Electric Vehicle Insurance Implications and Opportunities
Premiums are generally higher than for gas-powered vehicles.
As more electric cars and heavy-duty trucks take to the road in coming years, insurers must prepare to underwrite and assume a range of new and emerging property and casualty risks.
Claims involving lithium-ion batteries, for example, already have resulted in losses across the property, natural resources, construction, marine, midcorp and liability lines of insurance business, according to an October 2023 report by Allianz Commercial. The emerging risks, the report found, “have unique characteristics that require specialist technical, management and organization skills.”
In assessing and modeling the risks for pricing purposes, underwriters account for battery replacement costs, specialized repairs, and charging exposures. The same considerations apply to carriers providing specialized insurance policies covering large trucks. In most cases, the premiums charged by insurers is higher than for a comparable gasoline-powered passenger vehicle.
The higher rates are primarily due to higher sticker prices and expenses related to repairs and maintenance. Obviously, a vehicle powered by a large lithium-ion battery requires repair and maintenance skills different from a vehicle fueled by an internal combustion engine. As electric vehicles proliferate, the demand for specialized mechanics is likely to exceed available supply, adding to repair costs for the insurers picking up the tab.
While coverages in passenger EV policies are similar to conventional policies, not all carriers provide coverage for property and liability losses caused by at-home EV charging stations (most condos and apartment buildings require the insurance). Assuming the coverage is in place, the premium charged will reflect the added exposures.
Commercial trucks may experience other problems, such as not being able to reach the intended destination or the next charging station due to insufficient battery power. Unlike electric cars, electric semi-trucks drive great distances in many cases, requiring charging en route. Depending on the model, driving distances on a single charge range from 150 miles to 500 miles. In areas of the country where charging stations are few and far between, truck drivers worry about a power loss, increasing the risk of accidents and exposure to cargo loss or damage.
Truck drivers also rely on a range of technologies like telematics, vehicle control and mapping systems, as well as wireless connections when making numerous stops during the day. Insurers are just beginning to provide coverages absorbing the risks associated with a network outage or a cybersecurity incident.
Other innovative insurer approaches are underway. In 2022, Munich Re introduced a novel insurance policy called aiSure that covers the risk of battery failure. The global re/insurer leverages analytics software and algorithms developed by Germany-based Twaice to predict battery status and health. More recently, Chubb announced the launch of a new Lloyd’s of London consortium to provide insurance covering EV batteries in transit and in storage, a much-needed coverage as demand escalates for lithium-ion batteries.
