Norway Discovers Unintended Side-Effect of Plug-in Car Incentives: Higher Insurance Write-Offs

It’s a well-known fact that Norway is in love with the electric car. Driven by the most generous carrot-and-stick incentive packages anywhere in the world — one that both rewards electric car buyers with free parking, free charging in public places, permission to drive in bus lanes and zero sales tax, and punishes owners of heavily-polluting cars with high taxes and registration fees —electric cars now account for more than fifteen percent of all new car sales across the nation.

In Norway, plug-in cars are no-longer niche, but low purchase costs are causing headaches for insurance companies

In Norway, plug-in cars are no-longer niche, but low purchase costs are causing headaches for insurance companies

In fact, it’s hard to see a downside of Norway’s incentive program, especially when you consider than 98 percent of all electricity in Norway is generated using renewable sources.

But now it appears Norway’s incentive program has an unfortunate, terrible consequence: lowering values mean more plug-in cars are being written off.

As Vg reports (via InsideEvs), electric cars are so much cheaper to buy than they are in other countries that more Norwegian electric cars are being written off following an accident.

That’s because while the cars themselves are heavily discounted at point of sale, the replacement parts needed to repair the car in the event of an accident aren’t. While the cars are sold with no VAT, all spares command them, which makes plug-in cars more likely to be written off due to uneconomic repair costs.

Consequentially, this leaves insurance companies shelling out more for new cars than they usually would, resulting in a lower profit for insurance companies and soaring premiums for plug-in car owners.

As for the cars themselves? Written off vehicles are sold for their scrap value and may or may not find themselves being recycled. Either way, while the cost of replacement may be more economic than repair, the carbon footprint of replacing a written off vehicle is far worse than fixing it up.

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  • Erocker

    Lots of reckless drivers in Norway.

  • Surya

    My question is: what is actually happening to the cars? Because I think they are still too valuable to be scrapped. Maybe not in Norway, but why not repair them and sill them in neighboring countries? I’m sure they would be competitively priced there?

  • Chris O

    Soaring insurance premiums because of quicker total loss makes no sense. Of course since the Norwegian tax regime makes them relatively cheap, they will be written off more readily than regular cars that constitute a major tax investment, but that in itself does not affect the total money insurance companies have to pay for a certain type of damage.nnnThe only reason cars are declared a total loss is for insurance companies to avoid having to pay more in damages than the car is worth.

  • Espen Hugaas Andersen

    This isn’t as much of an issue as many would have it. As it says in the original article in Norwegian; thus far, they’ve written off 5 out of the 6500 Model S in Norway. If we assume a 5 out of 6500 are written off each year, that works out to a cost of about 538 NOK per owner per year (or about u20ac60). A typical Model S owner will be paying around 8000 NOK per year for insurance, so the cars written off are responsible for about 7% of current insurance premiums. The figures aren’t that different for other EVs.nnThe article that InsideEVs picked up is actually just a rehash of an earlier article in May: http://www.vg.no/forbruker/bil-baat-og-motor/elbil/naa-blir-det-dyrere-aa-eie-elbil/a/10130868/nnBack then, insurance rates were lower, and they have been raised somewhat since then. Insurance rates are now pretty much in balance with costs. And these insurance rates aren’t really any higher than for fossil cars of a similar price.