Last week the Minister of Finance announced that producers of electric vehicles in South Africa will be able to claim 150% of qualifying investment spending as an incentive to aid the transition to new energy vehicles. Government has also reprioritised R964 million over the medium term to support the transition to electric vehicles.
“We welcome this move as it may see more green vehicles come online in the future,” says Tarina Vlok, MD of Elite Risk, a high-net-worth insurer and subsidiary of Old Mutual Insure. “Currently we only have a very small percentage of electric or hybrid vehicles on our book. At the moment it as a small segment covered by insurance. However, we expect this to change significantly as new regulation pushes manufacturers to prioritise production of EVs,” says Vlok.
She adds that Elite Risk is also gearing up to insure more EVs, and, given the push to solar, the consumer switch to EVs or hybrids may become even more enticing.
“This is because some drivers may have been put off from getting a hybrid or e-vehicle, given that these vehicles often need hours of charging time before being taken for a spin. With the frequency of loadshedding, including increased prominence of stage 6 and higher, charging time may be compromised.
A risk with loadshedding, she says, is that if you don’t have sufficient power with a back-up system or alternate power supply, it may impact on your experience with an EV or hybrid vehicle. In addition, excessive output demand can put severe strain on inverters and batteries. “You would need to know whether your back-up system can cope with the charging of your vehicle.”
In the face of this, there is still a lot that South Africans need to understand before deciding on taking the plunge.
“Firstly, it is not significantly more expensive to insure an electric vehicle; but the premium may need to be adjusted as EVs can be pricey,” says Vlok. She says that the average claims cost of EVs or hybrids are likely to be higher because the electronics of these vehicles are expensive.
“In addition, parts sourcing may be a problem. We always recommend that repairs – regardless of whether combustion engine vehicles or EVs hybrids – would need to be done by accredited motor body repairers.”
Statistics suggest that in the USA replacement parts are 2.7% more expensive than combustion engine vehicles.
“The battery is also very expensive, and if things go wrong, normal wear and tear won’t be covered by an insurance policy. However, a comprehensive motor policy would cover things like damage because of impact or accident, or theft. It all depends on what is the cause of the loss of the battery.”
If the battery runs flat, will insurance cover it?
“No. But we can arrange for a tow truck or a lowbed truck to take your EV to your home. Within limits of course.”
She adds that home chargers wouldn’t be covered under the vehicle’s insurance policy, rather it would fall under the home insurance policy.
Below Vlok gives some key insights into the issue:
- As EVs become more common and repair costs decrease, insurance rates are likely to become more competitive. However, it is important to note parts availability plays a role in this, as well as repairs. Repair facilities may charge more because of the specialised training required.
- It’s important to make sure that your insurance policy covers all the unique aspects of owning an EV. For example, you may need coverage for the battery, charging equipment, or a rental vehicle if your EV is in the shop for an extended period.
- Remember that – as with any vehicle regardless of the segment – insurance coverage for an EV can vary widely depending on a number of factors, including your driving history, your location, and the make and model and even colour of your vehicle. It all depends on your risk profile.
“Overall, switching to an EV can have insurance implications, but with some careful planning and research, and as they become more popular choices, it’s important to protect the investment, which will give drivers peace of mind on the road,” concludes Vlok.
