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As sales of electric vehicles (EVs) grew in 2023, the number of EVs insured and the number of claims increased as well.

Higher frequency and severity of EV claims have contributed to an escalating profitability challenge for all EV insurers.

Electric Vehicle SalesMore than 1.4 million electric vehicles (EVs) were sold in the U.S. in 2023, a 54% increase over 2022. Total sales of light-duty vehicles (LDVs) which include all cars, vans, SUVs and light-duty pickup trucks, grew 13% in 2023 to 15.5 million. 9.3 out of every 100 new LDVs sold in 2023 were electric.¹
The total number of EVs insured grew by 40% to 3.9 million in 2023 while the number of private passenger vehicles (PPAs) insured grew only 1.2% in the same period, to a total of 265 million.²
The steady rise in insurance rates had an even greater effect on EV insurance shopping in 2023. 24% of new EV buyers shopped around for lower rates on their auto insurance policies, significantly higher than the 19% of new PPA buyers that shopped for coverage last year.²

_{^{Source: 1. Argonne National Laboratory 2. LexisNexis® Risk Solutions Internal Proprietary Analysis 2023}}

Loss Cost Increase For EVsThe distinctive driving experience and higher repair cost of EVs has contributed to higher claims frequency and severity than Internal Combustion Engine vehicles (ICEs). In 2023, claim frequency and severity for EVs were, respectively, 17% and 34% higher than those for PPAs overall.
Consequently, the number of paid claims, as well as the total claims payment amount for EVs has risen faster than the number of EVs as a percentage of the total PPA market over the years (Figure 1).

EV MARKET IN 2023

1.5^% of all PPA vehicles

1.7^% of all paid PPA claims

2.3^% of the total claims payment amount of all PPAs

_{^{Source: LexisNexis® Risk Solutions Internal Proprietary Analysis 2023}}

The Future of EV Auto Insurance

Although sales began to slow in the fourth quarter of 2023, EVs sales remain significantly higher than that of LDVs overall. As a result, the EV segment of auto insurance is expected to grow robustly in the next few years.
In this evolving market, auto insurers need to gain a better understanding of the distinctive risk profiles of EVs and to develop EV-specific rating and underwriting strategies to help capture this growth opportunity profitably.

EVOLVING TO EVALUATE RISK PROFILES

By correlating the loss performance of EVs to how they are built and how new drivers adapt to their unique driving experiences, we’re developing powerful tools to help the auto insurance industry evaluate these risk profiles.