Risks from electric vehicles

Risks from electric vehicles - Tracking the changes in risks from automobile insurance

Climate action is a pressing issue for the entire globe, and a transition away from fossil fuels is urgent. Transport accounts for more than a third of CO2 emissions from end-use sectors, and vehicles will need to switch to non-gasoline fuels. Countries around the world are implementing measures to switch to electric vehicles (EVs), providing various subsidies and tax exemptions. In addition, rising oil prices have spurred a shift to EVs, which have seen rapid sales growth in Europe and China. In Japan, hybrid vehicles have become mainstream, but a further shift to EVs is expected in the future.
EVs differ from gasoline-fueled vehicles in their body structure and function, and also in the risks related to their ownership, use, and/or maintenance. There have been attempts to pass on these risks through automobile insurance, but what accidents occur and the nature of the damages incurred may change. We must wait until a sufficient amount of insurance data has been accumulated to quantify these changes, however, empirical verification of EV safety is being carried out by various people/institutes in concern.
As the increased use of EVs brings about changes in risk, the insurance industry will need to address EV risk in the following ways.

• Risks from lithium batteries
  It is the lithium battery that characterizes the risks from EVs. From an insurance point of view, the increased risk due to the characteristics of these batteries should be carefully monitored, not only in the case of automobile insurance for ownership, usage, and management, but also in the case of, for example, cargo insurance when these vehicles are being transported as a commodity or liability insurance related to the manufacture and sale of EVs.
•  Battery replacement and recycling
  Insurance is embedded in the supply chain in that it is responsible for repair and replacement costs in the event of an accident. From a sustainability point of view, a mechanism with less environmental impact is required. 
•  Addressing risks arising from EV characteristics
  Other EV characteristics, such as weight, quietness, propulsion, and sudden stops due to regenerative braking, can also affect risk. Research is also underway to make EVs safer. 
• Addressing risks at insurance companies
  It will take time for insurance data to accumulate before EV risks are reflected in insurance rates. At this stage when technology is rapidly developing, it will be necessary to work with automakers and research institutes to recognize what risks are changing. There still is room to consider insurance schemes that better capture the risk characteristics of EVs. In addition, it is expected to improve customer convenience by, for example, expanding the service network so that repairs can be made smoothly in case of an accident.

【Examples of distinctive EV insurance coverage and services】

Source: Overseas insurance company websites