According to a new analysis, owners of electric vehicles in Canada will notice a rise in insurance costs in the near future.
The assessment, conducted by credit rating agency Morningstar DBRS, indicates that insurance companies in the United Kingdom, Europe, and parts of the United States, where electric vehicle adoption is higher than in Canada, are beginning to feel the effects of the transition to electric vehicles on claim costs.
According to Victor Adesanya, co-author of the paper, the average insurance premium for electric vehicles in Canada has not increased considerably when compared to traditional vehicles powered by internal combustion engines. The situation remains unchanged, and the reason is that electric vehicle adoption in Canada is declining in comparison to Europe, the United States, and other countries. So, since there are few electric cars, this is not a problem right now, but it may become one in the future.
According to the survey, the move to electric vehicles in Canada has been slower than in the United Kingdom and Europe, where sales have increased dramatically since 2019, aided by government incentives for consumers and physical investment in charging infrastructure.
Ottawa has mandated that all new automobiles sold in Canada be zero-emission by 2035.
Within two years, 20% of all automobiles sold must be zero-emissions, and while the government has outlined a plan for achieving this goal, critics argue it is unachievable.
According to Statistics Canada, electric vehicles accounted for 3% of all light vehicle registrations in 2022, up from 2.3 percent in 2021.
In 2022, Canada's total number of registered road vehicles was 26.3 million, with service vehicles accounting for 91.7% of the total.
Because electric vehicles are new to the market, insurers here do not have enough historical claims data to adequately assess lifecycle durability and maintenance and repair costs, according to the Morningstar analysis.
However, he outlines numerous reasons why Canadian EV owners can expect insurance premiums to climb in the future.
"In general, it costs more, which is why it will be more expensive to insure, because the higher the value, the more it will cost to replace if it is damaged or stolen," explained Adesanya. "This is the risk that the insurance company will take into account when setting its rates."
According to the survey, electric vehicles have fewer replaceable parts than gasoline-powered vehicles, implying lower maintenance expenses.
However, the paper warns that other issues, such as the cost of changing battery packs, the availability of spare parts, and the scarcity of technicians, would affect the price of repairs and, ultimately, insurance premiums in the short run.
