What the US car insurance industry really thinks about EVs – and how to get the best policy
This is what the US car insurance industry really thinks about EVs, how it affects your premium, and how to choose an insurance company for your EV that really will have your back if you need help.
Can insurance companies embrace change?
A recent white paper by the University of Illinois Urbana-Champaign and Argo Group, an underwriter of specialty insurance products, asserted that EV and energy storage battery factories offer a great opportunity for insurers. That’s because battery-making facilities “tend to be well-funded, low-risk enterprises with plenty of loss data to analyze.”
The white paper’s recommendations for insurers are also applicable in the EV insurance sector. It suggested that insurance companies refine their ranking systems used to determine favorability; ask for and engage with feedback from customers on what insurance products they need the most; and continue to model and compile new loss data across emerging industries.
And because EVs are rapidly being adopted in the US market, insurers need to also rapidly adopt change. Alex Hindson, the group chief risk & sustainability officer at Argo Group, said to Electrek:
Insurance is an industry that has a problem with innovation. It’s all based on data and appetite for risk. So if insurance companies don’t understand something, they’re cautious.”
Gas cars vs. EVs
Electrek also spoke with a former claims director of a top five insurance company who asked to not be identified, so we’ll call him John Smith. He explained the current state of the US car insurance industry for context:
The US car insurance industry is hurting right now – losing a lot of money – because of COVID, because that’s when car production stopped. It’s difficult to obtain parts for vehicles due to supply chain issues. There’s also a chip shortage for new cars. So what that’s doing is raising the used car market prices by about 40%.
If you have an accident in a used car, it costs the insurance company 30-40% more to repair it due to the cost of parts and labor.
Insurance companies are trying to raise their rates to be profitable, and they’re throwing electric vehicles into this because they’re currently taking a bath. They actually don’t want to write new policies because they’re losing money.
And Hindson explained why some car insurance companies don’t offer competitive premiums for EVs:
If an insurance company offers high premium for electric vehicles, it’s for one of two reasons: They either don’t know what they’re doing and price high for uncertainty, or they do know what they’re doing and don’t want to do it.”
In other words, car insurance companies exercise caution if they don’t understand something.
Gas cars often have lower insurance rates, and it’s not because they’re safer. It’s because there’s an enormous amount of data on gas cars that insurance companies can tap into. They’re a known quantity.
But some insurers have decided they want to pursue the emerging EV market, so they’re gathering their own data. So if their prices are more competitive, it may be because they’re building more of the market share.
Neither Hindson nor Smith cited EV fires as a risk factor for insurance companies. Hindson also noted that if an EV gets into an accident, it’s more likely to be declared totaled due to the weight and expense of the battery.
How to get the best car insurance policy for EVs
Some insurance companies are trying to partner with EV companies, and specifically with Tesla, because EV makers have the background knowledge and data they seek.
Teslas need to be repaired by certified Tesla locations, so it takes a lot longer to do the repairs because they’re backed up. When it comes to non-Tesla EVs, many dealers require you to come to their facilities.
The average length of a car rental when your car is being repaired, Smith explained, is between 12-15 days. For Tesla drivers, it averages about 20-25 days. So it costs the insurance company about $36 per day on average for a rental car.
So the cost of premiums has more to do with repair bottleneck and the limited number of facilities to do the repairs than the car’s safety rating.
Smith shared the best way for EV owners to get a reasonable premium and good coverage:
Shop around, because so many insurance companies have a better EV book than others. Progressive and Allstate, for example, are good at using technology to understand data – they put something in your car to better understand your driving habits, and that brings down the premium. [Editor’s note: Smith did not work for Progressive or Allstate.]
Choose a company who wants to embrace and better understand electric vehicles.
When you’re shopping around, ask the insurance company, “Are you partnered with electric vehicle repair facilities?” If they’re not, move on to the next company. In the long haul, it will so much easier to repair if you have an accident.
Hindson also echoed this sentiment, advising that drivers seek insurance companies that use telematics, because car insurance companies love data. And data will eventually help them catch up.
Hindson said:
[The insurance industry] can’t do well by excluding things. We can’t win by playing defense. The problem will solve itself with time.”
Smith echoed this sentiment:
Driving an EV has so many positives. The world just needs to catch up.”
Photo: Tesla
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On today’s fleet-focused episode of Quick Charge, we talk about a hot topic in today’s trucking industry called, “the messy middle,” explore some of the ways legacy truck brands are working to reduce fuel consumption and increase freight efficiency. PLUS: we’ve got ReVolt Motors’ CEO and founder Gus Gardner on-hand to tell us why he thinks his solution is better.
You know, for some people.
We’ve also got a look at the Kenworth Supertruck 2 concept truck, revisit the Revoy hybrid tandem trailer, and even plug a great article by CCJ’s Jeff Seger, who is asking some great questions over there. All this and more – enjoy!
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Thanks to Trump’s repeated executive order attacks on US clean energy policy, nearly $8 billion in investments and 16 new large-scale factories and other projects were cancelled, closed, or downsized in Q1 2025.
The $7.9 billion in investments withdrawn since January are more than three times the total investments cancelled over the previous 30 months, according to nonpartisan policy group E2’s latest Clean Economy Works monthly update.
However, companies continue to invest in the US renewable sector. Businesses in March announced 10 projects worth more than $1.6 billion for new solar, EV, and grid and transmission equipment factories across six states. That includes Tesla’s plan to invest $200 million in a battery factory near Houston that’s expected to create at least 1,500 new jobs. Combined, the projects are expected to create at least 5,000 new permanent jobs if completed.
Michael Timberlake of E2 said, “Clean energy companies still want to invest in America, but uncertainty over Trump administration policies and the future of critical clean energy tax credits are taking a clear toll. If this self-inflicted and unnecessary market uncertainty continues, we’ll almost certainly see more projects paused, more construction halted, and more job opportunities disappear.”
March’s 10 new projects bring the overall number of major clean energy projects tracked by E2 to 390 across 42 states and Puerto Rico. Companies have said they plan to invest more than $133 billion in these projects and hire 122,000 permanent workers.
Since Congress passed federal clean energy tax credits in August 2022, 34 clean energy projects have been cancelled, downsized, or shut down altogether, wiping out more than 15,000 jobs and scrapping $10 billion in planned investment, according to E2 and Atlas Public Policy.
However, in just the first three months of 2025, after Trump started rolling back clean energy policies, 13 projects were scrapped or scaled back, totaling more than $5 billion. That includes Bosch pulling the plug on its $200 million hydrogen fuel cell plant in South Carolina and Freyr Battery canceling its $2.5 billion battery factory in Georgia.
Republican-led districts have reaped the biggest rewards from Biden’s clean energy tax credits, but they’re also taking the biggest hits under Trump. So far, more than $6 billion in projects and over 10,000 jobs have been wiped out in GOP districts alone.
And the stakes are high. Through March, Republican districts have claimed 62% of all clean energy project announcements, 71% of the jobs, and a staggering 83% of the total investment.
A full map and list of announcements can be seen on E2’s website here. E2 says it will incorporate cancellation data in the coming weeks.
Read more: FREYR kills plans to build a $2.6 billion battery factory in Georgia
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Tesla has reportedly delayed the launch of its new “affordable EV,” which is believed to be a stripped-down Model Y, in the United States.
Last year, Tesla CEO Elon Musk made a pivotal decision that altered the automaker’s direction for the next few years.
The CEO canceled Tesla’s plan to build a cheaper new “$25,000 vehicle” on its next-generation “unboxed” vehicle platform to focus solely on the Robotaxi, utilizing the latest technology, and instead, Tesla plans to build more affordable EVs, though more expensive than previously announced, on its existing Model Y platform.
Musk has believed that Tesla is on the verge of solving self-driving technology for the last few years, and because of that, he believes that a $25,000 EV wouldn’t make sense, as self-driving ride-hailing fleets would take over the lower end of the car market.
However, he has been consistently wrong about Tesla solving self-driving, which he first said would happen in 2019.
In the meantime, Tesla’s sales have been decreasing and the automaker had to throttle down production at all its manufacturing facilities.
That’s why, instead of building new, more affordable EVs on new production lines, Musk decided to greenlight new vehicles built on the same production lines as Model 3 and Model Y – increasing the utilization rate of its existing manufacturing lines.
Those vehicles have been described as “stripped-down Model Ys” with fewer features and cheaper materials, which Tesla said would launch in “the first half of 2025.”
Reuters is now reporting that Tesla is seeing a delay of “at least months” in launching the first new “lower-cost Model Y” in the US:
Tesla has promised affordable vehicles beginning in the first half of the year, offering a potential boost to flagging sales. Global production of the lower-cost Model Y, internally codenamed E41, is expected to begin in the United States, the sources said, but it would be at least months later than Tesla’s public plan, they added, offering a range of revised targets from the third quarter to early next year.
Along with the delay, the report also claims that Tesla aims to produce 250,000 units of the new model in the US by 2026. This would match Tesla’s currently reduced production capacity at Gigafactory Texas and Fremont factory.
The report follows other recent reports coming from China that also claimed Tesla’s new “affordable EVs” are “stripped-down Model Ys.”
The Chinese report references the new version of the Model 3 that Tesla launched in Mexico last year. It’s a regular Model 3, but Tesla removed some features, like the second-row screen, ambient lighting strip, and it uses fabric interior material rather than Tesla’s usual vegan leather.
The new Reuters report also said that Tesla planned to follow the stripped-down Model Y with a similar Model 3.
In China, the new vehicle was expected to come in the second half of 2025, and Tesla was waiting to see the impact of the updated Model Y, which launched earlier this year.
Electrek’s Take
These reports lend weight to what we have been saying for a year now: Tesla’s “more affordable EVs” will essentially be stripped-down versions of the Model Y and Model 3.
While they will enable Tesla to utilize its currently underutilized factories more efficiently, they will also cannibalize its existing Model 3 and Y lineup and significantly reduce its already dwindling gross margins.
I think Musk will sell the move as being good in the long term because it will allow Tesla to deploy more vehicles, which will later generate more revenue through the purchase of the “Full Self-Driving” (FSD) package.
However, that has been his argument for years, and it has yet to pan out as FSD still requires driver supervision and likely will for years to come, resulting in an extremely low take-rate for the $8,000 package.
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