Editor’s note — The original published version of this article incorrectly attributed several quotes to Michelle Levinson of the World Resources Institute. The article has been updated. School Transportation News regrets these errors.
As school districts across the nation transition to greener transportation options, the push for electric school buses is met with both enthusiasm and concern. While these eco-friendly buses promise a cleaner environment and better health outcomes, they pose significant challenges for many school districts. Add rising insurance costs to the list.
Electric school buses are not immune to the same factors that have driven up all other automobile insurance—including internal combustion engine school buses. The Consumer Price Index for June showed motor vehicle insurance premiums fell slightly from earlier this year but remain at record levels. Insurance rates in February came in at a 21.5 percent increase over the previous 12 month period. CNN reported that the increase, which was the same in January, represented the largest spike in insurance since 1976.
But electric school buses cost two, three even four times more than a comparable diesel, gasoline or propane school bus. Purchase cost always is a major factor in insurance rates, according to the Insurance Information Institute. But cost is not the only one. The cost of repairs and parts also impact rates, as Hertz found out last year. The rental car giant sold more than 20,000 EVs due in large part to high-priced insurance claims.
Despite EVs promising and very often resulting in less required maintenance and significant cost savings as a result, when repairs are required the parts can be costly if even available. But until now, insurance rates for electric school buses hadn’t entered the larger conversation.
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Meanwhile, the movement towards greener transportation has gained momentum, with federal and state incentives encouraging the adoption of electric school buses largely via grant and rebate funds. Advocates highlight the environmental benefits, reduced greenhouse gas emissions and improved air quality. While electric school buses can be a game changer, there are ongoing cost concerns.
“I have not sen insurers provide an EV discount,” said Lisa Paul, chief strategy officer for transportation at global insurance broker Hub International. “I have seen insurers provide discounts for sharing telematics and advanced monitoring solutions that come come from an EV OEM.”
Despite the electric enthusiasm, diesel-powered buses remain the preferred choice for most school districts. While modern diesel engines continue to rely on fossil fuels, nearly 15 years of EPA emissions regulations have made them more fuel-efficient resulting in fewer pollutants than their smoky predecessors. Advanced technologies, such as selective catalytic reduction (SCR) and diesel particulate filters (DPF), have significantly reduced the environmental impact of diesel engines. Today’s diesel engines are 90 percent cleaner than those operating in 2010. They are even cleaner when using the drop-in fuel renewable diesel. While diesel engines are growing more expensive due to regulations, a diesel school bus remains a fraction of the price of an electric school bus, and doesn’t require electric charging infrastructure.
“While electric buses are the future, modern diesel buses have come a long way in terms of emissions and efficiency,” Paul noted. “They are a practical and cost-effective option for many districts, especially those in rural areas where electric infrastructure may be lacking.”
Insurance Challenges
A representative of Highland Electric Fleets, which contracts with school districts nationwide to provide electric school buses and all necessary charging infrastructure, told School Transportation News that insurance brokers have told the company that auto-related coverages over the past couple of years have resulted in significant losses for insurers.
“As a result, they’ve warned us that premiums are on the rise across all vehicle segments and fuel types,” the spokesperson continued. “We are currently in our renewal season and anticipate that insurance premiums for our electric school buses will increase on a per bus basis despite our fleet doubling in size next year. This is due to the general market conditions impacting all vehicle segments and fuel types and, for electric school buses, because the risks are new with limited loss history.”
Highland does not operate diesel buses to be able to compare electric insurance rates. But early indications are that electric school bus premiums are hefty.
“Insurance for electric school buses is considerably higher than for their diesel counterparts,” added Courtney Davis Curtis, executive vice president and global education at HUB International, one of the largest insurance brokers in North America. “The technology is still relatively new, and insurers are factoring in the potential risks and costs associated with repairs and maintenance.”
Several factors contribute to the higher insurance premiums for electric buses:
Higher Initial Costs: Electric school buses typically cost significantly more than diesel buses. A conventional electric school bus can cost between $300,000 to $400,000 (or higher for a transit-style Type D), whereas a comparable diesel bus costs about $100,000 to $150,000 (again, more for a Type D). The higher the value of the vehicle, the higher the insurance premiums.
Repair Costs: Despite promising significant savings from less required maintenance than an internal combustion engine vehicle, electric school buses have sophisticated technology that can be expensive to repair. Battery replacement, in particular, can be a significant expense though most electric school buses on the road or in the pipeline are protected by extended warranties. Still, like any new technology, electric school buses often come with bugs that need to be worked out by dealers, which can result in significant vehicle downtime.
Specialized Training: Mechanics and technicians require specialized training to service electric buses, which can add to maintenance costs and impact insurance rates. Training programs need to be expanded to meet the growing demand for expertise in this area.
Uncertainty and Risk: As electric buses are relatively new, there is less historical data on their performance and reliability. Insurers often charge higher premiums to account for this uncertainty.
High-Voltage Systems: “The high-voltage components in electric buses increase the risk of fire, impacting both liability and physical damage potential,” explained Courtney Davis Curtis of insurance broker HUB International. “Insurers are still gathering data to understand the risk difference between high-voltage electric buses and traditional diesel buses.”
Self-Insurance Options: “The main factors include whether the fleet self-insures and the risk associated with the vehicle segment,” noted Michelle Levinson of the World Resource Institute. “School bus fleets are generally considered low-risk vehicles, so insurance costs should not be as high as other commercial vehicles of the same weight class.”
By using telematics data, Curtis and Paul at HUB both added, school districts could leverage lower costs per mile and communicate their robust safety protocols to reduce insurance premiums.
Michelle Levinson, the senior manager of eMobility finance and policy at the World Resource Institute for the Electric School Bus Initiative, highlighted the complexities involved in calculating insurance costs.
“The depreciation schedule and residual value of electric school buses are less clear than for fossil fuel buses, so insurers may inaccurately estimate payouts and adjust premiums,” she shared. “Repair timelines can also be longer due to the specialized nature of electric buses, although this should improve as adoption increases.”
Levinson noted that repair timelines for electric school buses can increase because local dealers may not be equipped to make repairs to the same degree they are for diesel or other fossil fuel vehicles.
“However, I expect this to improve as the penetration of electric school buses increases,” she added.
HUB’s Paul further elaborated on the need for better data and understanding. “Insurers need more comprehensive data to accurately assess the risks associated with electric buses,” said Paul. “The industry is still in the learning phase, which contributes to the uncertainty and higher costs.”
Industry Concerns
As a result, school districts already grappling with the balancing act of weighing the benefits of electric school buses with the high upfront costs will now have the added financial burden of higher insurance.
“To our understanding, the main factors that influence insurance costs for districts and fleet operators are whether the fleet self-insures or not” said Levinson. “Many districts and operators self-insure and do not see any difference on their books between [electric school buses] and diesel.”
The topic of insurance for electric school buses at the recent Michigan Association for Pupil Transportation annual conference piqued the interest of Kenni Jean Schrader, transportation supervisor at Three Rivers Community Schools, which currently operates two electric school buses with more on the way. She said she sat in on a presentation by a representative of SET SEG, an insurance agency based in East Lansing, Michigan, that pointed to insurance premiums on the rise for electric school buses.
The company did not respond to STN requests for comment or to obtain the presentation.
“Our district vehicles are currently insured under an umbrella policy with no specific reference to EV buses,” Schrader said. “While [at STN EXPO] Reno, I spoke with districts whose carriers plan to implement coverage increases and require 15 feet of space between parked buses, such as in Bowling Green, Kentucky.”
She continued, “At this time, I am not aware of any state mandates that require such measures for buses or any type of EV vehicle.”
Cedric Browning, the director of operations for Bowling Green Independent Schools in Kentucky, said insurance premium increases so far have been minimal but confirmed the parking requirement for the district’s 13 electric school buses. He said the requirement also extends to propane. The reason? Fear of vehicle fires, Browning noted.
“We already have our infrastructure established and [this] is going to require us to make some expensive changes,” he told STN. “No details yet on the cost for the changes, but yes, it would involve moving chargers, which our utility company covered costs on their side of the meter for installation. But I don’t see them doing that for any changes we have to make. And yes, we would have to dig because we would have to go underground.”
Meanwhile, WRI’s Levinson said she hasn’t seen vehicle insurers offer electric-specific discounts.
“Although I’m not aware of any programs focused on reducing insurance costs, these costs are just one line item among the operational costs that fleets incur. These also include fuel, fees and registration, maintenance, etc.,” she shared. “When districts look at their operating costs holistically, the broader operating cost savings from ESBs can be thought of as offsetting any higher premium fleets might be paying to insure ESBs.”
Negotiating Better Rates, Collaboration & Innovation
Some districts are negotiating with insurers to secure better electric school bus rates. By demonstrating a commitment to maintenance and safety by adopting advanced monitoring solutions and sharing telematics data with insurers, they can potentially lower their premiums. Some insurers offer discounts for districts that provide data demonstrating safe driving practices and robust safety protocols.
“Robust hiring standards, vehicle monitoring, telematics tools, and maintenance technologies can help districts leverage lower insurance costs by sharing data with insurers and demonstrating their commitment to safety,” HUB’s Curtis explained. “Telematics systems, for example, provide valuable data that can be used to showcase a district’s commitment to safe driving practices.”
As the electric bus industry matures, any additional insurance costs are expected to stabilize, as is the hope for similar insurance spikes for all other vehicles. This could make it easier for districts to embrace this technology. In the meantime, ongoing collaboration among policymakers, educators and industry leaders is essential to overcome current challenges and pave the way for a sustainable future in student transportation.
“Collaboration is key,” Curtis emphasized. “We need to find a middle ground where school districts can afford the insurance without compromising on their commitment to greener transportation.”
Innovative solutions are emerging to address these challenges. Some districts are exploring shared ownership models, where multiple districts share the costs of purchasing and maintaining electric buses. Others are looking into leasing options, which can reduce the financial burden and provide flexibility.
Policymakers play a crucial role in supporting the transition to green transportation, including insurance. By providing funding and incentives, they can help districts overcome financial barriers. Government support would be essential to improve electric school buses and their adoption in school districts. But Levinson at WRI said school districts have yet to indicate the need to reduce insurance costs associated with electric school buses as a high priority.
“We try to be responsive to the needs of the districts we work with closely, and through this lens we work to problem solve and create resources to support the broader sector. Convening insurers is an interesting idea,” Levinson emphasized. “But we defer to the needs we hear from folks on the ground, and right now, this doesn’t seem to be top of the list.”
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