Transitioning to EV will not remain static as the insurance sector collaborates to drive down insurance costs.

The transition to electric vehicles is slow but making progress in the UK as market share reached 17.6%[i] in May 2024, and there have been reports of a 72%[ii] increase in quotes for EV insurance. However, it is still very early days for insurance providers to fully understand the differing risks of the growing choice of EVs. In the meantime, the market contends with higher claims costs for repairs, a factor that is being reflected in premiums.

It makes sense then to look at more established markets like the U.S. and China[iii], where EVs already make up over a third of the car parc. This is helping us to understand the differences in Combustion Engine (ICE) vs. EV driving dynamics and claims frequency. For example, there’s a higher claims frequency from drivers who are new to driving an EV and becoming accustomed to the different dynamic driving style. Higher power and torque, plus the characteristics of brake regeneration, will also cause the vehicle to drive differently, and the driver needs to adjust to this. Familiarity must therefore be a key factor in risk assessment at this early stage of EV adoption, and we’re on the cusp of delivering that valuable insight to motor insurance providers.

Perhaps one of the most fundamental ways to lower the cost of EV insurance is through industry collaboration. Many EVs have sophisticated technology and safety systems that need specialist knowledge or equipment to repair, and repairers need time to adapt. If the automotive sector works together, staff training and the equipment needed will become more quickly established. Consider Advanced Driver Assistance Systems (ADAS), today; many repairers have this repair equipment in house or can call upon specialist services to complete the work faster and more economically. As EVs typically have 20-30% more ADAS features than equivalent ICE vehicles, collaborating on repair knowledge could make a huge difference to EV claims costs.

Data sharing surrounding battery diagnostics, repair and recycling could also help reduce claims costs. It is important for diagnostics and repair methods to be publicly available. Indeed, Thatcham Research is leading the charge here, working with EV manufacturers to help progress repair methods and training.

Meanwhile data solutions are being developed to increase the knowledge pool surrounding battery health. LexisNexis Risk Solutions is actively working to gather actionable data, identifying specific details on EVs in areas like battery type and drivetrain (the components of a motor vehicle that deliver power to the drive wheels). Knowing whether a specific battery could be repaired in the event of an accident could make all the difference to a pricing decision at the point of quote.

As data enrichment advances in this way with the help of collaboration, we can help ensure the cost of EV insurance is not a barrier to adoption.

Content provided by Andrew Ballard, product principal, LexisNexis Risk Solutions UK&I.

[i] https://www.smmt.co.uk/vehicle-data/car-registrations/

[ii] https://www.confused.com/car-insurance/price-index

[iii] https://cleantechnica.com/2023/11/05/25-bev-share-in-china-china-ev-sales-report/#:~:text=Plugin%20vehicles%20are%20all%20the,to%20continue%20this%20record%20streak.