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Own damage claims common among EV owners

In an exclusive chat, Shashi Kant Dahuja, Chief Underwriting Officer at Shriram General Insurance, shares the trends in the EV insurance market:

Own damage claims common among EV owners

Ravi Lalwani: What are the trends in EV sales?

Shashi Kant Dahuja: As per current data observed from the Vahan portal, over 2.7 million EVs are registered in India. Considering the plentiful value that EVs offers in reducing fuel consumption and improving the environment, the government of India has set a target of EV sales penetration of 30% for private cars, 70% for commercial vehicles, 40% for buses, and 80% for 2 & 3-wheelers by 2030. To strengthen the EV ecosystem and boost sales, numerous incentives are being offered to buyers and this will attract new start-ups to spread their wings in the Indian EV space in the coming years and eventually lead to an increased insurance penetration in the EV segment. The government has also taken many steps toward facilitating EV growth, such as simplifying the loan application procedure, offering income tax rebates, and enabling a robust battery charging infrastructure. As a result, the end consumer can purchase electric vehicles in exchange for a significant tax rebate and finds it relatively cheap to drive them. What’s more, an EV has negligible maintenance costs too. With all these advantages, the future of electric vehicles in India is very illuminated.

From which cities does your company receive a majority of the requirements for EV insurance?

In India, the electric vehicle landscape is rapidly changing and the future is incredibly bright for both the rural and urban regions. Electric vehicles have proven to be a cleaner alternative to fuel-powered vehicles. Notable for their fuel efficiency, EVs can be a cost-effective way to reduce operating expenses. Given the soaring fuel prices, this is a huge advantage for EV acceptance in India.

It’s evident that EV is the most targeted vertical for insurers in recent times and Shriram General Insurance (SGI) is also geared up to join the Indian EV bandwagon. SGI is therefore eyeing the EV vertical development on a larger scale. Currently, the top cities contributing to the EV insurance business for SGI are Delhi, Gurugram, Noida, Jaipur, Guwahati, Bhopal, Lucknow, Moradabad, and Varanasi.

Which are the popular EV vehicles and brands among your customers?

The most popular EV category popular among our customers is 2-wheeler and the most popular brands are Hero Electric, Okinawa Scooters, YC Electric Vehicle, and Kinetic Greens.

How is the premium for EVs determined? Instead of engine cc, is it power or battery capacity or some other factor that determines the insurance premium?

As per, The Motor Vehicles Act of India, 1988, third-party liability insurance is a mandatory requirement for all vehicle owners. The Insurance Regulatory and Development Authority of India (IRDAI) regulates third-party insurance premiums and considers the electric motor’s kilowatt capacity (kW) for calculating the premium for third-party insurance. So, unlike the internal combustion engine vehicles, where the premium is calculated considering the CC, it’s KW that is considered for EV premium calculation.

The comprehensive insurance includes both third-party insurance and own damage (OD) cover parts. The OD cover provides financial protection against damages or losses to the insured e-vehicle. Unlike the TP premium, here the insurer decides the own damage component of the comprehensive insurance. The major factors deciding the OD insurance premium are the vehicle model and make, current IDV, no claim bonus, etc.

Is it costlier to insure EVs compared to fuel vehicles?

Even though the EV running cost is cheaper, buying an electric vehicle is more expensive when compared to a fuel-based vehicle. Hence, the Insured Declared Value (IDV) is also high for EVs. The higher the IDV, the higher will be the vehicle insurance premiums. IDV is one of the important factors used for determining comprehensive car insurance cover premiums. In addition, EVs being more sophisticated than non-EV, the risk assessment is done accordingly and due to aforesaid reasons, the insurance premium is relatively high. However, third third-party insurance premium of the EV is cheaper than the fuel-enabled vehicles.

What trend have you observed in claims?

There are 2 types of claims: own damage claims and third-party claims. The own damage claims are applied for own damages caused to the vehicle due to factors related to accidents, natural calamities, etc. Whereas the third-party claims financially protect the insured against any third-party liabilities. We have observed that the own damage claims in electric vehicles are significantly higher than the claims received for third-party losses.

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