What Will EV Transition Mean for the Insurance Industry?

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Picture of By <span>Aren Mirzaian</span>
By Aren Mirzaian

Updated on January 16, 2025

Visit author page
Picture of By <span>Aren Mirzaian</span>
By Aren Mirzaian

Updated January 16, 2025

Visit author page

4 minute read

Article Contents

Canada has long been vocal about its commitment to reducing greenhouse gas emissions and meeting global climate targets. One of the most significant steps in this direction has been the effort to electrify the nation’s vehicles, with the federal government unveiling various initiatives to push the country toward cleaner transportation.

While Canada is pushing for electric vehicles (EVs) to become the norm by 2035, many drivers wonder how this will affect them. Will you still be able to gasoline-powered cars after 2035? How will this shift affect insurance premiums? Read on to find out how the transition to electric vehicles will impact the auto insurance industry.

Canada’s Electric Vehicle Transition at a Glance

  • In 2021, the Canadian government announced plans to fully transition to electric vehicles by 2035 by totally banning the sale of gas-powered “light-duty” vehicles by that date.
  • In December 2024, Quebec fully adopted these regulations, making it illegal to sell new vehicles with an internal combustion engine (ICE) starting on December 31, 2035.
  • ICE vehicles registered in Quebec in 2034 or earlier will be exempt from these regulations, allowing older gas-powered cars to be resold.

Immediate Implications for Canadian Drivers

The shift to EVs comes with immediate implications for the average Canadian driver. The types of vehicles on the market, the availability of charging infrastructure, and the price of insurance will be major concerns going forward.

One of the most evident changes Canadians will see in the near term is the increasing variety of electric models. Historically, EVs in Canada were concentrated among a few high-end brands, but more affordable offerings from major automakers like General Motors, Ford, Nissan, Hyundai, and Kia are now coming onto the market.

Perhaps the most pressing concern for new EV adopters is charging infrastructure. Major urban centers such as Vancouver, Montreal, and Toronto have relatively wide charging availability, but some rural areas like Chatham and Cambridge lag behind. The government has announced investments in thousands of Level 2 and DC fast charging stations across the country thanks to the Zero Emission Vehicle Infrastructure Program (ZEVIP), but the rollout is far from complete.

Drivers in remote or rural regions could still find it challenging to locate convenient charging stations. This coverage can influence consumers from underserved areas, either forcing them to install electric vehicle chargers at home or making them reluctant to switch to an EV due to range anxiety.

From a financial standpoint, the upfront cost of an EV remains higher than that of a comparable gas-powered vehicle, especially when considering the hidden costs of owning an electric car. The federal government currently offers rebates of up to $5,000 on eligible zero-emission vehicles, and some provinces, like Quebec and British Columbia, offer additional rebates that can stack with the federal incentive.

A significant factor that might sway Canadians to choose EVs is the operational cost advantage. EVs typically cost less to run since electricity per kilometre is cheaper than gas. Routine maintenance costs may also be lower due to EVs needing fewer moving parts. However, battery replacement costs can be high, and replacing important components damaged in a collision may be extremely expensive due to the complexity of these systems.

How the Transition to EVs Will Affect Insurance Premiums

One of the most pressing questions for Canadian drivers considering an EV purchase is: will my insurance go up or down if I make the switch? Unfortunately, this is not a simple yes-or-no question. A variety of factors governs the relationship between EV ownership and insurance premiums:

Vehicle Cost and Repair Expenses:

One of the main risk factors insurers consider is the potential cost to replace or repair a vehicle that is involved in an accident. Since electric vehicles generally have a higher sale price than their gas-powered counterparts, they’re more expensive to replace when totalled. Repairs on an EV can also be expensive for insurers, requiring skilled mechanics and costly replacement parts.

Potential for Lower Risk Profiles:

EVs may be seen as lower-risk vehicles from a certain perspective. They often come equipped with advanced safety features, and EV drivers themselves tend to be more cautious, tech-savvy, and mindful of their driving habits.

Usage-Based Insurance and Telemetry:

EVs are prime candidates for usage-based insurance models, also known as telematics or pay-as-you-go insurance. These systems track driving habits and tailor insurance premiums based on driver behaviour rather than a static set of demographic or vehicle-based factors. Because many EV drivers are already accustomed to monitoring their charging habits and planning routes, they might be more amenable to having a telematics device track their movements.

Vehicle Autonomy and Advanced Driver Assistance:

While not all EVs are autonomous, most new models offer some level of advanced driver-assistance systems (ADAS). Features such as adaptive cruise control, lane-departure warnings, automated parking, and collision avoidance could reduce the frequency and severity of collisions, potentially lowering insurance premiums.

How the Transition to EVs Will Affect Insurance Premiums

Insurance Impact in Different Provinces

Auto insurance systems can vary significantly from province to province. Public insurance plays a major role in British Columbia, Saskatchewan, and Manitoba, while private insurers are the norm in provinces such as Ontario and Alberta.

Because of these differing frameworks, Canadians will likely experience varying insurance outcomes depending on which province they call home. However, as EV adoption accelerates, more standardized insurance practices can be expected nationwide.

Insurance Industry Response to Quebec’s New Regulations

According to a recent report from Morningstar DBRS, as more claims data for EVs become available, insurers will need to adjust their pricing models accordingly, which may lead to higher costs for EV owners. The report highlights that repairs and replacement parts for EVs are significantly more expensive than those for traditional vehicles, leading some insurers to total damaged EVs rather than repair them. However, the highly regulated nature of auto insurance in Canada could help mitigate the pace of potential rate increases.

Insurers might begin offering coverage riders or specialized policies to address EV-specific concerns. For instance, battery degradation is one of the top worries for prospective buyers, so some insurers could incorporate coverage that protects policyholders in the event of a sudden battery failure. There might also be riders that cover damage to home-charging equipment or even provide liability coverage if a charging station malfunctions and causes damage to a house or neighbouring property.

Key Advice from MyChoice

  • Transitioning from a gas-powered car to an EV can come with rebates that lower the initial cost.
  • Some insurers will lower premiums for drivers transitioning to EVs, while others will raise premiums to match the increased cost to repair or replace them.
  • Insurance changes due to EV adoption will vary from province to province due to the differing forms of available auto insurance.

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