrid ones to better the environment, there’s no doubt that the usage of these vehicles will increase exponentially in the next several decades.

Canada’s gas prices are unfortunately on the rise and have been rather unpredictable over the course of 2019-2023. The intrigue in hybrid and electric vehicles is guaranteed and will likely continue to grow as these vehicles become more accessible and more widely available. As demand increases and availability for parts increases, costs will likely go down.

But will auto insurance change with the inclusion of these vehicles? Probably not. They’ll likely be less expensive to insure, if anything, as parts for them becomes more widely available and it becomes easier to repair and replace them with spare parts.

One thing that may actually be affecting the way auto insurance works is not electric vehicles, but autonomous vehicles. Autonomous, or driverless vehicles are vehicles that do not require a driver to be directed and are instead controlled entirely by AI. This may mean that the way fault is determined will change, since “drivers” won’t really be a thing – but manufacturing companies might? Until we start seeing self-driving/driverless/autonomous vehicles on the roads, we can’t know for sure what kind of an impact there will be.

If you drive a hybrid or an electric vehicle, connect with an Excalibur Defender. We’ll be happy to discuss how you can get the best rates for your eco-friendly car.