Traditional insurance firms have reportedly had to adapt to high repair costs of electric vehicles (EV) and the rapid pace of adoption in China, Europe and the UK, which has resulted in significant insurance premium rate increases, says Morningstar DBRS.
Even though governments have incentivised the reduction in the numbers of internal combustion engines (ICE) vehicles on the road, it is apparent, that the cost of insuring ZEVs is becoming a obstacle for mass adoption.
Insurers across Europe and the UK have had to adapt to the rapid pace of adoption by proactively reviewing pricing models as more EV claims data are generated.
As a result, this has led to significant rate increases partly because of the higher price tag of EVs , and partly because they simply cost more to repair.
However, in an effort to support sales momentum, a number of EV manufacturers have come up with their own bespoke insurance solutions by creating insurance subsidiaries or partnering with a niche insurance firm (InsurTech) to provide exclusive insurance cover for their brands.
Morningstar DBRS explained that this is a trend that could gain momentum in the near future potentially changing the landscape for private passenger automobile insurance in the future with some premium dollars shifting to insurance subsidiaries of large EV manufacturers or niche auto insurance players that provide exclusive coverage for specific EV manufacturers.
The firm noted however, that it is still too early to predict, and that they do not expect this emerging trend to impact the earnings or credit ratings of their rated insurers in the short to medium term.
However, it is anticipated that the auto insurance landscape may change in future if the new EV brands are able to gain material market share, and decide to continue creating tailored insurance solutions, to make their cars more appealing to the price conscious mass market.
“Insurers in Europe and the UK have had to adapt to the rapid pace of adoption by proactively reviewing pricing models as more EV claims data are generated. This has led to significant rate increases partly because of the higher price tag of EVs and partly because they are more costly to repair,” commented Victor Adesanya, Vice President, Insurance.
