Gearing up for the electric vehicles ecosystem

More than a fifth of total CO2 emissions currently come from the transport sector. EVs offer an opportunity to significantly lower these emissions. However, there are hurdles to EV adoption. Some of these challenges (outlined in Figure 1 below) are customer facing (such as range anxiety, inadequate charging infrastructure, heavier vehicles); while others are production related (availability of materials, quality control, unknowns of battery or vehicle degradation). The question is whether insurers are ready to face these challenges and create EV-specific risk coverage products.

In this publication, we have guided the reader through a forward-looking and holistic view of EV ecosystem risk, focusing on the vehicle use phase. The EV industry is evolving. Traditional vehicle insurance models are no longer enough to accurately capture the overall risk. We need risk models that can focus on the particularities of EVs; of the driving experience of an EV; unique features of an EV; as well as repair and maintenance challenges (refer Figure 2 below).

Figure 2: EV usage and repair risks

Ultimately, it is about finding the sweet spot where environmentally friendly modes of transport (with a low carbon footprint across the value chain of production, use and disposal) meet financial viability for all ecosystem players (OEMs, insurance and service providers). Advancements in technology and the use of data as well as innovative insurance solutions will play a central role in the journey to arriving at the optimum balance.

In Part II of the EV risk radar, we will explore in detail the unique challenges facing EVs in the construction, manufacturing, transportation and disposal phases of the value chain.