Electric vehicle (EV) sales globally are forecast to grow 30% per year.

?Close to 14 million 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 73 million units estimated to be sold in 2040.?

EV adoption creates new insurance risk features due to changes in driving behaviours, usage, repairability and vehicle features.?

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.?

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. In the US repair costs were on average 26.6% more for EVs, Germany 30%-35% and UK 35%.?

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.?

The EV insurance market is forecast for double-digit growth in the coming years but underwriting profitability is challenging. Despite high premiums, insurers saw combined ratios of over 100% for EV insurance in 2023.?

The new risks and repair costs associated with EVs can lead to challenges for the insurance industry. In China the average EV insurance premium for drivers was 81% higher than for standard motor in 2023, and similar for European markets. The average UK premium for EVs jumped to GBP 1344 (USD 1700) at the end of 2023, around double the cost of cover for ICE cars, according to UK broker Howden. However, the premiums may still not be covering the underwriting losses.?

For the full version, please?click here Insuring electric vehicles | Swiss Re?