This article is by Andrew Ballard, product principal, LexisNexis Risk Solutions UK&I. It looks at how the industry can adapt to the challenges posed by EV insurance claims and repairs.
The transition to electric vehicles (EVs) in the UK is progressing steadily. There has been a reported 72% increase in quotes for EV insurance and market share of newly registered EVs reached 17.6% in May 2024. It is still early days, however, for insurance providers to fully grasp the varying risks of electric vehicles and the higher claims arising from higher parts cost and longer repair times. These increased costs for repairs are having a knock-on impact on premiums, undermining the otherwise lower running costs of these vehicles.
By looking at more established markets like China, where EVs already make up over a third of the car parc, it is possible to see the differences in Combustion Engine (ICE) vs EV driving dynamics and claims frequency.
At LexisNexis Risk Solutions, what we have learnt is that there is a higher claims frequency among drivers who are new to driving an EV. These drivers are still becoming accustomed to the different driving dynamics, including the higher power, torque and regenerative braking which is possibly the most significant difference. In essence, regen braking as it is commonly known, feels like someone is gently applying the brakes as soon as the foot is taken off the accelerator pedal. Most cars allow the driver to alter how forcefully the regenerative brakes are applied.
It would make sense then that a driver’s experience and familiarity with EVs becomes a key factor in risk assessment during this early stage of EV adoption.
COSTS
With regard to repair costs, many EVs feature sophisticated technology and safety systems requiring specialist knowledge or equipment to repair. Repairers need time to learn these new skills and acquire specialist tooling. However, closer collaboration between car manufacturers, insurers and repairs could accelerate access to training an equipment, ultimately reducing repair costs and insurance premiums.
Take Advanced Driver Assistance Systems (ADAS), EVs typically have 20-30% more ADAS features than equivalent ICE vehicles based on LexisNexis Risk Solutions analysis. Many repairers now have the correct repair equipment for ADAS Calibration in house or can call upon specialist services to complete the work faster and more economically. Therefore, if ICE and EV repairers joined forces on repair knowledge, this could make a tangible difference to EV claims costs.
Data sharing surrounding battery diagnostics, repair, and recycling could also help shrink claims costs. Making diagnostics and repair methods publicly available is vital. Indeed, Thatcham Research is leading the charge here, working with EV manufacturers to advance repair methods and training.
Finally, battery costs need to be considered when assessing insurance risk, knowing that EV batteries can range in priceiii from around £2,000 to £20,000 with the average cost for a High Voltage electric car battery £7,235.07
Complementing the insights we are already offering on the presence and performance of ADAS in EVs along with ICE vehicles, data solutions are being developed to further enhance the knowledge pool surrounding EVs, including driver familiarity, battery health and drive train.
Knowing at point of quote, for example, the cost to repair or replace a battery in a claim could significantly influence insurance pricing decisions, as well as speed up the repair process. As data enrichment advances through greater collaboration, we can tell insurance providers more about the risk of each specific electric vehicle to help bring down the cost of insurance and play our part in ensuring the transition to EVs keeps moving ahead.
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