Insurance consequences from the shift towards electric vehicles include a higher claims cost severity, according to Taylor Fry.

EVs require specialist repair knowledge, have significant total loss exposure and are typically equipped with advanced driver assistance systems and sensors that are expensive to replace and calibrate.

Taylor Fry says battery packs account for a high proportion of vehicle value and even minor collisions can trigger high repair costs, while reports from overseas have been mixed on the degree to which advanced safety technology is reducing accident frequency.

Current higher EV repair costs partly reflect repairer scarcity and parts supply immaturity.

“As the repair ecosystem develops, average EV claims costs should moderate – however, the pace of this development is highly uncertain,” the actuarial consultant’s Kush Mithal and Vincent Tu write in an artcle.

Insurers need to consider the impact of changes in brand mix, as several new manufacturers with little local claims history enter the market. 

“Over the short to medium term, with the accumulation of local EV claims experience, insurers should be better placed to validate and revise assumptions currently embedded in their pricing,” the authors say. 

EV sales as a proportion of all new car sales in Australia reached a new high of 14.6% in March, up from 7.5% a year earlier, as the Middle East crisis and fuel concerns drove demand. 

Take-up of the vehicles is also affected by federal and state government initiatives, amid uncertainty around potential scaling back of the fringe benefits tax exemption for EVs. 

“As EV volumes grow, engaging with repairers early to ensure access to a sufficient network of certified repairers will be an important lever to managing claims cost,” Taylor Fry says. 

The article is here.