Recently, the Australian Capital Territory (ACT) became the first in the country to announce an end to the sale of petrol cars. Under the Zero Emission Vehicle strategy the ACT will phase out internal combustion engines by 2035.
“We are heading down a path that the internal combustion engine vehicle will be as much of a novelty as a cassette tape or a black-and-white television in the context of technological change,” said ACT chief minister, Andrew Barr.
As more governments around the world announce the phasing out of petrol cars, what are the insurance implications for brokers and insurers involved in fleet management?
“Overall, this global movement toward electric vehicles is a monumental time in history,” said Greg Thomson (pictured above), risk engineer with Zurich Resilience Solutions (ZRS), the risk engineering wing of the global Swiss insurer. ZRS focuses on reducing risk and improving the resilience of companies that manage motor fleet operations.
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Thomson said it’s inevitable that the presence of electric vehicles (EVs) globally is set to increase.
“There are always going to be issues and challenges to work through but, as time goes on, when infrastructure, culture and education get better and EVs are developed enough to match our individual requirements, one day having an ICE (internal combustion engine) vehicle will be seen as unique,” he said.
Thomson suggested the ACT was ideally suited to ending petrol cars.
“I am not surprised by the approach which ACT are taking on the banning of petrol cars,” he said. “When considering the locality of this movement being in a very high government worker demographic, a reasonably isolated and wealthy city of Australia, it does not come across as being overly radical and, to some degree, due to its unique position, it is seen as a symbolic step.”
Thomson compared the approach to European moves towards banning petrol cars but said, unlike in Europe where the governments are aligned on EV policy, in Australia the situation “appears to be very disjointed state by state.”
However, he expects the high proportion of government and corporate vehicle ownership in the ACT to make the adoption of the petrol ban strategy “reasonably swift.”
Thomson said he has a number of questions about how the rural sector of that territory – which is reliant on diesel four-wheel drive vehicles – will cope.
“What will the impact of this added demand for EV vehicles be in an already restrictive supply market?” he said. “With ACT being the capital of Australia, will this be the testing ground for other states of Australia to decide their next move?”
In terms of Zurich’s involvement with electric cars and discussing them as an option with fleet clients, Thomson said ZRS recently employed two engineers from fleet management firms where EVs were in operation.
“If a business (whether it be insured or not with Zurich) were to express interest in acquiring EV vehicles, ZRS are very capable of working with them to ensure they have a full understanding of EV ownership and their associated risks,” he said.
However, he said Zurich does not favour one brand of EV over another.
“We can help project manage the beginning of a fleet’s decarbonisation, from improving fuel efficiency, augmented fleet utilisation, through to assisting the careful selection of EVs fit for purpose and even project managing the introduction of EVs and helping with driver familiarisation,” he said.
Thomson outlined the range of risks and other considerations specific to electric cars, including battery related fires and crash management practices, charging station servicing and maintenance programs, the radius range of EVs, access to breakdown services and possible cyberattacks.
He also said a fleet’s adoption of EVs could enhance recruitment and retention of employees by being in tune with the generally more environmentally conscious younger generations.
There are also other benefits from a corporate fleet perspective.
“The biggest benefit is zero carbon emissions which is a good way of promoting and advertising corporate, social and moral responsibility and commitment toward sustainability,” he said, noting that operating a motor fleet is often one of the higher contributors to an organisation’s carbon footprint.
Thomson said employees who receive EVs as part of their employment package “have generally embraced the change.” However, he said, there’s a necessary adjustment of driving habits due to the need to find charging locations.
EVs also have a high initial purchase price compared to that of a comparable ICE vehicle.
“The benefit, however, is realised in the low operating cost which is seen in the OPEX balance sheet,” he said.
Thomson said one change in the EV space is Fleet Management Organisations (FMOs) offering these vehicles to their customers on lease arrangements.
“However, there can be significant delivery times,” he said. “Corporates need to sign up early and plan ahead to ensure that their fleet needs are met.”
Thomson said, in anticipation of their increasing adoption, utility providers are forecasting added power requirements and adding infrastructure to meet the demand for vehicle charging.
“Emergency services are receiving education on how to safely deal with a serious event involving an electric vehicle and EV end-of-life planning is starting to become a common topic among FMOs, owners, repair and maintenance providers and insurance businesses,” he said.
Thomson said there are always going to be challenges to work through.
“As time goes on, when infrastructure, culture and education get better and EVs are developed enough to match our individual requirements, one day having an ICE vehicle will be seen as unique,” he said.
The twilight days of the internal combustion engine could be closing in.
Apart from the ACT, a number of countries are planning to ban petrol cars. Norway was the first nation to announce a ban which will come into force in 2025. France plans to ban petrol cars by 2040.
According to news reports, Costa Rica was on track to be the first country to actually implement a ban in 2021. However, an online search brings up numerous firms in Costa Rica still offering petrol and diesel vehicles for sale or rent.
