Electric vehicle transition to drag up car insurance premiums, warns report
The transition to battery electric vehicles (BEVs) will “force a whole-scale adaption of the motor insurance sector” as it struggles to find a solution to the additional costs involved in insuring the new technology, a new report has warned.
BEV claims are already 25.5 per cent more expensive than their combustion engine counterparts and could rise “disproportionately” according to Thatcham Research – an organisation funded by the sector to investigate motor insurance risks.
As a result, consumers will have to fork out in the form of higher premiums.
“There is no part of the motor insurance claims process which is unaffected by BEVs,” Thatcham said, adding that a “lack of awareness” of the issues in the market has made it harder to quantify the effect of electric vehicle uptake on insurers costs and repairs.
Motor insurers must handle significant differences between EVs and their traditional combustion engine vehicle counterparts – such as the use of expensive batteries – which can impact the cost of claims and premiums.
A lack of data on batteries has seen insurers forced to write off cars for minor incidences, as many EVs have no way to repair and assess even slightly damaged battery packs.
Adrian Watson, head of engineering at Thatcham Research, said: “Without meaningful change, there is a strong likelihood that claims costs will continue to rise disproportionately.”
“Much of the motor insurance industry is yet to adapt to mass BEV adoption challenges, and the implications remain unquantified on repair capacity, training and skills, cost and the lifetime sustainability of BEVs.”
Another example raised in the report concerned current government guidelines, which state that BEVs awaiting repair must be stored at a 15 metre distance from other objects and in an outside quarantine area to reduce fire risks.
As a result, safely quarantining just two BEVs would require the same storage capacity as 100 combustion engine vehicles, prompting a minimum additional cost of £60 added to each claim.
Watson said that “this could result in a measurable rise in associated claim cost and duration.”
“There are many other factors which may also result in further insurance premium costs due to the differing processes that follow a BEV collision,” he added.
Other factors could include the increased weight of a BEV, which creates challenges in roadside recovery and requires automotive repair firms to invest in specialised equipment.
While the sector remains supportive of the EV roll-out, the insurance sector has expressed concerns surrounding the major changes that it will need to implement to handle the ever accelerating transition.
Jonathan Fong, senior policy adviser at the Association of British Insurers (ABI), said that although the sector supports the roll-out of EVs, the ABI has been “calling for more investment in training and reskilling automotive technicians to help develop a robust and independent repair network that can cope with an increasingly electrified fleet”.
Chris Payne, head of networks and engineering at LV= General Insurance, said “as one of the major insurers in the UK we’re working hard to find solutions to some of the current challenges around EVs”.
“As an industry we also need to ensure there is collaboration between insurers, car manufactures, salvage agents, repairers and the entire supply chain.”
He added: “This will ultimately help us work towards a combined goal that enables the latest vehicle technology to be repaired safely, and efficiently with the right skills, tooling and equipment to ensure we meet the needs of the future.”