Hybrids, electrics and the cost of car insurance

By Posted : 02/24/2011

Hybrid, electric car insuranceHybrids and electrics are all the rage these days. But how expensive is auto insurance for these vehicles?

The introduction of hybrid and electric cars has been among the biggest developments to hit the car industry in recent years. But can you find cheap car insurance for these vehicles?

At least one major auto insurer – State Farm – reports that while insurance rates for the category of electric vehicles have not been determined, auto insurance costs for hybrids are already well-established.

 "We don't have any across-the-board discounts for hybrids," says Dick Luedke, spokesperson for Bloomington, Ill.-based State Farm Insurance.  "We rate each make and model independently of others."

State Farm uses its make and model ratings to compute all claims.

 "We determine whether a vehicle generates more-than-average or less-than-average claims costs for each coverage, and rate the vehicle accordingly," Luedke says, noting ratings can be seen at the State Farm website.

Hybrids have been on the market for more than a decade, and that's long enough to establish a clear record of the types of claims they generate. 

For example, at State Farm, the Toyota Prius hybrid is priced according to the following indices:

  • Collision Damage Index. The Prius earns a "D," meaning it is charged somewhat higher-than-standard premiums.
  • Damage Theft Index. On this index of the comprehensive premium, the Prius gets a "D" – again, somewhat higher-than-standard premiums. 
  • Liability Rating Index. On this index of the bodily injury and property damage liability premium, the Prius earns a "B," and is charged a somewhat-lower-than standard premium in that area. 

An apples-to-apples comparison between the four-door Toyota Camry and the four-door Toyota Camry Hybrid shows that grades for the two cars are nearly identical.  The former earns grades of D, D and C (average premiums), while the latter merits grades of D, D and B on the three indices.

The determination of the premium is not based on an average of the letter grades, Luedke says.  That's because the grades carry different weightings of importance in determining premiums.  For instance, the grade on the Liability Rating Index often determines more than half the premium, he says.   

Electric vehicles and auto insurance premiums

What about car insurance rates for electric vehicles?  Unfortunately, not much can be concluded at this point, as electric vehicles do not have a lengthy claims history to help insurers determine appropriate rates.  

"We don't have enough data on electric cars – and we use our data, not someone else's – to determine those rates.  So far, right now we're rating those cars neutrally," Luedke says.

That leaves only speculation as to whether auto insurance premiums on electric vehicles will be higher or lower once substantial claims histories have been generated on the cars. 

One of those willing to guess about where electric vehicle car insurance premiums will go is James Bell, executive market analyst with Irvine, Calif.-based Kelley Blue Book. 

Bell anticipates electric vehicles will initially be more costly to repair than ordinary cars.  But he suspects concern about greater repair costs in electric cars will evaporate as quickly as it did a decade ago for hybrids.

For his part, Robert C. Passmore, senior director of personal lines with Des Plaines, Ill.-based Property Casualty Insurers Association of America, believes any gap in auto insurance premium costs between conventional vehicles and hybrids/electrics will be whittled away as the newer types of cars become ever more popular.

 "If more vehicles are hybrids or electrics, you would think the cost of repairs will come down," he says.

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