How Automakers Will Deliver 54.5 MPG: Will it Impact Insurance Premiums?

With the announcement of new CAFE (Corporate Average Fuel Economy) standards by the White House, there are two big questions to be answered:

1. How will automakers deliver a corporate average of 54.5 miles per gallon?
2. What will this mean for the consumer, in terms of car prices and car insurance premiums?

We’ve got answers to each of these questions, and we’ll answer them by looking at the potential steps and technologies automakers will be employing, and how each of them could influence what consumers will pay.

Electric Automobiles

Plug-in electric cars like the Nissan Leaf and Chevrolet Volt aren’t exactly setting sales records, we expect more automakers to produce these types of automobile. Ford, Honda, Mitsubishi and a slew of other car manufacturing companies have fully electric car models on the way.

Thus far, it appears that electric cars are cheaper to insure than their internal combustion siblings, at least in the case of the Nissan Leaf, which has an average insurance premium of just over $500 for full coverage, which is more than $200 lower than the average premium on a Honda Accord. But because these types of cars are so new, it’s possible prices will change as more of them enter the roads.

Diesels

While Europeans have been driving high MPG diesel-powered cars for years, they’ve not been offered en masse in the United States. Even automakers we consider to be American companies, like Ford and General Motors, have diesel-powered variants available in Europe of the same cars they sell in the United States with gasoline engines.

Diesel pollution issues have been solved, and more than half of all gas stations in the United States offer the fuel alongside gasoline. We expect not just more diesel cars to be produced, but wouldn’t be shocked if more trucks and SUVs are also offered with diesel engines. Best of all, diesel vehicles should cost no more to insure than gasoline ones.

Hybrids

This technology seems to be a shoe-in. With the sales success Toyota has had with its Prius, Ford’s rapid adoption of the technology in multiple automobiles and other automakers rushing to develop their own variants, we’re certain that more hybrids will be hitting the road.

Hybrids have not only proven to be cheap to insure, but a number of companies already offer substantial discounts, just for driving a hybrid car.

Hydrogen

As of right now, only Honda has a hydrogen-fueled car on the market, the FCX Clarity. It utilizes a hydrogen fuel cell to create electric power. Benefits of this system include zero emissions, since the only byproduct produced by burning hydrogen is water.

That doesn’t mean the FCX Clarity is without issues. Right now, it’s only available in California, and only available as a lease. Full coverage insurance is included as part of the lease, so we’re unsure how these types of vehicles will rate once they’re more available. Mercedes is also developing hydrogen powered cars.

Lightweight Materials

New plastics manufactured from biodegradable materials, carbon fiber and even hemp and other plant materials will be used to lessen the weight in our cars. While most of the new lightweight materials can’t be used in structural components, many of them can be used for body panels, dashboards and more will be produced from these types of products, greatly reducing the weight of cars and improving their fuel efficiency.

A good example of using these materials has already been demonstrated by UPS. They produced prototype plastic delivery vans that boost the fuel efficiency of their delivery trucks by 40 percent. The use of these items shouldn’t impact the cost of insurance, although they may add to the price we pay for cars.

Start/Stop

Also known as “microhybrids,” these cars share much in common with traditional hybrids, but their electric motors are intended to simply get a car moving in short order. When these cars come to a stop, the engine is turned off, and turns back on when the accelerator is pressed. Thus far, only General Motors has a start/stop model, the 2012 Buick LaCrosse, which is being marketed with the term eAssist. This technology should add nothing to the cost of insurance.

Turbocharged Engines

While turbocharged engines are nothing new, we expect they’ll become more common than they are currently. Small, already fuel-efficient four cylinder gasoline engines will use turbochargers to increase power output and fuel efficiency. Unlike current turbo models, where the emphasis is on performance, newer turbo designs likely will not greatly increase auto insurance premiums.

Waste Heat

Much of the energy produced by gasoline engines is lost as heat. But heat itself is energy, and it can be recaptured and used to power other items on an automobile, such as air conditioning. This too should add nothing to the cost of insurance premiums.

The Bottom Line

Even if none of these technologies will add to the cost of car insurance, they will increase the price we pay for cars. Estimates range from a low of $2,000 to a high of nearly $7,000. The Obama administration estimates that the average family will save more than $8,000 in fuel costs on cars that meet the new standard.