Canadians may have to pay higher insurance premiums if they drive an electric vehicle due to the Liberal government’s push to phase out fossil fuels, according to a report from Morningstar DBRS.
The global credit rating agency published a study on Monday, titled Electrification 2035: Auto Insurance Rates to Increase as the Transition to Electric Vehicles Becomes Law in Canada.
The report discusses effects EVs will have on auto insurance premium rates as Canada moves into its zero-emissions vehicle sales targets, which found that consumers will be paying more.
EV owners in the UK already pay higher premium rates than drivers of gas-powered vehicles and in some cases, EV owners are even denied “coverage as insurers take time to adjust their pricing models,” reads the report.
Repairs on EVs are very expensive, as is part replacement, which has led insurers to opt for totalling damaged vehicles instead of making repairs to them, thus raising premiums.
“For EV drivers in Canada, a silver lining might be found in the highly regulated Canadian automobile insurance industry,” said vice president of insurance for DBRS Victor Adesanya.
“Provincial governments are responsible for the regulation of auto insurance policies, including the monitoring of claims handling and dispute resolution. Provincial regulators also review and approve requests made by insurers to increase rates before they can be implemented.”
Despite this, Adesanya said that Canadians can, “expect that auto insurance rates will trend upward over time as insurers generate more claims data for EVs and reflect that experience in their pricing.”
Because insurance is a one-year contract, insurance companies will re-evaluate their premiums annually based on their expenses, inflation and claims, with prices almost guaranteed to increase.
However, premiums for EVs have remained stable thus far, mostly because so few Canadians are driving EVs. Only 8.9% of car sales in 2022 were EVs, according to Transport Canada.
