The Australian Automobile Association’s (AAA’s) EV Index shows the country is on track to reach 100,000 annual EV sales in 2024. According to the Electric Vehicle Council, the data released this month shows that, for the first time, more than 30,000 EVs were sold during the second quarter of the year.
“These sales figures are without precedent, which is extremely encouraging given the broader economic pressures with high interest rates and the cost-of-living limiting people’s ability to purchase new cars,” said Samantha Johnson, CEO of the Electric Vehicle Council.
Rising fuel costs and environmental concerns are likely two reasons for the growing sales. Another significant factor is a greater number of appealing EV models to choose from. According to the NRMA, there are currently 31 car brands selling EVs. By next year, the NRMA expects Australia to have as many models as the UK which has more than 120.
However, despite growing popularity and the big savings that come from ditching petrol, cost driven insurance challenges remain.
Parts of the industry are moving to meet these challenges. Some insurers are offering EV-focused coverages and brokers are also facilitating new telematics-based offerings.
In July, Zurich Australia (Zurich) announced a deal with Tesla that makes it the “preferred” insurer for the American multinational’s EVs in Australia. In March, the insurtech KOBA Insurance (KOBA) launched a telematics-based insurance product for EVs.
KOBA CEO Andrew Wong (pictured above) said that one industry challenge is, traditionally, car insurance pricing models haven’t gone to the level of granularity that is possible now with new technology and data.
“For the most part, insurance is [still] built around who you are,” said Wong. “So your age, gender, where you live, who’s driving the car, the value of the car itself and your past claims history.”
He said these are the main contributors to the policy premium - together with the car type, its value and access to parts if repairs are needed.
However, Wong said other risk-related ingredients are starting to impact the premium price offered by motor insurers - for example, telematics data and its driver risk assessments that can inform insurers around whether a driver’s driving style is high or low risk.
Telematics is showing early signs of effectively reducing claims numbers and bringing down insurance costs for all types of vehicles.
Anthony Saunders, from the brokerage Insurance Choice, recently told Insurance Business about a telematics-based motor insurance policy he arranged last year for a fleet of cars run by the non-profit Pathfinders.
However, EVs have other insurance issues including the relatively higher cost of parts and sometimes longer repair times.
Luke Kelly, director of Fuse Fleet Underwriting, said brokers and customers can control some of these costs by understanding that different EV makes and models can have very different risk profiles.
In an IB interview he suggested brokers and fleet managers considering EVs should make choices based on the cost and availability of parts, particularly the lithium-ion battery. Also, whether some of the new tech – like autonomous driving capability – is really needed because these will drive up repair costs. The availability of charging stations, said Kelly, should also be looked at.
Industry sources have also suggested that some design features of EVs can drive up insurance costs.
IB has found that some EV models have charging ports – an expensive component to repair according to brokers – at the front. For example, the MG ZS and Nissan LEAF
Wong said he hasn’t heard about the position of charging points being a particular issue.
“But there definitely are key concerns around the models of the cars, the cost of the parts, the frequency in which the parts are replaced and the damage which different parts of the car can take,” he said.
However, he said one risk and insurance issue that some EVs do have is their oversized windscreens.
“I think the big one with most EVs that we’ve seen, that we talk about more so than anything, is the windshield,” said Wong. “These days there’s so much more tech in windshields.”
He said the sheer size of some EV windscreens can be an insurance cost issue.
In some Tesla EV models, for example, not only is the windscreen large compared to many other cars, but some parts of the roof are also made from glass. Online estimates show that replacing the windscreen of some Tesla models can cost at least $2,000, much more than many other vehicles.
“That does have an impact on risk and insurance and premiums, right?” Wong said. “If you have a huge piece of glass to replace [also in the roof] you can crack that but you can’t really crack a ceiling in a regular car.”
He said that would be considered in risk calculations.
“The frequency of those types of repairs are higher,” he said.
Battery fires are another EV risk. However, despite recent media reports focusing on battery fires, some connected to scooters, the number of fires started by overheating or malfunctioning car batteries is very small.
“I think it’s important to understand the difference between a car fire and a battery fire,” said Wong. “A battery fire is a fire that is sourced or originated from the battery itself, a problem with the battery overheating and things like that.”
He said since EV uptake began to pick up in Australia almost a decade ago there have been less than 10 car battery fires.
Are you an insurance professional involved with EVs? What are the challenges? Please tell us below
