Could Rising Insurance Premiums Jeopardize the Car

Could Rising Insurance Premiums Jeopardize the Car Industry

The recent rise in auto insurance rates could potentially jeopardize the vehicle industry’s transition to battery electric vehicles (BEVs) before it truly begins. Even if electric cars finally become as affordable as internal combustion engine (ICE) vehicles, high insurance premiums could still discourage drivers from replacing their fossil fuel cars with EVs.

Aside from inflation, rising rates of distracted driving accidents, particularly among younger drivers, are to blame for the increase in auto insurance rates. Furthermore, with modern vehicles increasingly featuring advanced technologies and software, insurers are charging more to keep them insured. This has left electric cars, a modern class of high-tech vehicles, dealing with higher and higher insurance rates.

These premiums are already acting as a barrier to new vehicle purchases among buyers with tighter budgets. Since even ICE cars are becoming more technology-laden, insurance prices have risen across the board and forced drivers to dig deeper into their pockets. In the last year alone, insurance costs have jumped by more than 22.2% to an average of $182 due to the higher costs involved in repairing and maintaining modern high-tech vehicles.

The U.S. Bureau of Labor Statistics (BLS) estimates that vehicle insurance costs jumped by almost 47% in 2024 compared to March 2020 when the pandemic was starting. And as insurance companies pay out expensive claims, particularly for high-tech vehicles that require more specialized expertise to fix, their insurance rates increase.

Consumer Price Index data from March indicated that car repair prices were up by 21% compared to March 2023 and it is likely that these costs were even higher for high-tech vehicles like electric cars as vehicle parts became more expensive and labor shortages increased wage prices. The surge in auto insurance rates comes as most Americans are contending with high interest rates and a cost of living crisis. As American households are forced to spend more on auto insurance, many may choose to downgrade to older vehicles that aren’t as modern but have lower insurance premiums.

Electric cars are in an especially precarious position as they cost around 20% more to insure and typically have auto claims that are 34% more severe than those for ICE cars. However, high insurance premiums don’t feature as one of the reasons consumers aren’t buying electric vehicles. Several consumer surveys have found that high purchase prices, limited confidence in EV technology, and range anxiety are the top reasons, potentially indicating that many drivers may not consider the cost of insurance premiums until after they make the switch to BEVs.

Companies like FingerMotion Inc. (NASDAQ: FNGR) can help with insurance technology that could keep insurance premiums as affordable as possible.

NOTE TO INVESTORS: The latest news and updates relating to FingerMotion Inc. (NASDAQ: FNGR) are available in the company’s newsroom at https://ibn.fm/FNGR

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