APAC to lead global EV insurance market in the next five years

The global EV insurance market is seen to skyrocket by 40.3% in CAGR.

The region dominated the global market of electric vehicle (EV) insurance in 2021, with a share of $19.4b, and is projected to hold its stance in the next five years, according to a Fortune Business Insight report.

This forecast is driven by rapid electrification in countries like China, Japan, South Korea, and India. Government policies in China, including restrictions on conventional vehicle sales and infrastructure development, are accelerating EV adoption and insurance demand.

The global EV insurance market was valued at $40.27b in 2021 and is projected to grow significantly, reaching $687.62b by 2029, with a CAGR of 40.33% during the forecast period. 

The COVID-19 pandemic increased demand for EV insurance globally, driven by rising fossil fuel costs, government incentives promoting EV adoption, and environmental concerns.

EV insurance is essential due to the high cost of repairs and battery replacements, which can range from $2,500 to $20,000 depending on the model.

This has accelerated the adoption of EV insurance to mitigate expensive repair costs compared to conventional vehicles.

Insurance providers are now more readily offering policies for electric vehicles, which include standard coverage like collision, comprehensive, liability, and bodily injury. Some insurers even provide specific discounts for EVs, such as those offered by Allstate.

Major EV manufacturers like Tesla have started offering their own insurance programs, further increasing market awareness and availability.

Government initiatives promoting electrification, such as rebates and tax exemptions, are also contributing to market growth. For example, Canada and several states in the US offer incentives that reduce the upfront cost of purchasing EVs, further boosting demand for EV insurance.

Despite growth prospects, high insurance costs relative to traditional vehicles remain a significant barrier to market expansion. 

Electric vehicles are perceived as luxury items in many regions, leading to higher insurance rates compared to combustion-engine cars.