During an interview with Insurance Business, Luke Kelly (pictured above), director of Fuse Fleet Underwriting, helped put one persistent electric vehicle (EV) myth to rest. IB asked Kelly if his firm is seeing any insurance claims from EV battery fires?
Widespread news reports have implied that EVs are a big fire risk compared to combustion vehicles. “Absolutely not,” he said. “We haven’t seen a claim on a battery fire in our fleets.”
Kelly said his firm insures several thousand EV vehicles across a portfolio of mainly light commercial vehicles.
“Put it this way,” he said. “When I think about my risk with EVs, battery fire is furthest from my mind.”
Kelly said the EV risks that are “front and centre” include the cost of components and the competency of repairers.
“I think that’s what’s challenging most insurers,” he said.
However, despite these obstacles, he’s confident that Australia’s transition to EVs is well underway.
“Adoption is going to happen,” he said.
The Electric Vehicle Council (EVC) says about 9% of all car sales in Australia are now EVs. Car fleets in particular – often sold their coverages by brokers – have experienced a strong increase in EV use. By the end of this year the EVC expects nearly 180,000 to be on the road, up from a negligible number a decade ago.
“That echoes what we see in our portfolio,” said Kelly. He said about 10% of the vehicles in the fleets he covers are EVs, up from 2% to 3% only three years ago.
Kelly said they’re also seeing “a lot more” inquiries from fleets looking to adopt EVs. He said there are three main drivers behind this electric uptick.
He said the environmental side of EVs and their lower emissions “really aligns with everybody’s goals in terms of sustainability and where we want to go.”
“If a business isn’t recognizing and paying attention to that need, they’ve got their head in the sand,” said Kelly.
Another driver is energy efficiency which, he said, is a financial incentive for fleets.
“You’ve really got a way more efficient conversion of energy [compared to a combustion engine] which means they are effectively cheaper in the long run for a fleet owner,” he said.
Kelly said governments are also offering incentives for companies to adopt EVs. For example, in NSW, the incentives include no stamp duty for EVs purchased under $78,000 and registration fee discounts.
“We’re [also] noticing that the potential for connectivity and telematics in the EVs can really help us assess and manage risks a bit more effectively than the traditional vehicles,” he said.
Kelly’s firm is behind an insurance offering that uses telematics to risk manage car fleets.
However, major EV challenges remain, he said, including the expense of both EVs and their repairs. Kelly thinks insurers can play a role here.
“If brokers and consumers are going down the EV purchase journey, they’ve got to drill into the data a bit more and be a little bit more savvy because it’s not yet as straightforward,” he said.
Kelly said because the EV market is still immature and the car models are relatively new there are some challenges compared to buying a traditional combustion vehicle.
“I think we’re not even close to maturity on pricing for EVs in the market - you see such disparity,” he said. “I understand the reasons for that: the insurers’ pricing models and their repairers are generally unfamiliar with the vehicles and they don’t necessarily have the knowledge or know how right now to put these vehicles back on the road.”
He said repairs costs for EVs continue to increase “because they [insurers and repairers] haven’t really had the time [with EVs] that they’ve had with other vehicles.”
“Then the parts availability, or the lack of knowledge about how to procure those parts, also affects the repair time,” said Kelly. “Especially in the context of the battery and new safety technology where it’s really dependent on the make of the vehicle, who’s making it and that manufacturer’s engagement with stakeholders, including the insurance industry.”
He said there’s currently “no relief” on pricing by insurers.
“To me, that’s where we’ve got to get better as an industry,” said Kelly. “There needs to be a bit more work done because the pricing disparity we’re seeing, particularly on the retail side, it’s out there,” said Kelly.
He’d like to see more engagement by insurers with EV manufacturers so they can better understand the repair cycle.
Kelly said industry stakeholders also need to become more knowledgeable about which EVs present a lower risk profile.
“I won’t call out any particular brands, or any names, but there are stark differences, including in terms of the fire risk of a battery,” he said. “I think this is an education piece.”
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