ELECTRIC VEHICLE PREMIUMS PLUNGE BY NEARLY £100

With consistent growth in popularity across the UK, electric vehicles now make up one in ten of all new car sales, but how has the cost of insuring electric vehicles changed in 2021, and how do their premiums compare to that of a petrol or diesel car?        

Looking at our data, we have analysed the average car insurance premiums since the beginning of 2020, showcasing the decline in insurance costs year on year, the comparison of electric and petrol or diesel vehicle premiums, as well as highlighting ways that electric drivers can save overall.

Electric vehicles are substantially growing in popularity and sales have surged by 87.9% in the year to date, currently representing 9.5% of all new car sales. Drivers of electric vehicles will be pleased to know that insurance premiums have plunged by £97 year on year, whereas that of a petrol or diesel car has dropped by £82.

Electric vehicles have higher premiums but lower running costs

Despite the decline of nearly £100, the average annual premium for an electric car is £33 more expensive than the average premium for a petrol or diesel car during 2021. A typical premium for an electric vehicle costs £656, compared with £622 for a traditional car. However, the gap in the cost of premiums has narrowed from July-October 2020, when electric vehicles were £48 more expensive on average to insure than traditional cars.

Why the premium drop in 2021?

The decline in the cost of premiums in recent months suggests that insurance companies are competing more aggressively to win new customers ahead of the introduction of new FCA pricing rules in January 2022. This new regulation does not allow insurers to offer new customers lower prices than their existing customer base and is being put in place to avoid price walking - a tactic where insurers increase prices for existing customers each year at renewal. Price walking leads consumers to shop around and switch their insurance provider to avoid paying higher prices for being a loyal customer.

Ursula Gibbs, director at comparethemarket.com, commented:

“Insurance has become less expensive ahead of the FCA's new rules which come into force at the start of 2022. The regulations ban insurers from offering new customers lower prices than existing ones, so insurers may be particularly keen to attract new customers ahead of this deadline.

However, motorists may lose out on these savings if they choose to auto-renew their policy. One of the best ways for drivers to take advantage of the situation is to shop around for a cheaper deal when their policy ends. Our figures show electric vehicle drivers could typically pay £192 less than last year if they switch to the cheapest deal available."

How electric vehicle drivers can save

Regardless of the slightly higher premium costs for electric vehicles, it’s a great sign that they are heading in the right direction and there are many other ways that drivers looking to make a greener choice on the roads can save:

  1. Road tax: Road tax doesn’t need to be paid on cars that do not emit carbon, and cost less than £40,000
  2. Government grant: Drivers can receive a grant of up to £2,500 from the Government when purchasing eligible electric vehicles costing less than £35,000
  3. Fuel savings: The average UK driver spends £1160 on fuel each year, and is often the largest expense when it comes to owning and operating a traditional vehicle, which goes unspent by electric vehicle drivers
  4. Switching insurance providers: Electric car drivers can also cut the cost of insurance by switching to the cheapest deal available. On average, the cheapest annual premium for electric cars is £561 in Q3 2021. This means drivers could save an additional £95 by shopping around for the best deal when their policy comes up for renewal.

Sources