Insurance risks can have a substantial impact on the widespread adoption of electric vehicles, potentially discouraging people from shifting away from their traditional internal combustion engine-powered (ICE) cars.
According to Fuse Fleet Underwriting Director Luke Kelly, The high costs of electric vehicles and repairs are “relative immaturity” of the market. Insurers have yet to gain more data to price the insurance effectively, making insurance coverages expensive.
Without further ado, here is a list of insurance considerations fleet managers and brokers must remember when planning to buy electric vehicles.
High repair costs
Repair costs for electric vehicles are usually higher compared to those of conventional ICE-powered cars. It is only natural, given that EVs usually feature specialized parts that tend to be expensive to repair or replace.
For instance, li-ion batteries currently account for about 40% of an EV’s overall pricing. It also contains critical minerals that make it harder to repair. According to Wired UK, battery parts are hard to obtain, and there is “little or no” guidance to repair specific units.
Long repair times
Repairing electric vehicles or replacing damaged components takes a very long time, primarily due to supply chain issues and a lack of the necessary stock.
Research platform Medium noted that EVs “require service technicians to spend much more time figuring out what is going wrong. They are on the phone more with the manufacturer. They are on more test drives.”
Parts availability
It is also worth noting that some electric vehicle makes and models no longer have a sufficient supply of replacement parts, particularly older or less prominent car units. In effect, it increases the replacement costs and extends the turnaround time.
Complex tech and safety features
Contemporary electric vehicle models now offer cutting-edge technologies and safety features to further attract buyers to join the shift. These technologies include autonomous driving systems and sensors. These features undoubtedly boost the vehicles’ safety, but they also increase repairs and/or replacement costs.
Battery degradation
Electric vehicle batteries may not avoid degradation over time, as noted by Insurance Business. In that sense, several insurance policies take into consideration relevant factors, such as those related to replacement expenses and battery lifespan.
For context, battery degradation is primarily due to various factors such as follows:
- Temperature
- Charge and discharge voltage
- Current
- Level at which the battery is charged or discharged
Charging infrastructure
Insurance policies also consider factors related to charging infrastructure availability. The lack of sufficient charging stations can increase the risk of running out of battery range, which can lead to a potential accident on the road.
Model-specific considerations
Some makes and models feature distinct features or exposures that may affect insurance rates. Some models are apparently more inclined to various risks, such as theft or particular types of accidents.
Market value
The value of electric vehicles tends to decline, making it crucial for insurance companies to efficiently and accurately evaluate the models’ current worth to determine coverage.
All that said, it is indeed crucial for the industry to keep these risks at the top of considerations to ensure progressive electric vehicle uptake. It is also significant to observe some aspects, such as the way carriers react to claims with EV-related problems in the following years.
