August 19, 2022

We’ve been driving the Tesla Model 3 since November of 2019. Every year, when it’s the time for us to renew our insurance and we’re in for a shock with a huge increase in the cost or a complete refusal to insure the car completely.

I was intrigued by the reason why it was so difficult to obtain insurance for Teslas. Tesla… therefore I contacted the Insurance Council of Australia to find out why insurance companies refused to cover it, or charge significantly more than an equivalently priced car.

Before we go into the reason, I’d like to describe the issue we encountered in Model 3. Model 3. I’m 30 and so my wife. We’ve never been through any insurance claims before We live outside of the Melbourne CBD, and neither of us have any license issues.

Our first insurance contract in November 2019 was through UbiCar. It was with an agreed price that was $96,800 (they also offered a brand-new alternative) and the annual cost was just under $1400. I thought it was pretty reasonable and we opted to lock the contract and were content.

At this time, it was the Model 3 was new to Australia and UbiCar was among the few insurance companies with the Model 3 listed. The Model 3 also required drivers to use either an OBD monitoring device or smartphone application to monitor your driving performance.

For reference, it was about the same time I purchased the Toyota Supra. It was approximately $10,000 more expensive and I also insured it through UbiCar too, however it was insured for $1100 and an agreed value of $104,000.

The following year was the year that things began to become costly. UbiCar ended its business and I began looking for other options, and discovered some insurance companies were refusing to provide any kind of coverage or even a cost-effective policy. Allianz even had a the most outrageous price of $9000 for complete insurance.

I settled on AAMI and it was $1800 for comprehensive insurance with only limited mileage, an than $1100 excess, and a the lower value agreed upon of $80,000.

The next year was when things got somewhat wild. In the month of November 2021, when I was given my renewal letter from AAMI it was around $2000, and the value agreed upon dropped to $74,000.

Then I began search for other quotes. I began pulling my hair when certain of the largest insurance companies just refused to provide insurance for the Tesla. The list of insurance companies that do not want to offer insurance to the Tesla includes:

  • Budget Direct insurance
  • Woolworths Insurance
  • Coles Insurance
  • Huddle
  • Budget Direct
  • Kogan Insurance
  • Bingle
  • GIO
  • BUPA
  • MyStateBank
  • CGU

Although I was able to locate an insurance company to protect my vehicle but the premium was comparable to a car that was worth 50 % higher than the Tesla which means that it was higher in proportion to an equivalently priced car.

So , what’s the issue? I called with the Insurance Council of Australia, and a spokesperson explained the reason why Tesla as well as electric cars generally are so difficult to insure.

“There are several reasons that may underpin the cost of insurance premiums,” they explained.

“These could include:

  • The technology of computers and the components used in electric vehicles cost more to develop and maintain
  • Repairing electric vehicles that are damaged requires the import of parts from Australia
  • There are a few service centers in Australia which repair electric vehicles. Vehicles might require transport to a remote area to be repaired
  • Reparing vehicles with electric motors requires special tradespeople. Currently, there are very few of them in Australia
  • The repair of battery problems in the electric vehicle can be time-consuming and labor-intensive. Additionally, it requires special devices and disposing (recycling) techniques. One of the major factors in cost is the risk of electric vehicle batteries and the requirement for replacement.
  • Supply chain management in Australia is still in its early stages and this is causing higher prices, and the market is not likely to improve until demand for and supply increase.
  • The supply chain for all vehicles has been affected by the virus, with price increases evident throughout the repair sector,” the spokesperson said.

While the first two reasons are logical but it’s the other reasons that will likely be more difficult (and be more annoying) to be taken care of.

A lot of premium brands that are well-known in Australia are stocked with large quantities of spare parts. Some even have their own repair centers which means it’s less of a problem for insurance companies.

Tesla however appears to spit the majority of this to the market for aftermarket services which results in claims being delayed and getting too complex for insurers to manage.

For instance in the event that we received our Model 3 was delivered it was damaged by a paint flaw. Tesla needed to contract an external panel shop to fix the panel, instead of doing this task in-house.

With Tesla being at the forefront of the charge for selling electric cars within Australia as well as more set to follow because of Model Y going on sale in the coming months It’s a situation that’s only going to get worse in the coming years.

How can we solve this issue? Tesla operates its own insurance business in the USA which helps lower prices for insurance, based on their own risk factors. The insurance isn’t yet available for sale in Australia yet, and no confirmation of when it’ll be made available.

Tesla does not have an arm for public relations of its business, so there’s no one to talk to.

We asked the peak Victorian motoring body the VACC about their thoughts regarding the current situation with insurance and VACC chief Geoff Gwilym claims more needs to be addressed through the council for insurance.

“There is a significant labour shortage in the automotive industry, and it is getting worse,” Gwilym stated.

“If you believe that the Insurance Council of Australia wants more repair workers for vehicles, what are they doing to achieve this. What is their strategy to draw more people into the repair industry? What is their approach to training? What if they used some of their profits to attract people to the field instead of penalizing motorists by imposing high insurance rates.”

“There are plenty of trained people ready and willing to repair EVs, but some EV companies will not make their parts available to the aftermarket industry,” the expert stated.

In any case, if you’re planning to go to the store and purchase the latest Tesla or other electric car be sure to obtain insurance before you do, or you could end up paying high costs.

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