Udayan Joshi, President – Product, Underwriting & Reinsurance at Liberty General Insurance demystifies EV adoption and insurance:
India is the world’s 4th largest car manufacturer with EVs now claiming a significant stake in the personal vehicle category. The year 2022-23 saw the highest-ever battery vehicle sales.
Some Indian customers are interested in EVs as they think EVs will reduce running costs in the long run. Others are interested in EV technology and the desire to do good for the environment. The EV intenders believe that the EV provides lower cost per mile compared to petrol/ diesel vehicles and there is a choice between hybrids and fully electric.
The increasing adoption of electric vehicles worldwide has resulted in a higher demand for insurance coverage specifically designed for these vehicles. Stringent emission norms enforced by regulatory bodies and rising environmental concerns have accelerated the adoption of emission-free electric vehicles, further driving the demand for EV insurance.
Global EV insurance market
The global EV insurance market is flourishing due to the increasing adoption of EVs, government incentives and regulations promoting electric mobility, rising environmental concerns, advancements in vehicle technology, and the growing need for specialized insurance coverage for EVs.
Factors like awareness, distribution network, and infrastructure necessary to support electric vehicles.
BlueWeave Consulting, a leading strategic consulting, and market research firm, in its recent study, estimated the global EV insurance market size at $38.93 billion in 2022. During the forecast period between 2023 and 2029, BlueWeave expects this to grow at a CAGR of 39.68%, jumping over 10X in value by 2029 to reach $401.59 billion.
Urban v/s Non-Urban
Liberty General Insurance receives much of its business from the top 20 cities of India for EV insurance. Udayan says: “While we still see a higher share of urban markets in overall EV demand, we expect the transition from ICE vehicles to EVs to gain pace in non-urban markets over a period, on the back of the overall EV ecosystem expanding.”
Popular brands & insurance calculation
Most of the OEMs working actively in this space and making EV models available to their target customer segments appear to be a priority. Udayan speaks: “Going by the choices exercised by customers in our book, the most popular EV car brand is Tata, as they have been an early mover, offering a wide range of options with many models and variants across different segments.”
Electric vehicles are structurally different than conventional IC engine vehicles. Accordingly, the premium rates for electric vehicles are determined using various risk parameters such as kilowatts (KW) of electric motor power of the vehicle, geography, age of the vehicle, claims history, cost of spares, etc.
Udayan shares more details: “Excluding the impact of subsidies, we see EVs currently having a higher cost than the conventional ICE vehicles for similar models now. However, purely from the insurance rate standpoint, it’s not costlier to insure EVs. The third-party premium rates are 15% lower for EVs compared to non-EV vehicles.”
Trends in EV insurance claims
As per Udayan, these are still early days to draw a firm conclusion on the claims experience specifically attributable to the ‘electric’ nature of the vehicles. Udayan further added: “In some instances, we have noted that claims arising due to undercarriage damages impacting the battery are expensive to repair. Broadly, the availability of child parts and reparability of battery is going to play a critical role in claims ratios for insurance companies in the longer run. Also, it shall be interesting to see how these vehicles respond to situations like water inundation/floods.”
Liberty General Insurance has built strong distribution capabilities to provide insurance protection to customers of various automobile OEMs. The company provides EV insurance solutions to customers of almost all manufacturers of electric 2-wheelers and electric cars.
Udayan concludes: “Recognizing the need for additional coverages, we have designed and launched add-ons to offer comprehensive protection to EV owners.”