The world market demand for hybrid and electric vehicles (H/EV) is expected to double its growth this year as it currently accounts for almost a quarter of the number of brand new motor vehicles sold. Based on reports, the global hybrid car market is expected to expand with a compound annual growth rate (CAGR) of 16.6% between 2018-2024.
Here’s what you need to know:
- The market share of hybrid cars is increasing, but drivers who opt to use electric power to lower down their fuel consumption, are made to pay higher insurance premiums compared to gas-powered vehicle owners.
- Using hybrid vehicles for longer miles is riskier to drivers compared with the standard cars.
- Insurers are faced with costly repairs of hybrid vehicles that use more
The Asia Pacific region is seen to represent the fastest growing market of hybrid and electric vehicles until the end of 2018. The demand will further open up new markets for the hybrid cars industry.
The increasing trend in the sales of Hybrid Electric Vehicles is fueled by the adoption of more eco-friendly solutions in transportation to reduce global warming. Unlike vehicles using an internal combustion engine, HEVs use both gasoline power and the electric power stored in batteries to run the car, relying more on gasoline as its main source. There are also Plug-In
Hybrids or (PHEVs), which mainly depends on battery-powered electric motor and uses gasoline to complement its electric motor power. But both HEVs and PHEVs are built to reduce the need for fuel. You may ask what states lead in hybrid sales, well Texas and California are two of them.
Both the government and the consumers are taking proactive roles in pushing for solutions to promote and utilize alternative sources of energy. To encourage car owners to shift to hybrid vehicles, governments offer tax credits. Governments are also investing more in renewable energy sources.
However, one setback of the use of a hybrid car is the high cost of insurance. A report in 2017 showed that 40 percent of the hybrid car owners in the UK were unable or unwilling to pay for the rising cost of insurance premiums on their electric and hybrid cars.
Compared with auto insurance premiums on standard vehicles, hybrid car insurance is more costly. In 2015, a cost comparison analysis that looked into the difference of insurance price between gas-only vehicles and hybrid cars showed an average of 7 percent difference in rate in
It is understandable that the insurance cost of hybrid cars is higher compared with their counterpart gas-only vehicles since hybrid cars’ up-front price cost more. But there are other reasons why you are charged more by your insurance:
Hybrid car drivers are on the road for longer
A study shows that drivers of hybrid cars spend more time on the road and these increased miles affects the rates of your auto insurance. How? Car insurance agents ask drivers to include information on their mileage and the model year so that the insurance company will get to know the driver’s profile. Mostly, hybrid car drivers are seen to clock in more miles.
The reduced fuel consumption that hybrid car drivers save is one reason why they can drive for more miles. They may pay more in the up-front price of their auto models, but hybrid car owners do not face a problem of inflation on fuel consumption. People who are often on the road would also prefer to get hybrid vehicles to save more. The growing global demand for hybrid cars
However, the more miles a driver clocks in would indicate that he is on the road more and would increase the risks of the driver meeting a road accident. In 2008, the Highway Loss Data Institute studied the claims of 12 vehicles that have hybrid and gas-only versions. The study revealed that the hybrid versions of 10 out of 12 vehicles have a higher average damage claim.
Higher repair costs
To boost fuel economy, hybrid vehicles use the latest technology that would require specialized mechanics to deal with. Hybrid or electric versions of some car models tend to cost more than their traditional version. Studies on the base price of cars showed a 17 percent difference compared with its gas-only versions. The higher the price, the more expensive the collision payouts when the car gets totaled or stolen. The cost of this technology is considered by the auto insurance company.
Hybrid parts surplus are still wanting
To sum up, the cost of hybrid cars is more expensive than gas-only fuels and it is what primarily pulls up the price of auto insurance premiums. While the market for electric-powered and hybrid vehicles is growing, insurance companies are not too confident on the claims that are tied with the latest car technology. Depending on the damage, hybrid cars would also take a mechanic who specializes in that technology to handle repair issues, and these would further drive the insurance premium up.
Auto insurance companies see that the cost of these advances in energy efficiency take a toll on their business once the car owners start filing their claims. This is one reason why car buyers need to consider the higher cost of insurance when deciding on whether to switch to hybrid cars. In the future, we can see that there still lies the opportunity of more advanced technology that can help reduce the pricing of hybrid cars. The popularity of the hybrid car’s fuel efficiency is also seen to drive insurers to be more competitive, which might help pull the insurance premiums down.