EVs are becoming more popular in Australia – What are the worries about insurance?

One long-standing misconception about electric vehicles (EVs) was debunked by Luke Kelly, director of Fuse Fleet Underwriting (seen above), in an interview with Insurance Business. IB wanted to know if Kelly has heard of any insurance claims related to fires caused by EV batteries.

According to popular belief, electric vehicles pose a significantly higher fire danger than traditional combustion-powered automobiles. No way, he firmly stated. “So far, no claims related to battery fires have been reported in our fleets.”

According to Kelly, his company insures a portfolio of mostly light commercial vehicles, including several thousand electric vehicles.

“Show it this way,” he instructed. “Battery fire is the exact opposite of what I envision when I consider the dangers of electric vehicles.”

According to Kelly, the two most significant concerns associated with electric vehicles are the high cost of parts and the reliability of service providers.

For the most part, he believes that is what is causing problems for insurers.

Electric vehicle use is on the rise

Nevertheless, he is optimistic that Australia’s shift to electric vehicles is progressing smoothly, notwithstanding these challenges.

He spoke about the fact that adoption will take place.

According to the Electric Vehicle Council (EVC), 9% of all vehicles sold in Australia are electric vehicles. The usage of electric vehicles has increased significantly, especially among car fleets, which are frequently covered by brokers. From a pitiful tally a decade ago, the EVC anticipates that approximately 180,000 will be traveling by the year’s end.

“That aligns with our investment portfolio,” Kelly stated. Ten percent of the fleets he monitors now have electric vehicles, up from two to three percent just three years ago, he said.

Why is the use of electric vehicles increasing?

Kelly added that they are seeing “a lot more” requests from fleets interested in purchasing electric vehicles. This electric surge, he added, is due to three primary factors.

He concluded by saying that electric vehicles’ reduced emissions and positive impact on the environment “truly align with everybody’s goals in terms of sustainability and where we want to go.”

“If a corporation isn’t identifying and paying attention to that need, they’ve got their head in the sand,” Kelly told the audience.

He also mentioned energy efficiency as a financial incentive for fleets, which is another driver.

“They’re actually more cost-effective for fleet owners in the long term due to their significantly more efficient energy conversion compared to combustion engines,” he explained.

There are financial incentives for businesses to switch to electric vehicles, according to Kelly. For electric vehicles priced below $78,000 in New South Wales, for instance, there are incentives such as reduced registration fees and the elimination of stamp duty.

We’re also finding that EVs’ connectivity and telematics capabilities can help us evaluate and control hazards a little better than with conventional cars, he added.

An insurance product that employs telematics for fleet risk management is the brainchild of Kelly’s organization.

When it comes to electric vehicle insurance, what are the most significant dangers?

Nonetheless, he did mention that the high cost of EVs and repairs is one of the biggest issues with EVs. In Kelly’s opinion, insurers can step in and help out.

“If brokers and consumers are embarking on the electric vehicle purchase journey, they need to be more data-savvy and diligent because it’s not yet as simple,” he said.

When opposed to purchasing a conventional gas-powered vehicle, Kelly said that there are certain obstacles to overcome due to the nascent nature of the electric vehicle market and the novelty of the available types.

According to him, there is a significant price difference between electric vehicles; therefore, the market is still far from reaching maturity in this area. “I get it. The insurers’ pricing models and repairers mostly don’t know what they’re doing when it comes to these vehicles, and they don’t have the expertise to fix them right now.”

He lamented that “they [insurers and repairers] haven’t really had the time [with EVs] that they’ve had with other vehicles,” which is leading to escalating repair prices for electric vehicles.

Repair time is affected by “the parts availability” or “the lack of knowledge about how to procure those parts,” according to Kelly. “The insurance industry and other stakeholders are particularly affected by the manufacturer’s engagement with stakeholders, the type of vehicle they produce, and the battery and new safety technologies.”

According to him, insurers are not currently offering “no relief” on pricing.

In Kelly’s opinion, the industry needs to improve in that area. The pricing difference that we’re seeing, especially in the retail sector, is real, and Kelly acknowledged this.

To better understand the repair cycle, he thinks insurers should engage with EV producers more.

Kelly added that anyone with a stake in the sector should educate themselves on which electric vehicles pose the least amount of danger.

“There are stark differences, including in terms of the fire risk of a battery,” he noted, avoiding specific brands or names. “In my opinion, this is a teaching piece.”