Swiss Re calls for closer insurer and EV manufacturer collaboration

Swiss Re echoes calls for closer collaboration between insurers and manufacturers to address emerging risks and underwriting challenges amid continuing growth of global EV market.

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Swiss re calls for closer insurer and ev manufacturer collaboration
Swiss re calls for closer insurer and ev manufacturer collaboration
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Swiss re calls for closer insurer and ev manufacturer collaboration

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(Re)in Summary

• Swiss Re urges insurers to collaborate with EV manufacturers to address risks and underwriting challenges.
• Global EV sales are projected to grow 30% annually until 2030.
• EV repair costs are higher due to complex components, with studies showing repair costs 26.6%-35% higher than ICE vehicles, impacting underwriting profitability.
• Some EV manufacturers are acquiring insurance licences, while others are developer closer ties with insurers to develop customised insurance solutions.

Swiss Re has urged insurers to work more closely with electric vehicle (EV) manufacturers to address emerging risks and underwriting challenges associated with the growing EV market.

The call, part of an economic insight published by Swiss Re on Friday (31 May), comes amid projections that global EV sales will grow at an average rate of 30% annually up to 2030, with the market for EV insurance expected to exceed US$200bn by the same year.

According to the International Energy Agency (IEA), nearly 14 million EVs were sold worldwide in 2023, a 35% increase from the previous year and accounting for 18% of all car sales. EV sales are set to account for half of all new car sales globally by 2035, with an estimated 73 million units sold by 2040.

The rapid adoption of EVs is creating new driving behaviours, vehicle risks, and repair challenges for insurers.

In its insight, Swiss Re highlighted some of the increased risks insurers face, such as driving behaviour changes and the complex nature of EV components, including digital sensors and embedded software, which require more labour time for diagnostics and repairs.

As a result, EV repair costs are higher than those for ICE vehicles. A US study by CCC Intelligent Solutions in 2022 found that total repair costs for EVs were, on average, 26.6% higher. Similar findings were reported in Germany by GDV, with repair costs being 30%-35% higher, and in the UK, where Bloomberg reported that repair costs were 35% higher.

In China, CPIC reported that the accident rate for EVs is nearly double that of ICE vehicles, partly due to a higher share of EVs in commercial use, according to local media.

These higher repair costs and accident rates and repair costs are impacting underwriting profitability. In China, the average EV insurance premium was 81% higher than for standard motor insurance in 2023, and the combined ratio for EV insurance providers exceeded 100%, according to data from the National Financial Regulatory Administration and Swiss Re Institute.

In response to these challenges, some EV manufacturers are acquiring their own insurance licences, including China’s BYD, which received a green light in May to offer statutory auto liability insurance.

However, other manufacturers are partnering with insurance companies to develop better risk cover and Swiss Re emphasised the importance of deeper cooperation between insurers and EV producers to overcome these underwriting challenges.

“EV producers know their vehicles’ risk features and are accumulating driving data, while insurers are accumulating claims experience,” the global reinsurer said, suggesting that joint innovation could lead to EV insurance solutions that integrate insureds’ driving behaviour or offer customised services for repairs and maintenance.

The call for increased collaboration is echoed by others in the industry. Speaking to (Re)in Asia in January, Pierre Martelly, Chief of Staff, International Asia at Generali, said that EV manufacturers can bring many benefits to the equation but that insurers bring valuable expertise in claims handling, network maintenance, and regulatory compliance, which EV manufacturers lack (see story below).

There are also other partnerships that insurers can develop to improve the underwriting of EV risk. In Australia, the Insurance Authority last month urged insurers to work with fire agencies and governments to help tackle EV battery fire risks and improve insurance models.

Amid a rapid surge of electric vehicles, the insurance industry is at a critical juncture as it adapts to the evolving landscape of risks. There is a sense in the industry that closer collaboration with EV manufacturers can help yield the necessary insights and data to develop more effective insurance products, ensuring both profitability and comprehensive coverage for EV owners.

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