UAE car insurers boycott Teslas over high repair costs

Reuters/Patrick Fallon/ZUMA Press

• Repair invoices three times higher
• Accidents 14% more common
• EV insurance premiums only 12% higher

Insurance companies are refusing to offer fully comprehensive insurance cover for Tesla electric vehicles in the UAE because of the huge cost of repairs, a lack of repair expertise and an increased number of accidents.

“The repair invoice for Tesla is almost three times as much as an average car,” said Issam Mouslimani, goodwill ambassador in the Middle East for the Chartered Institute of Insurers.

This has led to many companies only offering third-party insurance coverage to Tesla drivers.

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Global premiums for Tesla Model 3s rose more than two-thirds between 2021 and 2023, according to price comparison site Confused.com. 

Piyush Dubey, a UAE-based partner with financial institutions consulting practice Kearney’s, said: “The fusion of sophisticated electrical systems, driver-assist technology and complex vehicle software has ushered in a new era of challenges in risk assessment and repair costs.”

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On average, insurers charge 12 percent more to insure an EV, Dubey said, but premiums may still not be high enough given the additional risk.

The Swiss branch of global insurer AXA reported that electric vehicles crash 50 percent more often than conventionally powered cars. Insurance data shows a 14.3 percent increase in accident frequency and 14.5 percent increase in claim severity when drivers switch from petrol to electric vehicles.

“The combination of instant acceleration and battery placement, appears to be leading to more accidents compared to standard vehicles,” Dubey said. “Unfamiliarity with EV driving dynamics also plays a role, especially when drivers first switch from gas to electric.”

Mouslimani said the average at-fault claim cost for Teslas, when the driver and holder of the policy was to blame for the collision, was AED14,200 ($3,900), against AED4,800 for Mercedes cars and AED3,400 for Toyotas.

“They are generating almost the same amount of premiums, but when it comes to the cost of the claim it’s extremely higher than the other brands and it’s not feasible for insurance companies to underwrite it,” he said.

The infrastructure for repairs and servicing is limited, being primarily owned by EV manufacturers and their respective dealerships.

Taline Vahanian, UAE country leader for placement practice at professional services company Marsh McLennan, said the cost of the battery charger in an EV can be equal to half the price of the whole vehicle, significantly raising the potential cost of a road accident. 

“Even a minor collision could cause serious damage, making repairs impossible or costing more than 50 percent of the vehicle’s value, leading to a write-off,” she said.

Multiple challenges

GIG Gulf, an insurance company based in Dubai, is one insurer that has opted against offering a fully comprehensive plan for Tesla vehicles.

In a note to customers, Monther Quttieneh, GIG’s regional complaints manager, said: “Since Tesla operates differently from traditional automakers and has a unique supply chain, it can take longer to acquire certain components. 

“Additionally, the availability of qualified technicians and specialised repair facilities for electric vehicles further contribute to the increased costs and challenges associated with comprehensive coverage.”

Alex Malouf, a marketing communications executive based in the Middle East and a Tesla driver, said: “You would hope that insurance players such as GIG Gulf, manufacturers such as Tesla, and the government would come together to work out a solution, to help us owners access the insurance we need while also supporting the electrification of the mobility sector.”

The Emirati government wants half the cars on the Gulf state’s roads to be electric or hybrid by 2050.

AGBI has contacted Tesla for a comment.