Electric Vehicle (EV) Insurance Market Size, Share & COVID-19 Impact Analysis, By Propulsion Type (Battery Electric Vehicles (BEV) and Hybrid), By Vehicle Type (Passenger Cars and Commercial Vehicles), By Coverage Type (Accidental Damage, Theft or Malicious Damage, Car Battery & Auto Parts Replacement, and Others), and Regional Forecasts, 2022-2029

The global Electric Vehicle (EV) insurance market size was valued at USD 40.27 billion in 2021 and is projected to grow from USD 64.18 billion in 2022 to USD 687.62 billion by 2029, exhibiting a CAGR of 40.33% during the forecast period. The global COVID-19 pandemic has been unprecedented and staggering, with Electric Vehicle (EV) insurance experiencing higher-than-anticipated demand across all regions compared to pre-pandemic levels. Based on our analysis, the global market exhibited a growth of 41.38% in 2020 as compared to 2019.

As the demand for electric vehicles is increasing worldwide, so is the demand for Electric Vehicle (EV) insurance services. Rising fossil fuel prices, government focus on influencing EV adoption, and environmental concerns among the populace are some of the factors responsible for the rapid EV adoption. However, at the current stage of EV penetration, the cost of electric vehicles is significantly higher than their counterparts due to costly lithium-ion batteries. Therefore, insuring an EV has become a necessity among EV buyers.

Various repairs, battery replacement costs, and other damage repairs are significantly expensive compared to the repairs associated with conventional cars. For instance, EV battery replacement costs can vary from USD 2,500 to 20,000 based on the EV model and battery capacity. Hence, the adoption of EV insurance to avoid such expensive repair costs is driving the market growth

COVID-19 IMPACT

Increasing EV Sales Amid COVID-19 Pandemic Boosted Market Growth

During the COVID-19 pandemic, the surging cost of raw materials due to disrupted supply chains and closure of manufacturing facilities negatively impacted the overall automotive industry. However, electric vehicle insurance service providers remained immune to these changes up to some extent, owing to rising penetration of EVs worldwide. Electric vehicle sales witnessed a significant rise during COVID-19. Supportive regulatory framework, environmental and health concerns among the populace, and rising demand for private transport to avoid unnecessary social interactions are some of the factors that fueled EV sales, further accelerating the demand for EV insurance worldwide.

Moreover, the reduced number of accidental damage and repair claims due to government-enforced lockdowns and travel restrictions has fueled the profitability of car insurance companies. This has further enabled insurance companies to offer discounted premiums to attract new customers. For instance, In April 2020, due to reduced driving and claims trends, State Farm announced the Good Neighbor Relief Program, providing credit/dividends to auto insurance customers. The insurance company also reduced premium rates in every state. Along with these two actions, the company returned USD 4.2 billion in savings to its customers.

LATEST TRENDS

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Rising Trend for Adoption of Usage-Based Insurance (UBI) to Propel the Market

The rising awareness and increasing adoption of UBI among EV buyers are driving market growth. Insurance companies, including Liberty Mutual Insurance Company, Allstate Insurance Company, State Farm Automobile Mutual Insurance Company, and others are designing solutions and technologies that can analyze driver behavior and vehicle data accurately. The companies aim to improve their UBI offerings by accurate determination of premiums.

Under the usage-based insurance service plan, the premium is basically dependent on the driving behavior of any individual, where the driving performance is observed and recorded by booking in-vehicle monitoring devices and hence charging the premium accordingly. Furthermore, UBI is typically powered by telecommunications technology and accessed in the vehicle through a plug-in or pre-installed device in the vehicle's system. These devices can also be accessed through mobile applications hence providing insurers with a variety of data, including the vehicle being driven, how it is driven and where it is driven. This, in turn, reduces annual insurance premiums paid by the consumers, further driving the demand for UBI Electric Vehicle (EV) insurance services.

Leading insurance service providers and EV suppliers are focused on offering UBI EV insurance services for customer convenience. For instance, in 2021, Tesla introduced its first usage-based Electric Vehicle (EV) insurance product in Texas, U.S. The premiums will be centered on Tesla's proprietary safety score, calculated based on a customer's real-time driving behavior.

DRIVING FACTORS

Surging Awareness and Demand for Electric Vehicle (EV) Insurance to Aid Market Proliferation

In recent years, insurance for electric cars has been much easier to get than it used to be until 2017. Most insurance providers are offering some form of car insurance for electric vehicles. For instance, Mitsubishi i-MiEV is one of the most affordable electric vehicles on the market, starting at USD 22,995. The Mitsubishi i-MiEV is also affordable to insure, with an average yearly rate of USD 1,474.

Insurers are consumer-centric and want to design & provide policies and programs that work toward satisfying their customer's needs and expectations. Insurers are, therefore, at the forefront of addressing changes with respect to the risk involved in new driving habits and types of EVs.

The coverage provided for EVs is almost similar to standard auto insurance policies, including collision, comprehensive, liability, and bodily injury. Some insurance providers also offer discounts specifically for electric vehicles. For instance, Allstate, an insurance company, provides special discounts on EVs, provides liability coverage, collision coverage, medical payment coverage, personal injury protection, and others.

Several EV companies have also started offering EV insurance on their models. For instance, Tesla, one of the prominent electric vehicle manufacturers in the market, has started offering their own insurance on electric cars, called Tesla Insurance. Therefore, rising awareness and availability of these insurance policies offered by leading players are aiding market expansion.

Rising Government Initiatives for Rapid Electrification to Promote Market Expansion

Supportive government regulations such as rebates, subsidies, and tax exemptions are expected to boost the sale of electric vehicles, further creating a conducive growth environment for market players. For instance, in May 2019, the Canadian government launched incentives for a zero-emission vehicle program, which, depending on the EV model, can lead to a rebate of up to USD 5,000. In Ontario, vehicle owners are eligible to receive USD 1,000 toward the purchase of a used BEV or PHEV car through Plug’n Drive in exchange for an old fossil fuel-powered car. Similarly, the Go Electric Program from British Columbia offers rebates of up to USD 3000 for lease or purchase of a new EV.

RESTRAINING FACTORS

High Insurance Cost of Electric Vehicles is Likely to Hamper Market Growth

High insurance rates for EVs than the average gas or diesel-powered vehicles is one of the factors restraining market proliferation. EVs tend to cost more to purchase and repair due to their specialized and expensive parts. For instance, the car’s battery alone can cost thousands of dollars to repair or fix. The more it costs to repair or replace a vehicle, the more expensive it is to insure. For instance, in China, electric cars cost more than 20% more than fuel-powered cars. Similarly, in the U.S., insurance costs for electric cars are 15% more than combustion engine cars as electric cars are considered to be luxury vehicles in the U.S.

SEGMENTATION

By Propulsion Type Analysis

Increasing Demand for Emission-free Vehicles to Escalate Demand for BEVs

Based on propulsion type, the market is segmented into BEV and hybrid.

In 2021, the BEV segment held the largest Electric Vehicle (EV) insurance market share and is anticipated to continue its dominance throughout the forecast period. Increasing demand for emission-free vehicles and stringent emission norms enforced by the regulatory bodies are likely to influence the adoption of pure electric vehicles positively. For instance, according to the International Energy Agency (IEA), in 2021, nearly 4.7 million BEV cars were sold worldwide, whereas the total number of hybrid cars sold was 1.9 million units. Therefore, the rapidly growing demand for electric vehicle insurance services specially designed for pure electric vehicles is anticipated to boost growth of this segment.

The hybrid segment is also expected to witness significant expansion during the forecast period. Increasing demand for hybrid vehicles in developing and underdeveloped regions with a lack of EV ecosystem and EV infrastructure is expected to propel the segment growth in the years to come.

By Vehicle Type Analysis

Passenger Cars Segment to Lead Owing to Surge in Demand for Private Transport

Based on vehicle type, the market is segmented into passenger cars and commercial vehicles.

The passenger cars segment held the largest market share in 2021 and is anticipated to continue its leading position till 2029. After the COVID-19 pandemic, the surge in demand for private transport and the launch of passenger EVs are accelerating the adoption of EV insurance designed for passenger cars or private transport. Moreover, the rate of electrification of passenger cars is significantly higher compared to commercial vehicles. Hence, insurers' focus on providing insurance offers on various top-selling luxury electric SUVs and sedans, such as Tesla Model 3, Tesla Model Y, and others, is likely to accelerate the segment growth over the forecast period.

The commercial vehicle segment held a considerable share in 2021. Rising adoption of newly designed insurances, such as UBI, that charge insurance premiums based on analyzing driver behavior through telematics devices and also provide real-time fleet information is expected to augment the segment growth.

By Coverage Type Analysis

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Accidental Damage Segment to Dominate Due to Rising Road Traffic Congestion

Based on coverage type, the market is segmented into accidental damage, theft or malicious damage, car battery & auto parts replacement, and others.

The accidental damage segment held the largest market share in 2021. Accidental damage is one of the highly in-demand insurance coverages that is a part of most of the standard Electric Vehicle (EV) insurances offered by the leading players. Moreover, due to increasing road traffic congestion and road crashes, the demand for accidental damage coverage has been increasing among drivers, further fueling the segment's growth.

The car battery & auto parts replacement segment is anticipated to witness the fastest growth rate during the forecast period. Car battery is the most expensive part of an EV. Therefore, the cost of replacing the battery is significantly high. Hence, most EV owners opt for an insurance plan that covers car battery replacement. Additionally, most of the standard insurance coverage plans designed for electric vehicles include car battery replacement as a part of an insurance benefit. All these factors are likely to boost the segment growth.

REGIONAL INSIGHTS

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Asia Pacific dominated the global market with a market size of USD 19.40 billion in 2021 and is expected to retain its position throughout the forecast period. The rapid electrification of passenger and commercial transport in economies such as China, Japan, South Korea, and India is likely to elevate market growth in the region. Additionally, the Chinese government’s initiatives to limit conventional car sales, coupled with the developing EV infrastructure and connectivity, are accelerating EV sales in the region, further propelling the demand for Electric Vehicle (EV) insurance. Moreover, the rising penetration of EVs in developing economies of APAC, such as India, is also anticipated to boost the demand for this type of insurance in the coming years.

Europe is expected to witness significant growth during the forecast period. Increasing number of stringent emission norms enforced by the European Union coupled with favorable regulatory policies in the region, such as incentives and subsidies on EV purchases, are influencing EV sales in the region, and further driving the demand for Electric Vehicle (EV) insurance in the region. In 2021, EV sales in Europe were the second highest after China. As per the IEA, nearly 2.3 million units of EVs were sold in Europe in 2021.

North America has significant penetration of Electric Vehicle (EV) insurance. Moreover, the rising adoption of UBI in the region offered by leading companies such as Tesla is likely to boost the Electric Vehicle (EV) insurance market growth in the region. Additionally, the presence of leading players in the region, coupled with the availability of the EV ecosystem, is fueling the adoption of commercial EVs in the region. Therefore, increasing demand for UBI insurance for effective fleet management through telematics and lower insurance premium through safe driving is likely to drive the market growth in the region.

The rest of the world, including South America and the Middle East & Africa, is expected to witness significant growth due to increasing penetration of EVs in Brazil, Argentina, and others.

KEY INDUSTRY PLAYERS

Insurers' Partnership with EV Manufacturers to Drive the Competition

The market is significantly consolidated and led by several global players operating in this industry. The companies are focused on expanding their insurance service portfolio by introducing new insurance services specially designed for electric vehicles. Moreover, companies are also focused on partnering with leading EV manufacturers to target EV sales and expand the customer base significantly.

With its Strong Position in North America, Zurich is one of the Leading Players in the Market 

Zurich Insurance Group is a Switzerland-based insurance company that operates in three core segments – global life, general insurance, and farmers. The company operates in over 210 countries and territories. The group is a multi-line insurer that serves its customers in global and local markets. Their customers include individuals, small businesses, mid-sized and large companies, as well as multinational corporations. The group has maintained a strong position in North America and Europe as a provider of insurance to individuals, commercial operations, and global corporate customers, as well as growing positions in Asia Pacific and Latin America

LIST OF KEY MARKET COMPANIES PROFILED:

• Allianz (Germany)


• AXA (France)


• Zurich Insurance Group (Switzerland)


• Liberty Mutual Insurance Company (U.S.)


• Aviva (U.K.)


• Direct Line Insurance Group plc (U.K.)


• The Progressive Corporation (U.S.)


• GEICO (U.S.)


• Allstate Insurance Company (U.S.)


• State Farm Mutual Automobile Insurance Company (U.S.)

KEY INDUSTRY DEVELOPMENTS:

• February 2022: AXA Commercial launched a new proposition for fleet customers with electric vehicles to offer greener fleet options to businesses. The proposition includes “future-proof” policy edits, including definitions and consideration for EV accessories such as connectors and charging cables as well as cover for loss or damage to charging points.


•  February 2021: Zurich collaborated with an insurtech company, Greater Than, through an agreement with the U.K.’s one of the largest electric car subscription services, Onto. Through the collaboration, Zurich and Onto can obtain predictive risk data, improve road safety and enable dynamic insurance solutions.


• February 2020: Zurich Insurance Group partnered with a cybersecurity company, CYE, to protect the business against the growing risks of cybercrime. The Cyber Security Services addresses the full spectrum of cyber risks by helping businesses deploy cyber risk management programs effectively.


• August 2022: Liberty Mutual Insurance Company, in partnership with Autonomy, an EV subscription company, launched a digital month-to-month auto insurance product for EV users. The platform partnership with Autonomy’s DigiSure will enable the users to digitally onboard, evaluate, and qualify a subscriber for month-to-month auto coverage. Furthermore, the partnership with Autonomy will create easy, seamless access to electric vehicles.


• September 2022: Aviva launched standalone insurance products for EV charging points owing to the surge in demand for EVs in the U.K. The insurance product offers Erection All Risks (EAR) and Operational All Risks (OAR) cover for EV chargers, which is aimed at targeting business customers, including car park operators, contractors, local authorities, asset managers, and forecourt operators. The policies will cover businesses against the risk of fire, flood, and malicious or accidental damage and will be available for single chargers.

REPORT COVERAGE

An Infographic Representation of Electric Vehicle (EV) Insurance Market

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The research report provides a detailed analysis of the market and focuses on key aspects such as leading companies, insurance services, vehicle type, and propulsion type. Besides this, the report offers insights into market trends and highlights key industry developments. In addition to the factors above, the report encompasses several factors that have contributed to the growth of the market in recent years.

Report Scope & Segmentation