Increased Insurance Costs Could Derail the EV Revolution

Will increased insurance costs derail the electric-vehicle revolution? Perhaps.

Here are some of the reasons to consider, why it might. If you remember that car-carrier ship that caught fire and sank in the ocean in early 2022? The Felicity Ace, operated by Mitsui OSK Lines, took 3,000 Porsches, Audis, Bentleys, and Lamborghinis to the bottom of the Atlantic with it.

As of recent, Mitsui OSK Lines has filed a lawsuit against Porsche seeking 30 million Euros in damages, blaming the fire on the lithium battery in one of their electric vehicles. Of course this will never be reported on the mainstream media.

Nearly 500, 498 electric vehicles to be exact, and over 3,200 other vehicles, including 350 Mercedes Benz, were bound for Egypt on the Fremantle Highway when one or more of the EVs caught fire, costing at least one seaman his life, and injuring several others. Curiously, the Dutch coast guard had initially reported that only 25 of the vehicles were battery-electric models.

On a global scale, 3,000 vehicles are but a drop in the bucket, and in insurance terms, the loss of one 18,500–ton transport ship and one human life is only so much. We also want to note that all the wounded survived, despite broken bones, burns, and respiratory problems. To compute a total cost, the ecological devastation would also have to be factored in, along with the cost of rescue, firefighting, and salvage operations.

But all in all, this was a freak accident, a one-off. This stuff never happens… Right?

Why does this matter? This cargo ship is just one of several that have caught fire and burned over the past two years. While this could result in a major environmental disaster if a ship sinks, firefighters and salvage crews are working to keep it afloat and extinguish the fire so it can be brought into a facility for reclamation. The International Maritime Organization plans to evaluate new measures for ships transporting electric vehicles in light of the growing number of fires on cargo ships

The port authority assured reporters that no EVs numbered among the 5,000 vehicles (bound for Africa) on board, but just imagine if the fire had begun with the ship far out at sea. Or imagine the horror should an EV fire break out on a ferry boat carrying hundreds of vehicles and thousands of passengers. Or in an underground parking garage in a New York highrise?

Automakers have largely replaced steel and metal with plastic, and a huge fire could unleash immeasurable quantities of synthetic chemicals into the atmosphere from the burning plastic. A total capsize would send millions of pounds of debris and spilled motor oil (from the non-EV autos) to the sea floor along with any toxic flame retardants. The impact on sensitive marine life would not be known for years.

But let’s look at the bigger picture. Massive fires are not the only insurance concern with EVs. The New York Times recently reported the sad story of a Rivian owner whose electric pickup truck was involved in what would normally be considered “a minor fender bender.” The owner’s insurance company gladly offered to pay about $1,600 for the repairs, but the certified repair shop produced a bill for $42,000; about half the cost of the vehicle. This is because of the way they are constructed with the part of the chassis housing the battery being an integral piece of the structure.

Insurance companies are having to write off EVs with just a few miles if damaged. This is leading to higher premiums because of the many EVs for which there is no way to repair or assess even slightly damaged battery packs after accidents. EVs, according to Consumer Reports, may not withstand an accident as well as traditional gasoline-powered vehicles. EV batteries are vulnerable to damage, and with any indication of a compromised battery, insurance companies will likely declare an EV crash a total loss. This puts those EVs and their batteries in junkyards to degrade over time and hopefully not leak the chemicals or catch fire.

The higher costs for auto insurance only add to the already-higher costs of purchasing an EV, then procuring a personal charging station and spending more money to upgrade home wiring boxes especially for older homes.

As automakers continue to lose money on EVs and consumers worldwide continue to prefer the vehicles they have learned to trust over decades, will EV mandates fall by the wayside. We shall see what buyers want and if they are willing to switch or not.

New safety protocols are now in place at ship yards in case of a yard fire. However, the cost to insure electric cars continues to rise for multiple reasons. When insurance companies set their rates, they’ll look at claims that have been paid for similar cars, among other things, and set their prices. It comes as all motorists face soaring insurance costs, with prices said to be at an all-time high.

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Lauren Fix, The Car Coach is a nationally recognized automotive expert, media guest, journalist, author, keynote speaker and television host. A trusted car expert, Lauren provides an insider’s perspective on a wide range of automotive topics and safety issues for both the auto industry and consumers. Her analysis is honest and straightforward.