Are UK Insurers ready for the Electric Vehicle takeover? Part 1…

Increasing market size of Electric Vehicles

With the UK Car Parc (all registered vehicles) currently only consisting of 3.1% Electric Vehicles(EV) and Plug-In Hybrid Vehicles (PHEV) combined, the UK's Zero Emission Vehicle Mandate (ZEV) is predicted to increase this percentage to an enormous 46% by 2035 according to SMMT's predictions.

The key ZEV stipulation (1) car manufacturers are facing is to:

'end the sale of all new Petrol and Diesel Cars and Vans by 2035'

Even with the dates for final targets being pushed back by 5 years, targets for vehicle manufactures start much sooner, with 22% of all new cars sold by manufacturers in the UK in 2024 needing to be electric. These stipulations put huge pressure on manufacturers, as the consequences of not meeting these targets will result in huge £15,000 fines per vehicle (over their allowed Petrol/Diesel threshold), or having to buy surplus credit from a manufacturer that has met the quotas. Meaning that even with the 5 year delay, a huge change to the UK Motor and Insurance market is approaching imminently and quickly.

Percentage of new registrations that are EV/PHEV from 2018-2022. Source: Pebbles Financial Solutions

With the exponential increase in EVs being registered each year seen above, the increased pressure from the governments ZEV mandate will only result in a faster acceleration of EVs into the UK Car Parc - a development that many car manufacturers and Insurance companies are poorly prepared for.

The changes to the UK motor market may be even larger due to the competition from new, innovative and cheaper EV manufacturers exploding onto the scene. Quick reactions to these changes will be vital, so keep an eye out for relating materials and data products from Pebbles surrounding this area!

Challenges for Insurers

The rapid increase in number of EVs on the road will cause issues for insurers surrounding limited availability of data. Modelling the impacts of a greater number of EVs coming into close proximity with other EVs on the road will be difficult, as previously the main collision types involving these vehicles would have been with Petrol or Diesel vehicles.

It is now more important than ever for UK Insurers to have a grasp on cost of parts and repair time data, especially relating to the new EV technology. Focusing on the data used for severity modelling, insurers should evaluate crashes that are most likely to damage the expensive EV batteries (T-bone or Head-On collisions). This will be a key focus for Pebbles in our upcoming Vehicle File Extension, which will evaluate the severity of these various collision types on a vehicle-by-vehicle basis, based on crash test safety performance (EuroNCAP) combined with accident and injury statistics.

T-Bone collision crash test. Source: euroncap.com

Currently, Tesla dominates the top 10 best selling EVs in the UK, with the 'Model Y' and 'Model 3' vehicles appearing at number 1 and 2 respectively 2. This combined with their 1100 supercharging stalls across the UK, Tesla's home solar and PowerWalls (debuted in the US), Tesla has plans to capture the entire value chain in the UK. Fears for UK insurers should be focused on Tesla's plans to bring their own insurance company (Tesla Insurance) to the UK and outcompete UK insurers - a business plan that other EV manufacturers could follow.

Tesla's charging infrastructure in the UK. Source:

Will Tesla's domination of the EV market come to an end with looming competitors who can compete on: Price, Technology and Battery innovation?

Look out for part 2 of this article series for more information on this!

EV Claims inflation

According to a report published by Thatcham Research, EV incident claims are currently '25.5% more expensive than their ICE equivalents' and can take '14% longer to repair' 3. The most significant reason for the differences seen in repair costs and times is due to the high voltage battery used in EVs, which are very costly and have ongoing supply issues. Due to the increase in new EVs being registered each year, model predictions show the number of collisions resulting in battery damage will increase from 9,400 in 2022 to an enormous 260,000 in 2035. These predictions for the huge increase in battery damage in collisions will only exacerbate the current issues for insurers.

Image of the undercarriage of an EV. Source: carmagazine.co.uk

As well as the increased cost of repairs for EV batteries, the storage of EVs with damaged batteries uses large amounts space, 50 times the space needed for EV's. This is due to the increased risk of fire with damaged batteries, meaning the cars must be stored in an outside quarantine area. Do insurers have the infrastructure to deal with this huge increase in storage space needed?

Moreover, a lack of understanding surrounding EVs means that vehicles involved in these collisions are often deemed as irreparable, resulting in premature write-offs. To prevent these unnecessary losses the related industries will require further training on dealing with EVs correctly, Thatcham Research are already behind this, with their EV ready training courses designed to ensure safety and efficiency when working with electric vehicles. Adrian Watson, head of engineering research at Thatcham has said:

“Technical solutions do exist for most if not all of these challenges. However, it is vital that credible cross-industry plans are urgently put into place that focus on addressing battery cost, diagnostics, and the creation of a sustainable ecosystem for battery repair.”

Impact on Pricing

Issues for insurers do not stop at assessing the risk of these new EVs, that will soon takeover the UK roads, but also with pricing modelling. Historically, it has been widely thought that insurance premiums for EVs are higher (due to the risk factors discussed previously), however analysis from LV and other insurance giants predicts that with the rapid rise in electric vehicles in the UK Car Parc these premiums will inevitably drop and in fact when comparing like-for-like vehicles such as the Vauxhall e-Corsa (Electric) and its ICE counterpart, insurance premiums are already 33% lower for the electric option. 3

Plot showing the distribution of Pebbles market factors for Diesel, Petrol and Electric vehicles.

This contradiction of the increasing risk seen with EVs, but the greater competition in the market (from 3rd party insurers as well as the manufacturers such as Tesla providing in-house insurance) will prove a difficult balancing act for insurers to manage their pricing positions. For further details on Pebbles' view on the market positions (Pebbles Vehicle File) for UK vehicles, or any other subjects discussed in this article, you can contact us via one of the methods below.

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