The automotive market is undergoing significant change and with that comes an equally demanding need for change in its insurance counterpart. The driving force of the change is Electric Vehicles (EVs), and along with change they are also bringing increased uncertainty.
EVs are becoming more mainstream – particularly in some early adopting fleets, but now we also have some uncertainty of their popularity in some quarters. The result is an ever-challenging position. However, with a growing number of drivers making the switch from petrol to electric, insurers must adapt their product offerings and approach both in the underwriting and claims segments.
At GB, we have been closely monitoring the situation, and it is clear that a watch and wait approach will not satisfy the situation, insurers need to take proactive action now to address the changing habits of customers as they evolve.
Insurers can begin by examining the challenges ahead before moving onto the all-important task of addressing changes to product offerings and adapting to customer expectations.
Pressing Challenges & Future Considerations for Motor Insurers
Insurers face several challenges when tailoring their offerings to EVs, the most significant being the need for accurate risk assessment. The lack of historical data on EV claims makes it difficult to establish reliable pricing models. Insurers must invest in research and data analysis to understand the risk profiles associated with EVs, including factors such as accident rates and repair costs.
On this latter point, there is much talk in the market around if a battery pack is suspected of being damaged / damaged then vehicles may then be a right off. This will potentially see indemnity costs increase, create a different issue with salvageable parts and the markets for them, and of course, where vehicles are written off, the disposal of the vehicles and their constituent parts in an increasingly aware and ESG focused world.
Even the basic recovery of the vehicle will attract increased costs and issues as an EV weighting 2-3 tonnes may require a completely different recovery vehicle to the standard fleets available, with significant additional safety concerns to be addressed.
Furthermore, not all repairers will be able to manage EV repairs – it is becoming increasingly complex with ADAS systems without the “electric” factor. We are already seeing amalgamation across the repair sector to create “super” brands – will this drive competitive pricing, and will insurers be able to influence behaviours?
The rapid advancement of EV technology also poses a challenge for insurers. As manufacturers release new models with distinctive features and battery technologies, insurers must keep pace with these changes to ensure they offer relevant policies. This requires an agile approach to product development and a willingness to adapt to shifting consumer expectations and technological advancements.
To ensure your business is ready to tackle these challenges it is important to next examine and make changes to your Motor Insurance offerings.
Necessary Changes & Important Adaptions to Existing Policies
Coverage Limits
To cater specifically to EVs, insurers will need to revise existing petrol car policies. Key changes might include modifying coverage limits to account for the higher value of EVs, particularly their batteries. Insurers may also need to reassess their approach to theft and damage claims, as EVs may present different vulnerabilities compared to traditional vehicles.
Accounting For Increased Risk
When creating new insurance policies for EVs, insurers must focus on several increased risks. One notable concern is the potential for battery-related issues, such as fires or malfunctions. Insurers will need to understand these risks thoroughly and develop policies that address them. Additionally, as EVs often come equipped with advanced technology, including autonomous driving features, insurers must consider the implications of these technologies on liability and coverage.
Convenience and Differentiation
Insurers might also consider offering policies that include roadside assistance specifically for EVs, which could cover charging issues or battery failures. Moreover, insurers should consider integrating additional services, such as charging station locators or partnerships with charging networks, into their policies. These enhancements could provide added value to customers and differentiate insurers in a competitive market.
Speed and Technology
The anticipated rapid increase in EV ownership necessitates that insurers act quickly to adapt their offerings. This may involve streamlining the policy approval process for EVs to ensure a swift and user-friendly experience for customers. Furthermore, insurers must invest in technology to enhance their underwriting processes, allowing for quicker assessments of risk based on the unique characteristics of EVs.
As the EV market evolves, insurers will need to continually assess their pricing models to ensure they reflect the lower running costs associated with electric vehicles, such as reduced maintenance and fuel costs.
Equally, paying continuous attention to the evolution of customer expectations as they adapt to a new market is also vital.
Adjusting to Customer Expectations
As customers purchase their first EV, they will likely have specific expectations from insurers. A primary concern will be the cost of insurance, as many potential EV owners are keen to understand how premiums will compare to those for traditional petrol cars. Given the perception that EVs are more expensive to insure, insurers will need to provide clear pricing structures that outline how premiums are calculated.
Furthermore, customers will be looking for comprehensive coverage that extends beyond standard policies to include items such as protection for home charging equipment. Customers may also seek flexibility in policy terms, allowing for adjustments in coverage as they gain experience with their EV.
Despite these challenges, necessary changes, and adjustments, insurers can also look forward to some decreased risks associated with insuring EVs. EVs typically have lower accident rates due to their advanced safety features and reduced engine noise, which may lead to fewer collisions. Furthermore, the reduced wear and tear on EVs may result in lower repair costs over time, which can benefit insurers in the long run.
The road ahead is fraught with uncertainty, but with uncertainty comes opportunity and insurers who readily embrace both will thrive in an EV driven future.
Here at GB, we are prepared to help you do just that, by working with a highly specialised team of Motor Engineers who have been advising and supporting our clients through these initial stages and providing further support with regards to our approved repairer network.
We have expanded our network provision but have also identified that we have a different customer message to convey – customers are seemingly far more concerned at the outcomes of EV claims and the potential extent of damage to the battery than they are with regards to conventional vehicles. All our engineers and claims handlers have had additional training to support and assist the customer where we can.
To learn more about how GB can help you navigate the switch to EVs alongside your customers and ensure they feel adequately insured in their new journey connect with our team today.
