Electric vehicles are the future. The UK government, in common with many European countries, has said that sales of petrol and diesel vehicles will have to stop in 2030, just seven-and-half years away.
Yet, insurers are not yet fully on board with this revolution. Why?
It comes down to data. Today’s underwriters freeze with fear when asked to insure something for which they have little data. That’s where they are with EVs.
With EVs occupying just 1% of the car park in the UK insurers have very little data on the risks they present. Yet, with approaching 25% of new car sales now electric vehicles a rapidly growing number of motorists are looking for cover for their new cars. If traditional insurers do not quickly sort out their risk appetite and pricing, they will leave a yawning gap in the market for insurtech start-ups, perhaps working in collaboration with vehicle manufacturers.
The list of data gaps insurers have is very long and stretches from identifying new hazards to understanding the potential claims costs.
Of course, there is a vast amount of new technology involved in EVs, with the replacement of the internal combustion engine with electronic traction supported by large lithium batteries being the largest and most obvious difference. Early reports of battery fires immediately spooked underwriters and they now seem to be looking for problems rather than asking what the solutions are – and how those should be shaping the insurer response.
The batteries also make EVs much heavier than their petrol driven counterparts, causing underwriters to worry about the damage and injuries they might cause if involved in accidents. The stealthy quietness of the average EV also gives them nightmares about mowing down unsuspecting pedestrians unused to silent vehicles.
The charging technology is another unknown for insurers. Do they insure the cables? How should they rate vehicles that use on-street charging facilities versus those that have off-street charging points? Are they liable if someone trips over a charging cable, especially when cars are hooked up to charging points at busy service stations?
Then there are the repair cost issues.
Repair shops with the capability of servicing and repairing EVs are few and far between at the moment which means that prices are very high, something repairers are quick to justify by pointing to the considerable investments they have had to make in training and new equipment. Presumably, this price pressure will ease over time, although that will also depend on how long the supply chain issues that are plaguing the entire motor manufacture and repair sector persist.
Those are some of the problems with EVs insurers see very clearly. Perhaps they are not being so quick to see some of the solutions.
Most EVs are equipped with an extensive range of the latest vehicle technology, especially safety devices such as sensors and cameras. Does this make them less prone to certain types of accident? Logic would suggest the answer to that question has to be yes.
They also have the potential to be highly connected, perhaps giving telematics the big push forward that its advocates have been anticipating for over a decade? There are plenty of basic telematics insurance policies around but connected EVs could open new opportunities if some imagination – and old-fashioned underwriting flair is applied.
Surely, we cannot be very far away from the day when you could put a destination into the sat nav – especially for less frequent longer journeys – and, as well as getting route options and a list of charging points, you also receive insurance quotes tailored to each route, taking into account driving conditions, traffic reports and real-time weather forecasts. Of course, this would present a destabilising challenge to the default distribution model for motor insurance of the comparison websites, so resistance to such change would be fierce.
Insurers are going to need more imagination – and courage – than they seem to be showing today if they are to get on board with the EV revolution.
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