As hybrids become more popular and affordable, drivers wonder why the cost of insuring them remains higher than average. And for a green insurance company like ours, the relatively high cost of insuring a hybrid presents a bit of a pickle. After all, these hybrid drivers are our people.
Since the first actuarial tables appeared in the 1600s, setting insurance rates has been a complicated and math-intensive business. So we talked with Eric Madia, Esurance’s director of product and actuarial management, to break this hybrid-car insurance pickle down into manageable hamburger chips, and to find out how it could all change in the not-too-distant future.
What makes hybrid cars more expensive to insure?
1. The car itself
Hybrids generally cost more than their gasoline equivalents. For example, the 2011 Honda Civic has a starting price of $15,805, while the 2011 Civic Hybrid starts at $23,950. Eric explains, “The value of the vehicle is typically related to the premium charged.” The more expensive the car, the pricier the car insurance policy.
2. The parts
Hybrid cars leverage cutting-edge technology to reduce fuel consumption and protect the environment. For example, according to John O’Dell, Edmunds’ senior editor and green car advisor, damaged batteries for a Prius or Civic hybrid can range from $2,000–$4,000, and that jumps to $8,000–$15,000 for new EVs like the Volt or LEAF. Parts that cost more to replace or repair lead to higher claims costs.
3. The service
Hybrids have engines as well as state-of-the-art electronic components, which means only specially trained mechanics can work on them. This makes finding an affordable, reliable repair shop more challenging. Even minor repairs require specialized service, and as Eric notes, “These repairs are more expensive.”
4. The drivers
This may be surprising, because it’s easy to assume that hybrid owners are the conscientious, safe drivers every car insurance company wants — and in general, they are. The hybrid’s incredible fuel efficiency, however, makes it especially attractive to drivers who spend a lot of time behind the wheel. According to a 2009 study, hybrids log roughly 25 percent more non-commuting miles per year than their counterparts. And, of course, the more time on the road, the greater the likelihood of an accident.
Peering into the crystal ball
Take heart, fellow green car lovers. Car insurance for hybrids will become more affordable the more they break into the mainstream. John O’Dell predicts, “By 2020 there should be enough critical mass to bring down prices, which will help foster faster growth of these vehicles.” Lower purchase prices will translate to lower car insurance premiums. And as fuel-efficient technologies merge into the mainstream, repair and service costs will come down as well.
The moral of this story? Hang in there, hybrid owners. The money you already save at the pump will soon have company in the form of lower purchase, repair, and car insurance costs for your hybrid.