After the heavy rains in April, insurance premiums for electric vehicles (EVs) in the UAE have increased faster than petrol-powered cars. The unprecedented rains, the heaviest in 75 years, caused significant damage, leading to costly repairs and total loss concerns. Data indicated that EV premiums rose at double the rate of fuel-powered cars in the post-rain period, reflecting a heightened risk perception among insurers.
In the aftermath of the April 16 rains and subsequent floods in Dubai, insurance premiums for automobiles have seen a noticeable increase. Insurancemarket.ae shared data showing that average insurance rates for EVs have risen from 2-2.5% of the vehicle’s value to approximately 3.5-4% between May and July 2024. This increase is attributed to the vulnerability of EV batteries to water damage, resulting in costly repairs or total losses.
The average premium for EVs has increased by approximately 21% from May to July, compared to a 12.6% increase in premiums for petrol cars during the same period. Some insurers have become reluctant to insure EVs after the rains, with many vehicles being submerged and insurers opting for total loss due to the high costs and complexity of repairs for EVs and sports cars.
Gautam Datta, CEO of Watania International Holding, mentioned that some insurers are hesitant to insure EVs due to uncertainties surrounding loss implications and pricing difficulties. He emphasized the need for the industry to view EVs as part of a larger motor pool to distribute the loss impact more effectively and establish more rational prices.
Factors contributing to insurers’ hesitancy in insuring EVs include the higher repair costs associated with sophisticated electronics and battery systems. Flood damage to an EV’s battery can result in a total loss due to the prohibitive replacement costs. Limited repair options and specialized skills and equipment required for EV repairs can also lead to longer repair times and higher costs, making EVs less attractive to insure.
Avinash Babur highlighted EV’s battery high costs as a major concern for insurers, constituting nearly half of the vehicle’s price. The combination of high battery costs, risk of total loss, and challenges with repair and replacement has made EV insurance a complex and expensive proposition for insurers. As a result, while some insurers continue to offer coverage for EVs, others are becoming more selective in their approach.
In conclusion, the increase in insurance premiums for EVs in the UAE following the heavy rains in April reflects insurers’ heightened risk perceptions due to the damage caused to EVs. Insurers are grappling with the complexities and high costs associated with EV repairs, leading to some hesitancy in insuring these vehicles. As the industry navigates these challenges, it is essential for insurers to adapt their pricing strategies and risk assessments to effectively cover the evolving landscape of electric vehicles.
