Surging EV Parts and Battery Costs Drive Up Vehicle Insurance Premiums

Electric car insurance in the UAE costs 20-35% more than traditional vehicles, despite the Emirates leading Gulf electric vehicle sales with 24,000 units sold in 2024. Annual premiums range from 3,500-8,000 dirhams compared to conventional cars of similar value, creating a financial burden that's pushing many owners toward basic third-party coverage instead of comprehensive plans.

The price gap stems from expensive batteries and electric motors, plus scarce spare parts. Insurance managers and car technicians say repair costs are much higher because batteries represent 30-40% of a vehicle's total value. Replacing or fixing a battery can cost 60,000-80,000 dirhams per car.

Here's where it gets complicated: many electric cars sold in the UAE come from unauthorized dealers, especially Chinese brands without official representation. This creates a spare parts shortage that worries insurance companies. When parts aren't available through authorized channels, repair times stretch longer and costs climb higher.

Ezzat Al Aghwani from Sukoon Insurance explains that electric vehicles typically file claims at rates of 8-12% compared to 5-7% for traditional cars. "Any accident affecting delicate electrical systems can be costly," he said. "Even minor battery damage can lead to total vehicle write-off."

The structural design makes things worse. Traditional cars have segmented body parts that can be replaced individually. But electric vehicles often use complete panels, so even small damage requires replacing larger sections of the car.

Take a Tesla Model 3 versus a BMW 3 Series of similar market value. The Tesla's annual insurance runs 5,000-8,000 dirhams while the BMW costs 3,500-6,000 dirhams. The difference reflects higher claim rates and repair complexity.

Insurance companies are adapting by adding specific clauses for batteries and electrical components. They cover total or partial damage from accidents but exclude damage from improper charging or unauthorized chargers. Some insurers now offer emergency roadside charging services when batteries die.

George Al Ashkar from Fidelity insurance services points to another problem: unknown Chinese car brands entering the market without authorized dealers. "There are cars we can trust and others we know nothing about," he said. "Authorized dealers provide all necessary parts, but their absence leads to parts shortages."

Saif Al Hammadi, who runs EV GATE maintenance center, says many repair shops won't work with insurance companies anymore. The offered amounts don't match actual repair costs, especially when computer control systems get damaged or burn out.

Car owners are responding in two ways. Many switch to cheaper third-party insurance instead of comprehensive coverage. Others contact factories in China and abroad directly to buy parts at lower prices and faster delivery times.

But here's an interesting detail: most accidents don't actually cause electrical damage or computer failures. They usually involve external body parts that cost around 2,000 dirhams to fix. This makes third-party insurance more economical than paying higher comprehensive premiums.

The situation reflects broader growing pains as the UAE's electric vehicle market expands rapidly. Insurance companies lack long-term data on accident patterns, and the limited availability of used parts keeps costs high. The high speed and torque of electric vehicles may also increase the likelihood of serious accidents, especially given their lighter weight.