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EVs are a growing opportunity for insurers, but pose near-term challenges

Global sales of electric vehicles (EVs) are growing fast and emerging as a new risk pool for the motor insurance industry, according to an "Economic Insight" report published by Swiss Re Institute.

The market for EV insurance is growing rapidly in line with the sales of EVs. Estimates place the insurance market size at over $200bn globally by 2030 versus $51bn in 2022. EV driving behaviours, repair costs and vehicle risks are impacting underwriting profitability and may require closer links between carmakers and re/insurers, note the report’s authors. Ms Xin Dai, chief economist (China) and Mr Roman Lechner, P&C economic research lead, both of Swiss Re Instiute.

Close to 14m EVs were sold globally in 2023, up 35% year-on-year and accounting for 18% of all car sales. The International Energy Agency (IEA) expects EV sales to grow at an average ~30% annually from 2022-30. EVs are expected to be half of all new car sales globally by 2035, with 73m units estimated to be sold in 2040.


EV adoption is establishing new driving behaviours, vehicle risks and repairability that create new risk features for insurers.

The key new driving behaviour is that EVs accelerate very abruptly from a stationary position compared with internal combustion engine (ICE) cars. This can create a higher probability of accidents and collisions causing own damage in crash tests. In China, an insurer has stated that the EV accident rate is nearly double that of ICE vehicles, attributed partly to a higher share of EVs in commercial use. EV vehicle risks centre on charging infrastructure installation and operation, and battery-as-a-service solutions such as battery swapping. Accumulation of fire and explosion risks also raise property- and liability-related exposures.

EV repair costs are generally being found to be higher than ICE cars. A US study in 2022 found total repair costs were on average 26.6% more for EVs. This is confirmed by a study in Germany, which exhibited 30%-35% higher costs, and UK data showing 35% higher EV accidental damage costs.

There are several reasons: the main engine plant and battery are at the front of the car; EVs have more digital sensing or laser/radar devices that create higher costs for repairs. EVs typically need more labour time for diagnostics and calibrations due to their high use of embedded software and driver assistance systems, and many EVs are highly integrated, so harder to repair.

To support sales, EV producers are acquiring their own insurance licences, and some are partnering with insurance companies to offer risk covers. However, the new risks and repair costs associated with EVs can lead to challenges for the insurance industry.

Deeper co-operation between re/insurers and EV producers may help to overcome the near-term underwriting challenges. EV producers know their vehicles' risk features and are accumulating driving data, while insurers are accumulating claims experience. Joint innovation could support EV insurance that integrates insureds' driving behaviour, or provides customised or added-service solutions to insureds, for example on repairs and maintenance.


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