The insurance industry must adapt to new demands as more drivers transition to electric vehicles (EVs), according to Dawes Underwriting Australia (Dawes).
Electric vehicle sales in Australia hit record numbers last year, driven by increased Environmental & Social Governance focus, according to the Federal Chamber of Automotive Industries.
Tom Hall, senior technical underwriter at Dawes Underwriting Australia, said the growth presents specific challenges for insurers and underwriting agencies.
“It’s not difficult to see why EVs have taken off over the past few years,” he said. “Besides the green credentials EVs provide, they have lower running costs, reduced emissions, improved fuel security, and a balanced energy supply.”
He pointed out that while insurers have extensive data on conventional vehicles to predict issues and repair costs, the relative newness of EVs brings uncertainty to premium calculations.
“When insurers calculate premiums for popular and conventional vehicles, they draw on years of statistics on what might go wrong and the cost of repairs. But the relatively short history with EVs means there’s still uncertainty in the market,” he said.
Dawes has been involved in specialised motor vehicle insurance for 37 years and was one of the first to offer EV insurance in Australia, starting with Tesla in the early 2010s.
This year, the agency introduced enhanced insurance products for specialised vehicles and motorcycles, with additional provisions for EVs. New features include a $1,000 sub-limit for alternative transport if a power outage prevents charging and up to $2,500 for repairing charging points damaged by insured EVs.
“These changes reflect Dawes’ commitment to modernisation and adapting to a fast-changing market,” Hall said.
Although insurance for EVs is becoming more common, concerns remain, particularly regarding the risk of battery fires.
“Some insurers cover thermal run-away battery fire, and others don’t, which is a good example of why it’s so important for EV owners to receive specialised advice and understand the fine print of their insurance cover,” Hall said.
Crawford & Company recently called on insurers and underwriters to take proactive measures in assessing and mitigating risks related to lithium-ion batteries amid the rise of EVs in the country.
Echoing Crawford & Company’s advice, Hall stressed the need for brokers and insurers to offer more risk mitigation advice, such as proper charging practices.
“EVs are a great option for people and companies looking to reduce their carbon footprint, and it’s important that they can access expert advice and understand the need for specialised cover,” he said.
