The small catch in electric car insurance in South Africa

Many of South Africa’s major vehicle insurers offer comprehensive cover for electric vehicles (EVs) with no additional fees, but there is one case in which they might not pay out a claim that does not apply to regular cars.

There is a commonly held misperception that EVs are more prone to fires than internal combustion engine (ICE) models.

There have been several studies of data on car fires that show the opposite — including one from the Swedish Civil Contingencies Agency that found petrol cars were 20 times more likely to catch fire.

However, EV fires are more difficult to put out, as their batteries contain materials which make them susceptible to thermal runaway.

Therefore, in the rare event that an EV does catch fire, it takes much longer to extinguish the flame, increasing the potential for further damage unless properly attended to by a fire brigade.

Because EV fire incidents tend to go on for longer, they draw more scrutiny from the media and members of the public, many of whom have asked how this affects insurance policies.

EV batteries from reputed manufacturers typically have advanced safety systems to prevent them from malfunctioning and catching fire.

MyBroadband recently spoke to several of South Africa’s biggest vehicle insurers to find out more about cover for EVs.

Hollard Insurance, Naked Insurance, Outsurance, and Santam told us they provide comprehensive insurance for EVs and that their premiums do not have any additional special fees that are not charged on similar petrol or diesel cars.

“Currently, there is no difference between the rating factors of EVs and conventional vehicles,” Santam’s head of personal underwriting, Marius Kemp, explained. “At this stage, we are still monitoring the trends to see if there is a material difference in the risk.”

Like with fuel-powered cars, the driver’s risk profile, residential address, and vehicle cost are the main factors when calculating a premium.

However, Naked Insurance co-founder Ernest North and Outsurance chief client relations officer Natasha Kawulesar said that insuring an electric car could cost more than insuring an ICE car of similar value because their parts are more expensive.

On the flip side, premiums might also be lower for a specific EV model if its typical drivers have fewer accidents, either because they are more careful or because these cars have advanced safety and driver assistance systems.

Eskom the big elephant in the room

All the insurers said there are generally no specific exclusions for claims on these vehicles.

However, North pointed out that there was one exception where claims might be rejected for incidents related to total grid failure.

All of South Africa’s major insurers have included an exception on claims related to total grid failure in their policies since 2023.

Although this would not typically affect fuel-powered cars, an EV must be connected to a power source to charge up its battery.

North said if an EV were damaged due to a power surge after electricity is restored following a total grid collapse, it would generally not be covered.

“If the damage results from a normal surge, such as after load-shedding, it would typically be covered,” North said.

However, North also said insurers would not cover gradual wear and tear on batteries resulting from frequent power interruptions.

North advised that customers should consider the following elements of their insurance policies when taking out cover for an EV:

  • Battery coverage — Ensure that the policy explicitly covers the battery and understand the conditions under which it is covered. Insurance policies typically cover the EV’s battery in instances of unexpected damage or destruction, similar to coverage offered for other types of vehicles. However, battery degradation due to natural wear and tear, such as from power outages or ageing, is not covered under standard insurance policies.
  • Charging equipment — Check if the insurance covers charging stations or equipment.
  • Power surge protection — Since EVs are more susceptible to electrical issues, check if the policy covers damages from power surges.
  • Roadside assistance —Confirm if the policy offers specialised roadside assistance for EVs, including towing services to the nearest charging station if necessary.
  • Warranty — Make sure you understand what the warranty of your EV covers. You’ll want to pay special attention to the battery warranty, as that’s what will keep your car going. An EV’s battery is said to last between 10 and 20 years. How does the warranty length compare? Enquire if there is the option to renew the warranty for an EV from the OEM.
  • Confirm value — When it comes to EV’s, it’s worth noting that transaction volumes are typically lower, and in some cases, depreciation (or sometimes even appreciation) may occur at a different pace compared to most internal combustion engine vehicles. So, when you get an insurance quote, make sure to check what value it’s based on.
AC home EV charging box

There has been an 85% surge in fully-electric cars sold over the past year compared to 2022.

Outsurance and Santam said they have not seen a material increase in customers taking out policies on EVs.

Hollard Insurance’s number of insured EVs was still low, but it has seen a definite upward trend in adoption.

Naked, meanwhile, had an impressive increase in quotes requested and policies sold for fully electric cars.

“From 2022 to 2023, the number of quotes for EVs on our platform doubled, and we expect to see this upward trend continue,” North said.

“Electric vehicles account for a small number of new cars sold in South Africa. But with soaring fuel prices and growing awareness of the environmental impact of fossil fuels, we expect to see more South Africans switch to electric vehicles.”

North also provided a breakdown of the models for which Naked has generated the most quotes:

  • Mini Cooper SE
  • BMW i3
  • BMW iX3
  • Volvo XC40
  • BMW iX
  • Volvo EX30

Hollard said it was seeing more policies taken out on hybrid models, possibly because they tend to be more affordable.

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The small catch in electric car insurance in South Africa