You only have to glance at Autotrader or various car auction results to see how rapidly some EV vehicles lose their original retail value. The recent inroads made by BYD, OMODA, Chery and JAECOO have also hammered the values of so-called premium EVs, as renting a Chinese model brand new becomes a much cheaper option than a used BMW, JLR or VW Group EV.
For insurers that means Gap insurance is becoming a must have for many fleets or personal buyers/leaseholders. Here are some thoughts from Jackson Underwriting;
The rapid adoption of Battery Electric Vehicles (BEVs) across UK corporate fleets is creating a new generation of financial exposure for businesses, according to industry experts, with Fleet GAP Insurance emerging as an increasingly important protection for fleet operators.
As businesses continue accelerating towards net zero objectives and electrification targets, many are now encountering the unintended consequences of significant BEV depreciation and complex lease liabilities, particularly where vehicles are written off and contracts are terminated early.
Recent market conditions have seen used electric vehicle values soften considerably, driven by a combination of manufacturer price reductions, evolving battery technology, changing consumer demand and increased supply entering the secondary market. While this volatility impacts all stakeholders, it creates a particularly acute challenge for businesses operating leased or financed fleets.
In the event of a total loss, insurers typically settle claims based on the vehicle’s prevailing market value at the time of loss. However, where depreciation outpaces expectations, businesses can find themselves exposed to substantial shortfalls between the motor insurer’s settlement and the outstanding lease or finance balance.
This issue is further compounded by the fact that many business lease agreements remain unregulated, unlike consumer agreements governed under the Consumer Credit Act. As a result, corporate customers may face significantly more punitive early termination clauses and financial obligations following a write-off or contract cessation.
Industry specialists are warning that many businesses remain unaware of the scale of this potential exposure until a claim occurs.
“Fleet operators have traditionally viewed GAP Insurance as a discretionary add-on, but the economics of EV ownership are rapidly changing that perception,” said Mark McLaren Joint Managing Director, Jackson Lee Underwriting.
“High-value BEVs can depreciate sharply in the early years, and where a leased vehicle is declared a total loss, businesses may still be responsible for substantial outstanding rentals or termination liabilities. Fleet GAP Insurance can provide a vital layer of financial protection at exactly the point companies need it most.”
Fleet GAP Insurance is designed to bridge the gap between an insurer’s motor settlement and the outstanding finance, lease settlement, or replacement cost of the vehicle, it also provides for a temporary replacement vehicle car or van to 3.5t GVW,
whilst the business sources a replacement vehicle, helping businesses avoid unexpected financial losses and maintain operational continuity.
For brokers and intermediaries, the evolving EV landscape presents both a challenge and an opportunity to educate commercial clients on emerging exposures that may not have existed within traditional internal combustion engine fleets.
With BEV adoption expected to continue growing throughout 2026 and beyond, market commentators believe demand for Fleet GAP Insurance products is likely to increase significantly as businesses seek greater certainty around residual value risk and lease liabilities.
Be the first to comment