As Canada transitions to electric vehicles, the costs of insurance may go up, a recent data analysis says.
Based on data from the UK, Morningstar DBRS notes that as drivers switch to EVs, insurance companies will also be adjusting prices.
The cost of parts and repair for EVs is one of the main issues that insurance companies face when handling claims from drivers.
“Repairs and replacement parts for EVs are very expensive, prompting some insurers to total damaged vehicles instead of attempting to repair them,” the report author said.
However, Canada’s regulated insurance industry could mean that drivers may not see a huge price difference, according to Morningstar’s vice president of North American insurance ratings.
“Provincial governments are responsible for the regulation of auto insurance policies, including the monitoring of claims handling and dispute resolution,” Victor Adesanya said. “Provincial regulators also review and approve requests made by insurers to increase rates before they can be implemented,” he said, adding that it could reduce the impact on insurance rate increases for EV owners.
“However, we 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.”
The news follows the Government of Canada’s push to have all new car sales be 100 percent electric vehicles by 2035.
Ottawa has also released plans to transition Canadians to EVs, by requiring that 20 percent of all cars sold by 2026 be EVs, increasing to 60 percent by 2030.
In 2022, EVs represented 3 percent of all vehicle registrations, Statistics Canada data shows. That was an increase of 2.3 percent from 2021.
Provinces have also been providing incentives to encourage Canadians to purchase EVs, including Quebec offering $7,000. Prince Edward Island and New Brunswick offer $5,000. In B.C., EV rebates can be up to $4,000. Nova Scotia offers $3,000 for purchases of EVs, and Newfoundland and Labrador offers $2,500. Alberta, Saskatchewan, Manitoba, and Ontario do not have rebates for EV purchases.
