Page 34 - Insurance Times July 2024

components, data, and service network gives OEMs an For batteries, insurance companies offer battery repair or
enviable lead over insurers. Additionally, many OEMs are replacement coverage, which includes damage from
venturing to provide insurance to EVs on their own. OEMs electrical overload and costs for decontamination. Battery
have traditionally provided several financial services to their fires result in a total loss of the EV, and the cost associated
customers, and insurance is becoming a new addition. OEMs with such a risk is to be factored into the premium. Both
are providing insurance to EVs through their own start-ups fires and electric shocks that lead to personal injuries need
or in collaboration with incumbents. It is likely that OEMs to be considered in the pricing. Fires occurring during the
dominate such collaborations, and the role of the insurers shipment of EVs require a reevaluation of the standard
may be restricted to capacity providers and extending procedures for transporting EVs and a reassessment of
process support. marine cargo insurance premiums. With respect to battery
degradation or deterioration, there is currently a lack of
The insurance risks from EVs can be grouped into three dependable long-term battery performance data, and the
categories. The first category encompasses risks that are depreciation scales have not been established.
identical to ICEVs. These include risks such as natural disasters,
vandalism, personal injury, and property damage liability, and As a result, the risk associated with battery degradation has
uninsured or underinsured motorist risks. For these risks, there not been actuarially modeled and integrated into insurance
is no change in the way the risks are assessed, and the policy
coverage. Insurance coverage for battery swapping
conditions remain the same. The second category is where solutions is relatively straightforward when the ecosystem
the risks remain the same but exhibit increased frequency, is controlled by OEMs. However, when the market becomes
severity, or need a different response.
more decentralized, such coverage becomes possible when
the close connection between EVs and their batteries is
These include risks such as product recall, breakdown decoupled and authorized battery swapping solutions are
assistance, and post-accident repair, to name a few. In the
event of a product recall, the new reasons that could create available. The risks associated with driver adaptation to
a need for it, such as battery risk, software bugs, and other electric motors and regenerative braking systems can be
manufacturing defects, are to be calibrated for pricing the mitigated only through driver training. In addition, insurers
risk. For breakdown assistance, while some roadside may consider the possibility of extending the accident
forgiveness endorsement on EV policies, specifically for
assistance, such as towing support, is the same, instances
of breakdown due to a flat battery are a new risk. When certain types of claims, and for a limited duration.
the EV is driven through "charging deserts", this could
necessitate an increased need for support. Standard home insurance policies do not require
homeowners to disclose ownership of an EV. These policies
However, it may be deemed discrimination if higher cover damage from electrical fires, including the expenses
premiums are charged to residents for driving through for repairing or rebuilding the property. However, insurers
"charging deserts". An increase in the cover amount and have yet to incorporate the additional risks associated with
proportionately higher premium may arise because of the EVs and liabilities when neighboring properties are affected.
repair costs inflated by the replace or repair paradox, the Charging stations require coverage for damages to their own
possibility of total loss and vehicle write-off after an property and cyber insurance.
accident, and a reduced subrogation recovery. These risks
need the inclusion of specific policy wording, definitions of Additionally, they need increased liability coverage for
cover limits, and deductibles. potential damage to vehicles at their stations and
neighboring properties. Insurers offer cover for the theft of
The third category comprises risks that are entirely novel charging cables and damage to charging equipment, but
and specific to EVs. This category includes newly emerging wear-and-tear related damage is not typically covered. The
risks associated with EVs, including flat batteries, battery manufacturing of EVs and their components is concentrated
fires, charging equipment damage, property damage globally, leading to supply chain risks. Insurers need to factor
resulting from fire incidents, electric shocks, regenerative in these risks when developing business interruption,
braking issues, cyber hacks, challenges related to drivers contingent business interruption, and non-damage business
transitioning to EVs, and liability risks. Currently, insurers interruption coverages. For insurers, there are a few
offer varying levels of insurance coverage, and the industry challenges that are still unresolved, such as if a product
has not yet fully developed standards. liability warranty is extended when charging equipment

The Insurance Times July 2024 31