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Costly repairs could mean higher premiums for EV drivers: report – CBC.ca

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After Benjamin Vassalle hit a deer during a nighttime drive in northern Ontario in January, he and his partner knew that repairing their damaged electric vehicle would come at a cost.

Yet when their insurance company sent the car to an independent garage, the vehicle stayed there untouched for weeks — because the mechanic didn’t have the parts or expertise required to fix an EV.

The couple had little choice but to send their car to its manufacturer, Tesla, which fixed the broken headlight and crushed bumper.

A photo shows the damage on Vassalle’s Model 3 Tesla following a collision with a deer during a nighttime drive. Vassalle is worried that his insurer will hike their premiums as a result of the expensive repair claim. (CBC)

Although the ensuing $18,000 bill was covered by their insurance company, the couple is now worried that their insurer will hike their premiums in the future.

“I think there’s a lack of knowledge from insurance companies about [electric] cars and all the repairs that can occur when you have that type of car,” Vassalle said.

Electric vehicles are more costly and complicated to repair than traditional cars, experts say. And more people are buying them. For those reasons, insurance claims for EVs are on the rise in other countries — and the same might soon be true for the Canadian market, according to a new report. 

Report says EV premiums could start rising in Canada

A recent report by credit rating agency Morningstar DBRS assessed how a higher uptake of electric vehicles could lead to higher insurance premiums.

EV sales in the U.K., Europe and U.S. have boomed since 2019, according to the report. Boosted by government incentives and investments in charging infrastructure, these drivers will be the first to bear the brunt of higher insurance premiums on EVs — and Canada could be next, the report says.

In Canada, about 12 per cent of all new motor vehicles registered in the third quarter of 2023 were zero-emissions vehicles, according to Statistics Canada. That’s an increase from the same period in 2022, where they made up 8.7 per cent of all new registrations.

“Insurance is a pool business, whereby you have insurance premiums from a lot of people [that] are used to pay claims for very few people,” said Victor Adesanya, vice-president of insurance at Morningstar DBRS and a co-author of the report.

In the U.K., for example, the average cost of EV insurance rose by 72 per cent in 2023, compared to 29 per cent for internal combustion engine vehicles (heat engines that combust fuel or gas, like most cars), according to the Financial Times

An increase in insurance premiums for EVs will be gradual for Canadians — mostly because the provinces regulate sharp insurance hikes — but they could be driven up by claims experience as more people transition to electric cars, Adesanya explained.

“Once you get more EVs into the mix, then the experience of that pool begins to change,” he explained, noting that rates are driven by everything from inflation to repair costs to theft to the cost of a vehicle’s parts.

WATCH | Why EVs are easy to find but difficult to afford in Canada: 

U.S. announces rule aimed at expanding EV sales

1 day ago

Duration 2:00

The U.S. is moving forward with an ambitious plan aimed at shifting its auto industry toward making more electric vehicles — and Canadian companies could stand to benefit.

While EV sales are still growing, experts say they’ve cooled off due to concerns about range and charging infrastructure. But the federal government announced in December that it would implement an electric vehicle standard, aiming for a target of 100 per cent zero-emissions vehicle sales by 2035.

While Canada doesn’t have as many EVs on the road as the other regions covered by the report — mostly due to range anxiety, high prices and concerns about maintaining the cars in extreme temperatures — the cars are entering the mainstream, said Adesanya.

“In the next 10 years, we’ll most likely all be driving EVs, or close to all of us will have to start buying EVs,” he added. “So it’s going to affect both the insurance companies and the car owners.”

Kicking the tires doesn’t work for EVs, says prof

Electric vehicles have fewer parts compared to a traditional vehicle with an internal combustion engine, but an EV’s parts can be far more expensive, says Colin Simpson, who developed an EV technician program at George Brown College.

In five or 10 years, there will be a significant increase in used EVs on the market, and with that, certain repair requirements, said Simpson, who is also the dean of George Brown’s Centre for Continuous Learning. 

The problem is that customers might not be able to identify what those repairs should be, using the same methods they would for a traditional car, for which you can “get a visual idea of how well the vehicle has been cared for.”

EVs could have less wear and tear and lower mileage, but if the battery needs a replacement, it can cost up to $20,000.

An electric vehicle charging station is pictured in Surrey, B.C., in April 2021. (Ben Nelms/CBC)

“So the used vehicle market is going to be, I think, a challenge, because for one thing, people don’t have that same ability to recognize what’s a good deal and what is not when they’re buying a used electric vehicle.”

Understanding the state of an EV battery’s health is a “far more complicated process,” as well, which could pose difficulties for insurance companies trying to determine a pricing model for EV premiums, he said.

“This whole mystery around ‘what’s the state of health of the battery’ … the usual signs aren’t there, like the actual mileage.”

When comparing non-electric and electric vehicles from the same manufacturer, “that electric version might be more costly to initially purchase because of those [repair] costs can be higher and that can also influence the premiums,” said Rob de Pruis, national director of consumer and industry relations at the Insurance Bureau of Canada.

The agency is working with auto manufacturers and vehicle associations to collaborate on ways to reduce some of those claim costs. But they’re not simple solutions, de Pruis added.

“We don’t have a lot of influence over these vehicle manufacturers, and that’s where we’re also talking with the government.”

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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