Canadian EV insurance costs 36.8% more than gas. The gap is getting wider, not smaller

Canada's EV insurance problem is circular. Adoption is low, so actuaries have thin claims data, so pricing stays conservative, so premiums stay high, so adoption stays low. It is the kind of cycle that a clear policy signal could break. That signal has now been withdrawn.

In 2022, the federal government set a target: 100% of new light-duty vehicles to be electric by 2035, with interim benchmarks and incentives. By 2025, the mandate had been effectively gutted. ZEV registrations fell 40% year-over-year in Q3 2025, according to Statistics Canada data. "There's no longer the incentive to do it," Ontario broker Wyatt Osborn told Insurance Business. "We saw sales just plummet."

EVs now sit at roughly 8% of the Canadian vehicle fleet. That is not enough volume to give actuaries the claims experience they need. And so the premium gap persists.

What Canadians are paying

The average EV driver in Canada pays $3,131 per year for auto insurance, compared with $2,289 for gas-powered vehicles, according to Sussex International data covering 12 months of premiums and claims. A gap of 36.8%. In Q1 2025, EV premiums rose 18.9% year over year against 7.8% for non-EVs, according to Rates.ca data. The gap is not narrowing. It is widening.

Tesla premiums sit at the sharp end. Recent Ontario comparisons from rate aggregators have shown the lowest available annual premium for a late-model Tesla in the five-figure range for younger drivers. Other sources put average yearly Tesla premiums above CA$5,000 even for older models, reflecting OEM parts costs and the requirement for specialist repairs. Alberta runs the highest auto premiums on average nationally, and vehicle type - including EV status - is now a major pricing factor across most provinces.

Why premiums are higher

High-voltage components, advanced driver-assistance systems, sensors, cameras and proprietary software often require certified technicians and, in many cases, manufacturer-authorised facilities. Batteries are the biggest driver of the differential. They cannot be handled like conventional components when a vehicle is damaged, and they are expensive to repair or replace. The result is a greater likelihood of total losses in scenarios where a comparable ICE vehicle would be repaired.

The repair network has not kept pace with even the modest fleet growth Canada has seen. Low penetration means fewer trained technicians and less investment in EV-specific repair capacity, which keeps costs high, which feeds back into premiums.

Yvan Berthou, head of motor group underwriting at Zurich Insurance Group, put it plainly: "Initially, it was not uncommon for EVs to receive premium discounts, but this has shifted due to their unique risks and repair costs."

What the mandate collapse means for insurance

The mandate was supposed to break the cycle by forcing adoption up and giving insurers the data they needed. When it was reversed, that mechanism disappeared. "It's like this circular argument," Osborn says. "Adoption's low, so the premium stays high. But the premium stays high, which leads to adoption being low."

The collapse has also created a supply chain problem. Honda and other manufacturers re-evaluated their Canadian EV strategies when the mandate disappeared. "How is a company going to invest $15 billion when they believed that mandate would be there and that the demand would follow the mandate?" Osborn asks. With domestic manufacturing retreating, Canada is increasingly reliant on imports - including Chinese EVs - which bring their own insurance complications around parts availability, repair networks and importer liability.

Provincial regulation provides a partial brake. Victor Adesanya, insurance vice president at Morningstar DBRS, noted that regulators review and approve insurer rate requests before they take effect, which "could help mitigate the impact of insurance rate increases on the finances of EV owners." It is a brake, not a solution.

The Chinese EV wildcard

BYD, Zeekr and Xpeng are entering the Canadian market at price points well below established brands. If they take volume, they could broaden EV adoption beyond the affluent early-adopter cohort and give actuaries the data they need to price with confidence. As Insurance Business Canada has reported, cheaper Chinese EVs could over time normalise the premium differential by diversifying the risk pool.

In the short term they add complexity. Canadian body shops have slowly built capability around Tesla, GM and Ford. Chinese brands arrive with different battery architectures, different parts supply chains and no domestic manufacturing footprint. When a BYD is in a collision in Winnipeg, the source of the replacement battery and the certified technician to install it are not yet settled questions. And where there is no Canadian manufacturer, the importer assumes the liability of the manufacturer under Canadian law - which materially changes the product liability and commercial fleet insurance equation for any business adding Chinese EVs to its operations.

Tesla's different approach

Tesla is building out its own insurance infrastructure in Canada. Its Canadian insurance hire brings a claims background - specifically insight into how large North American carriers decide whether to repair or total vehicles, how they evaluate OEM repair networks, and what data they need to price high-severity segments with confidence.

If Tesla can show lower total loss rates on borderline collision claims, faster repairs through approved Canadian shops, and better telematics integration into claims handling, it is in a position to negotiate preferred-rate programs with partner carriers. That is not a given. But it represents the most plausible route out of the premium cycle: manufacturer-controlled data that allows insurers to price EV risk precisely rather than cautiously.

For brokers

Only 24% of Canadians are familiar with EV auto insurance policies, according to BrokerLink survey data. The premium gap is now a live variable in every EV purchase conversation, sitting alongside fuel savings, maintenance costs and government incentives.

The coverage questions clients will raise are specific. Battery damage under comprehensive and collision cover. The distinction between sudden accidental damage and exclusions for wear and tear or improper use. Policy wording on battery-related losses varies between insurers and jurisdictions, and those variations have real consequences for claim outcomes.

Some insurers are still offering EV discounts - Co-operators, Desjardins, TD Insurance and The Personal offer between 5% and 10% reductions for hybrid or electric vehicle drivers. Those discounts date from a period when EVs were seen as lower risk. The claims data is making them harder to sustain.

Adoption will eventually rise enough to give actuaries the data they need, repair networks will develop, and premiums will follow. None of those conditions are in place yet. The mandate collapse pushed the timeline out. The brokers who understand that position are the ones who can have an honest conversation with clients about what EV insurance actually costs and why.