The rapid growth of electric vehicles (EVs) on Australian roads is starting to have a clear impact on motor insurance premiums, as insurers face higher and more complex claim costs.

Actuarial firm Taylor Fry has highlighted that EV claims are generally more expensive to settle than those for traditional petrol and diesel vehicles. As a result, insurers are increasingly factoring these higher costs into pricing, which is placing upward pressure on premiums.

EVs require specialist repair expertise and are fitted with advanced driver assistance systems, sensors and cameras. While these technologies improve safety, they are costly to replace and recalibrate after an accident. Even relatively minor impacts can trigger complex repairs.

Battery packs are another major cost driver. They represent a significant portion of an EV’s total value, and damage to the battery — or even uncertainty around its integrity — can quickly escalate repair costs or lead to a vehicle being declared a total loss.

Overseas experience has provided mixed results on whether advanced safety systems are reducing accident frequency. In the meantime, insurers are seeing higher claim severity, particularly for low‑speed collisions that would be relatively inexpensive to repair on a conventional vehicle.

Some of today’s higher costs also reflect the immaturity of the EV repair market. Certified repairers are still scarce, parts supply chains are developing, and repair times can be longer. While Taylor Fry expects repair costs to moderate as repair networks grow and expertise improves, the timing and pace of that improvement remains uncertain.

Insurers are also managing increased pricing uncertainty as new EV manufacturers enter the Australian market, often with limited local claims history. Until a larger pool of Australian claims data emerges, insurers have less confidence in their assumptions around repair costs and total losses, adding further pressure to premiums in the short to medium term.

EV adoption continues to accelerate. Electric vehicles accounted for 14.6% of new car sales in Australia in March, almost double the share a year earlier. Rising fuel costs and global supply issues have played a role, alongside government incentives. At the same time, ongoing uncertainty around potential changes to fringe benefits tax concessions may influence future demand.

As EV numbers increase, insurers are focusing on managing claims costs through greater engagement with certified repairers and more controlled repair pathways. However, higher average claim costs inevitably flow through into pricing over time.

What this means for vehicle owners

For EV owners, this environment means higher premiums are becoming more likely as insurers adjust to rising claim costs. When arranging or renewing your motor insurance, it’s important to review sums insured, replacement options and excess structures to ensure your cover still makes sense for your vehicle.

If you’re considering an EV — or already own one — we can help you understand how these changes may affect your insurance and ensure your policy is structured appropriately.