There is a clear role for insurers in Australia to unlock the opportunities offered by the growing Electric Vehicle (EV) market, as well as to manage any potential risks, says the Insurance Council of Australia (ICA) in an industry paper.
The paper, titled, “Charging Ahead: Electric Vehicles & Insurance”, says that it is estimated that EVs will account for 72-99% of Australia’s new vehicle sales by 2050 (up from 4% in 2022), depending on the specific scenario.
Research indicates that road registered EVs do not present a greater risk of fire occurrence than internal combustion engine (ICE) vehicles. Data in global markets, including the UK and Sweden, also suggest that fires in EVs are less common than in vehicles that utilise a combustion engine, however, when EV battery fires do occur, they need to be managed differently and may require more time, resources and water to manage the incident.
Standards
In Australia, EVs and EV charging infrastructure are subject to regulations and testing that are considered by insurers when assessing risk. These include Australian standards for EV charging infrastructure, Australian Design Rules focused on high-voltage electrical components, and the National Construction Code which sets minimum requirements for EV charging within new developments.
As the Australian market matures and EV charging technologies continue to evolve, regulations and standards will need to keep up with the pace of change.
There is also an opportunity for the government and the industry to work collaboratively on evidence-based risk modelling to inform decision-making on the transition to electric vehicles.
The cost of insuring an EV can vary when compared with ICE vehicles due to a number of factors, such as the higher value of the asset being insured, delays in repair, and increased repair costs.
There are opportunities to tackle some of these challenges, including via government investment in the upskilling of existing technicians and training new technicians to work on electric vehicles and associated infrastructure.
Next 10 years
The next 10 years also offer a critical window of opportunity for the insurance industry to continue playing its part in enabling the transition to EVs, from supporting driver education and partnering with EV charging providers, to collaborating on repairs and offering tailored insurance products.
To read the industry paper, please click here.