Where’s Flo when I need an answer about insurance? She’s likely busy making more ads about bundling. Fine, I’ll ask the crimefighting emu, if I can track him down. Either way I think I’ll be in good hands.
In all semi-seriousness, I figured that within our stacks of commercial EV research I’d have no problem digging out some conversation starters about insurance costs to fleets as they swap more of their diesel trucks for eco-friendly plug-ins. No such luck. Fine, I’ll just Google this one off the list and be done.
Wrong again. At this point, the only thing I’m certain of is I’m grateful for the insurance professionals who navigate the endless rabbit holes of policy, simplifying it down to a monthly payment for people like me. After reading numerous reports and articles about total cost of ownership (TCO) of EVs vs. diesel, lifecycle costs, federal incentives and infrastructure, I cannot find a single comprehensive reference about insurance costs.
According to a recent report from ATRI, 2021 per-mile costs attributed to liability insurance premiums paid by carriers have increased by nearly 3.5 percent over the last 10 years, a relatively low change when compared to more impactful cost buckets such as fuel.
What happens, though, when fleets begin replacing diesel power units with electric equivalents carrying an upfront value estimated at two to three times greater? Ignore accident or safety statistics for a moment and think about the immediate increase in risk an insurance carrier could be facing.
As of 2021, average insurance premium costs per mile for truckload fleets operating between 100 and 1,000 power units were $.08-$.09. Let’s call it $.085 to keep the math simple. We’ll use an average annual mileage of 100,000.
$.085 x 100,000 = $8,500 per unit annually for premiums.
Same with personal auto insurance, premiums can be lowered by taking a higher deductible option. Safe driver discount anyone? Suddenly I don’t feel so bad about my insurance rate.
So where do we change the math to reflect the increased value of an electric truck? FMCSA guidelines only require liability and cargo coverage of $750,000 to $5 million, depending on type of cargo. What about the fleet vehicle’s full coverage?
Looking at a company vehicle plan, the liability premium accounts for 66 percent and the asset coverage is 34 percent of the annual total cost. For lack of a better example, let’s use these values for estimates to insure a commercial EV.
If $.085 per mile covers the non-hazardous cargo liability portion and is 66 percent of the total full coverage cost, the total value would be $.129 per mile according to my calculator. The difference is $.044 to cover the current diesel unit in our example. 100,000 annual miles = $12,900 per year.
The diesel truck gets a sticker value of $150,000 and using the 2x cost assumption, the electric vehicle gets a sticker value of $300,000. Same cargo type and liability requirements also assumed. Do we simply double the full-coverage value and say it’s now $.088 per mile vs. $.044?
Since we’re this far into the math, let’s go with it and adjust the per mile cost to $.173 and a total annual cost of $17,300 (staying with the 100,000 annual mileage).
For those of us who like percentages, that’s a 34 percent hike to perform the same function and value as before. Should insurance be a consideration in TCO models and payback calculators? Perhaps nothing changes and if that’s the case, no harm in having confirmation I suppose.
Final thought, will consumer auto insurance rates eventually change to reflect a growing population of electric vehicles which cost more to repair if damaged in an accident?
