By Adarsh Agarwal
With fuel prices rising steadily and growing environmental concerns surrounding heavy carbon emissions of internal combustion engine (ICE) vehicles, electric vehicles (EVs) have started gaining traction in India. Low maintenance costs and government-friendly policies have also aided the increased uptake of electric vehicles.
The central and state governments, too, are taking encouraging steps towards building a cleaner and greener transportation system to aid the goal of making India a leading electric vehicle market by 2030. For instance, government’s new EV policy on battery swapping with interoperability standards announced during the 2022 Union Budget will aid in faster adoption of EVs in the country.
The government, under section 80EEB, also provides individuals with a one-time tax exemption of up to Rs 1.5 lakh on interest paid on a loan taken to purchase an EV vehicle. The Insurance Regulatory and Development Authority of India (IRDAI), too, in March 2020 asked insurers to incentivise EV users and offer a 15 per cent discount on motor third-party insurance premiums.
According to government data, a total of 3.11 lakh electric vehicles were sold in 2021; this rose to 4.19 lakh in 2022. The wider adoption of EVs in the country has led to higher demand for EV insurance. Just like vehicles with ICE, electric vehicles also need insurance to drive on Indian roads. The type of covers offered – Own Damage and Third-Party Liability — for electric vehicles are the same as ICE vehicles.
EV insurance typically covers liabilities such as accidental damage, fire, natural calamities, riots, theft of the insured vehicle and third-party injuries or damages to their property. New-age insurers offer all types of motor insurance products like the standalone third-party cover, standalone own-damage cover, comprehensive cover or a bundled long-term cover for new vehicles.
Here are some pointers to help you make an informed decision while buying insurance for your EV.
- Comprehensive cover: Electric vehicles are costlier than fuel-based vehicles. Hence, it is recommended to opt for a policy that will cover the vehicle completely rather than a third-party cover, which will only cover any damages caused to a third-party person, vehicle or property. Also, check for add-on covers offered by insurers for wider protection. The premium for different add-ons may differ from insurer to insurer.
- Premium: Compared to petrol and diesel variants, comprehensive insurance policy premiums for EVs are relatively higher because of the higher repair costs and the cost of battery replacement. This is because of the advanced technologies used in EVs, which leads to increased costs. However, customers can get a 15 per cent discount on third-party premiums, which means that one can get insurance for electric cars at competitive rates. However, keep in mind that the price of cars and the policy location will also affect the premium.
- Zero-depreciation add-on: Electric vehicle components are made using high-end technology and will cost more. Zero depreciation add-on coverage becomes beneficial during a claim as the amount calculated based on depreciation is waived and the entire sum due to damages gets paid. For instance, the depreciation of batteries occurs much more rapidly than the traditional value of a vehicle.
- Location and impact on premium: The type of vehicle and geography reflect directly on the underwriting of the policy. For instance, if certain locations are prone to theft of vehicle or vehicle components like batteries, the premium can be higher. Due to underwriting restrictions, the insurance offered can be at a higher premium than what is available in other parts of the country.
- Insured Declared Value: Different insurance companies offer different insured declared values (IDV). Before you check the IDV offered by the insurer of your choice, it is important that you evaluate its current market value. While you compare electric vehicle insurance policies online, make sure that you look for an insurer who offers an IDV that is closest to the market value. This will be useful in case of theft or total loss of the vehicle.
- Pay as you Drive’ (PAYD) add-on feature: Electric cars are generally driven within the city limits and hence driven less compared to fuelled cars. PAYD offers customers the benefit of lower premium for vehicles that are driven less in a year. Make sure you check for insurers who offer this cover as it will offer premium at discounted rates.
When purchasing insurance, look out for other benefits offered by the insurer like cashless repair, smartphone-enabled self-inspection, and the option for customising IDV. Customer support, the availability of add-on options and Claim Settlement Ratio (CSR), which is the total claims closed by the insurer, are also important as these will aid in a smooth customer experience. In India, the EV space is still evolving, and with the improvements in the charging infrastructure, more people will be opting for electric vehicles in the future.
(The author is Chief Distribution Officer, Digit Insurance. Views expressed are personal)