Conventional wisdom is that hybrid vehicles reduce our dependence on foreign oil and emit fewer environment hurting CO2 emissions. When comparing a hybrid to a conventional gasoline-powered model on a mile-by-mile basis, there's some logic to this argument provided the pricing disparity between the two models isn't too broad. However, a new study by Quality Planning shows that hybrid owners drive much more than non-hybrid owners, potentially negating the benefits of the added battery pack and electric motor.
Quality Planning studied nearly 360,000 vehicles throughout 2007 and 2008 to analyze driving habits, and some of the study's findings are pretty surprising. According to the survey, hybrid and non-hybrid drivers have statistically similar commutes, but hybrid owners drive their vehicles 25% more (2,000 miles) in non-commuting scenarios.
Dr. Raj Bhat, president of Quality Planning, thinks part of the reason for these findings has something to do with the fact that high mileage drivers are typically more interested in hybrids than infrequent drivers.
"What we don't know is whether owning a hybrid vehicle encourages people to drive more miles each day or take more pleasure trips. High-mileage drivers appear to be attracted to these vehicles, so insurers should take steps to verify the intended use of hybrids and validate actual miles driven wherever possible."The study also shows that hybrid owners are significantly more likely to receive traffic tickets. According to the survey, Toyota Prius owners received .38 tickets per 100,000 miles driven, versus a non-hybrid average of .23 tickets per 100,000 miles. That's a 65% differential. One possible explanation for the ticket disparity has to do with where hybrid owners live. Quality Planning found that hybrid owners are more likely to live in an urban setting, where tickets are more frequently issued.
If you really want a hybrid and you don't want to hear any more bad news, you should stop reading. QP also found that repair costs are significantly higher for hybrid owners. The Ford Escape Hybrid, for example, costs 31% more to repair than the gasoline-only model, while repairing the Toyota Highlander Hybrid will reportedly add 45% more cost. A recent report by IntelliChoice that found that, in the long-term, hybrids and diesels are actually cheaper than gasoline-only vehicles.
The text below illustrates how much on a per dollar basis hybrid repair costs for collision and comprehensive coverage versus one dollar for a non-hybrid. The disparity is shrinking every year, but according to QP, hybrids still cost more to fix. Hit the jump to view the Quality Planning press release.
2006 Hybrid Models $1.16 $1.75
2007 Hybrid Models $1.09 $1.35
2008 Hybrid Models $1.13 $1.17
[Source: Quality Planning via Marketwire]
SAN FRANCISCO, CA--(Marketwire - July 15, 2009) - With gas prices on the rise again, energy-conscious consumers are looking to save on fuel costs, and hybrid vehicles are a popular choice when gas mileage is a primary concern. However, an analysis of the driving habits of about 360,000 vehicle owners by insurance services company Quality Planning has concluded that many owners of hybrid vehicles drive as much as 25 percent more miles than owners of non-hybrids, and that hybrid vehicles are often more expensive to repair.
Numerous studies have compared the cost of ownership of hybrid vehicles versus conventionally powered vehicles, but driving behaviors of the owners of hybrids and vehicle repair costs are generally not part of the analyses. To understand driving behaviors of hybrid vehicle owners, Quality Planning looked at classes of vehicles for which both hybrid and conventional engines are available and examined annual mileage for both vehicle types. Also considered were two common auto insurance rating variables: everyday driving (normally termed "pleasure use" by auto insurers) and "high-commute" driving (defined as commuting more than 15 miles per day).
Do hybrid vehicles encourage owners to drive more?
Quality Planning found that while the mileage for high-commute drivers was roughly the same for both types of vehicles, those drivers who use their hybrid vehicles for non-commuting purposes drove an average of 10,500 miles per year -- 2,000 miles (or roughly 25 percent) more than non-commuting drivers of non-hybrid vehicles.
"The additional miles driven by hybrid vehicle owners would seem to offset the net ecological benefit of owning a fuel-efficient vehicle. After all, a gallon of gas is a gallon of gas, no matter which type of engine is burning it," said Dr. Raj Bhat, president of Quality Planning. "What we don't know is whether owning a hybrid vehicle encourages people to drive more miles each day or take more pleasure trips. High-mileage drivers appear to be attracted to these vehicles, so insurers should take steps to verify the intended use of hybrids and validate actual miles driven wherever possible."
To further assess the risk represented by hybrid vehicles, Quality Planning looked at the demographic profile of their owners and found that they are frequently women, typically older, more affluent, and often live in cities. Quality Planning also looked at the number of moving violations issued to Toyota Prius drivers and found that those drivers tend to get more than their fair share of traffic tickets (0.38 violations per 100,000 miles driven, compared with an overall average of 0.23). However, this 65 percent difference may be because urban drivers generally receive more traffic citations.
Will a damaged hybrid cost more to repair?
Quality Planning also looked at the loss experience of conventional vehicles versus hybrids by comparing the collision and comprehensive loss costs of both kinds of vehicles. Loss costs include impact of both frequency (the number of claims per 100 insured vehicle years) and severity (the dollar impact of a claim). For all 2008 model-year hybrids, collision coverage loss dollars were 13 percent higher, and comprehensive coverage loss dollars were almost 17 percent higher. The 2006 and 2007 models had substantially higher comprehensive losses.
When comparing specific 2006-2008 models, the highest collision loss costs were associated with the Toyota Highlander hybrid (45 percent higher) and the Ford Escape hybrid (31 percent higher). In general, there were increases in both frequency of claims and severity of claims for hybrid vehicles. When compared with a baseline loss cost of $1 for the equivalent non-hybrid model, the hybrid models had the following loss costs:
2006 Hybrid Models $1.16 $1.75
2007 Hybrid Models $1.09 $1.35
2008 Hybrid Models $1.13 $1.17
"These findings should be of particular interest to auto insurers. Some currently offer policy discounts on hybrid vehicles. A 25 percent increase in miles driven or a 30 percent differential in loss costs is very significant," added Dr. Bhat.
Quality Planning sampled 359,309 vehicles from multiple carriers across the country over a two-year period from January 2007 to December 2008. The vehicles were re-underwritten using Quality Planning's proprietary program for correcting rating errors, Precision Re-Underwriting™. The vehicles analyzed were hybrid vehicles that had equivalent non-hybrid counterparts. The annual mileage estimates were obtained from Quality Planning's proprietary RISK:check® process, which uses statistical estimates and odometer readings when available; the estimates were confirmed by policyholders through mail and phone contact.
A leading source of information about risk, ISO provides data, analytics, and decision-support services to professionals in many fields, including insurance, finance, real estate, health services, government, human resources, and risk management. Using advanced technologies to collect, analyze, develop, and deliver information, ISO helps customers evaluate and manage risk. The company draws on vast expertise in actuarial science, insurance coverages, fire protection, fraud prevention, catastrophe and weather risk, predictive modeling, data management, economic forecasting, social and technological trends, and many other fields. To meet the needs of diverse clients, ISO employs an experienced staff of business and technical specialists, analysts, and certified professionals. In the United States and around the world, ISO helps customers protect people, property, and financial assets. For more information, visit www.iso.com.
About Quality Planning
An ISO business, Quality Planning is focused exclusively on providing rating integrity solutions to auto insurers. Quality Planning works with insurance companies to identify areas of significant rating errors using sophisticated database management, statistical analysis and modeling, customized survey design, and highly targeted customer interaction. Quality Planning helps clients work within their existing rating plans and charge fair prices to policyholders based on a true representation of risk. The company was founded in 1985 and is headquartered in San Francisco. For more information, visit www.qualityplanning.com.