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November 24, 2023

The impact of EVs on insurance claims

The proliferation of electric vehicles, at all levels of the vehicles parc, has big implications for UK insurers, not least, increased risk exposure and the rising cost of claims.

According to government registration data, there are 701,000 battery electric vehicle (BEV) cars (58%), 432,000 plug in hybrids (PHEV) cars (35%), 49,000 were BEV light goods vehicles (4%), 13,000 BEV motorcycles (1%), and approximately 35,000 were other remaining categories including buses, coaches, HGVs and range-extended vehicles (3%).

Electric vehicles will undoubtedly impact insurers’ risk exposure, and claims handling. However, Audatex can help. “Solera’s unrivalled data coverage ensures the best – right first time – methodology and straight-through processes are maximised for all our customers’ benefit,” says Tom Hart, Head of Account Management at Solera | Audatex. “We’ve added 170 new EV or hybrid models to our data over the last three years and this is set to accelerate in-line with new model releases over the coming months.”

Recent landmark research was recently released by Solera, based on 92,000 data points collected over 18 months to August 2023 from 20 countries. It showed:

  • Overall, EV repair costs are 29% higher than ICE repair costs, globally, on average.
  • EV parts costs are 48% higher, on average, per estimate. Parts included high-voltage battery, battery-control unit, cabling, battery box, and system battery charger. Unsurprisingly battery repair is the highest cost.
  • Driver airbag systems were replaced 8% more frequently on EVs.
  • Rear bumper absorbers were replaced 1,390% more frequently on EVs.
  • Rear bumper reinforcements were replaced 14% more frequently on EVs.

This is suggestive of higher collision risk, although more insurance data is needed to identify clear relationships between driveline and incident rate. However, there are a number of issues which insurers may find affect incident rates or patterns.

Linear torque Electric vehicles have several differences from ICE vehicles. They have linear torque, so electric cars have maximum power available from the moment the driver touches the accelerator. This can mean that drivers pull away faster than they expect, which can raise the collision risk. Some commercial vehicles mitigate this slightly with a power differential setting for take-off.

Familiarisation. Many drivers get no formal instruction about the regenerative braking in the vehicle, or the effects of harsh braking and acceleration on range, or the function and limitations of driver technology which typically comes with new electric vehicles. There is a clear correlation between collision risk and driver inexperience with the vehicle or vehicle type.

Driver assistance technologies should lower collision rates; however some studies suggest they either make drivers over-confident or they get turned off. In multi-vehicle settings, it can also be problematic for drivers to move between a vehicle which has sophisticated technology and one that forces them to rely solely on their judgement.

Roadworthiness awareness. The messaging around electric vehicles has consistently emphasised the reduced need, complexity and cost of maintaining electric vehicles. As EVs have far fewer moving parts there’s also less maintenance to be done,” claims a UK government guide.

However, this claim, while technically true, doesn’t serve as a true guide to roadworthiness. Electric vehicles need to be maintained in most of the same ways that ICEs do – with tyres, brakes and electrical systems being the top causes of MOT failure at three years.

The Institute of the Motor Industry and the British Tyre Manufacturers’ Association both opposed the government’s proposal to extend initial MOT requirements for electric vehicles to four years, because they both pointed out that electric vehicles failed this basic roadworthiness test more than petrol vehicles, almost as much as diesel vehicles, and tended to fail on more dangerous items, such as excessive tyre wear. 

Claims cost. Automotive risk intelligence company Thatcham Research recently wrote an extensive report examining the impact of electric vehicles on all parts of the claims process. It says that electric vehicle claims cost approximately 25% more to repair and take 14% longer.

Recovery through to salvage: The guidance on recovering electric vehicles is being rewritten, after the independent recovery industry reported its concerns to government. Electric vehicles present several issues when broken down or post-collision, including difficulty accessing vehicle diagnostics, the need to disconnect the drive wheels, the need for a flatbed and then the difficulty of finding a bodyshop prepared to accept a vehicle which may require a quarantine zone due to fire risk.

Difficulties of assessing battery safety. If there is any risk of a Li battery being compromised in a collision, beyond the most cosmetic of scratches, it becomes very difficult for anyone, currently, to assess or certify its state of safety. Thermal runaway, the process by which compromised cells start to generate heat exponentially is a serious fire risk. Therefore the industry may see higher total loss levels due to a lack of assessment and repair capabilities for batteries. Thatcham Research says that the value of an electric car is outstripped by the cost of battery replacement at just one year old.

Conclusion: Electric vehicles bring us many societal and climate benefits. However for the insurance market, they could radically change claims costs and risk exposure.