Green Cars and Car Insurance

Owning a hybrid car should be welcomed by all as a move in the right direction.

While green cars are often not the most affordable option for getting from A to B, the wider environmental cost of motoring is being addressed, and this is something that affects everyone.  The merit of running a hybrid car is recognised by the government through the road tax breaks enjoyed by low emission vehicles, but can the same be said of car insurance companies?

There are of course so many outlets for car insurance these days, from banks like Santander through to local supermarkets, that a general statement regarding green cars and the industry can be somewhat difficult to make. Some insurers currently offer a discount on premiums for vehicles with green credentials, but unfortunately such measures are some way off being commonplace.

The simple fact is that the number of green cars on the road is still relatively low, and this means that the car insurance industry is still largely in uncharted territory when it comes to this niche. The price of car insurance, like all insurance, is determined through actuarial work, a job that is mainly concerned with mathematical modelling. The basis for this predictive risk management science is historical statistical data. In the absence of much hard evidence, the car insurance industry often tends to err on the side of caution. This is perhaps unsurprising given the nature of the industry.

At a basic level, car insurance companies will always look at the risk of claim when determining the cost of premiums. This means that the discounts currently on offer from some providers when it comes to ensuring green cars may prove to something of a blip, if hybrid cars are subsequently shown to have higher average repair costs over the next few years. However, the power of the word ‘green’ when it comes to marketing may still alleviate the full impact of hard statistical trend analysis when it comes to insuring green cars.

A more reliable move in the right direction will come if the popularity of hybrid cars accelerates over the next few years. A higher volume of production will in turn bring down the cost of parts, making repair less expensive. Less expensive repair means cheaper claims for the car insurance industry. Since around three quarters of car insurance claim payouts currently meet the cost of repairs, cheaper parts should make a big difference when it comes to keeping the cost of insuring green vehicles reasonable. 

Taking the decision to own and run a green car is about considering more than the simple financial cost of motoring. However, simple economics can preclude positive environmental decisions as simply too costly for many. This means that the cheaper the whole business becomes, the more accessible green motoring will be – and that is something that should be welcomed by all.