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Electric vehicles – what brokers need to know

Electric vehicles – what brokers need to know | Insurance Business UK

Electric vehicles – what brokers need to know

Electric vehicles (EV) are taking the vehicle market by storm, experiencing exponential levels of growth in recent years. In 2019, only 1.5% of market share was made up of pure battery electric vehicles, noted Steve Molloy (pictured), director of commercial sales at AX, while in 2021, to date and still growing, that now stands at 8.4%. There has been a 122% growth in the purchase of battery electric vehicles in the last 12 months, he said, and there are now around 300,000 of them on the road in the UK.

Read more: LV= busts common myths on electric cars

Within that figure resides a key message for brokers – that is 300,000 vehicles that need insuring, a figure that would be even higher were it not for the continuing problem the market is facing around vehicle sourcing. It’s a no-brainer for brokers to explore tapping into the EV market, he said, with so many customers out there, and with fleets, business customers and company car drivers making up a substantial percentage of EV uptake.

“I’ve now had three or four brokers saying ‘we need more insight; we need more data. Not in order to fold the EV risk into our current capacity but rather to go out to underwriters and look for them to write the risk independently, because we don’t think we’re being competitive’,” he said. “And because AX has telematics units, driver behaviour units on every single one of our vehicles, there’s information we’ve been able to provide them.

“We can provide brokers with some quite interesting driver behaviour data, but also data around the costs of the claims. And when you’re approaching an underwriter, you need to understand claims history, ratios etc. There have been some great high-level figures we’ve been able to give them with regards to the differences between internal combustion engine (ICE) vehicles and battery electric vehicles.”

From AX’s data, battery electric vehicles cost on average around £1,000 more than an ICE vehicle to repair, Molloy said, and because the repairing of an EV is more complex, it takes about four days longer to repair an EV vehicle, it leads to longer car rental lengths. All of this will impact claims ratios and there is a cost to it. This is the sort of information brokers need to be able to take to underwriters.

There are a lot of brokers out there that are dipping their toe into the EV pool, he said, but they’re understandably a little bit nervous at the moment about where that price sits. Because when they compare the average premium for electric vehicles against their normal book it is significantly higher. So, there’s a confidence gap in the market.

“The one thing that brokers aren’t doing is comparing like-for-like on premiums,” Molloy said. “They’re seeing that the premium is a lot higher, but that’s because the general mix of electric vehicles at the moment is weighted quite heavily towards the prestige sector.  When you take into account that Teslas, which are defined as prestige vehicles, represent probably about 35% to 40% of vehicles on the road at the moment, you’re not comparing like-for-like on premiums. And I think that’s part of the reason they’re getting a little bit scared off.”

The brokers that are approaching AX are still developing their products, he noted - they haven’t actually taken the plunge of writing this risk yet. They’re still in a place where they need to know more about it, to know how to pitch the risk. And their questions are uncovering some interesting facets of the market, for instance the differing demands of EV drivers from a service perspective. While ICE vehicle drivers will generally take a like-for-like vehicle when their own is in for repairs and aren’t too concerned with needing the same vehicle brand, EV drivers are less comfortable with doing so as the range of the vehicle they are using is a crucial consideration.

The main pain point obstructing a more widescale uptake of EVs remains the cost of these vehicles, he said, but while they remain within the demographic of higher wage earners at the moment, price parity is widely expected to be reached by 2024. The battery technology involved continues to improve, allowing greater ranges and reducing ‘range anxiety’, and as efficiencies in repairing EVs and the infrastructure around EVs improve, the costs will come down with regards to both buying and repairing these vehicles.

Molloy believes the market will see significant year on year growth over the next few years but anticipates even greater take up between 2024 and 2030 if these trends follow through. Meanwhile, brokers amassing the right information and data now will give them something of a first-mover advantage.

“That’s what we’ve done actually,” he said. “We used COVID as a bit of an opportunity. We knew electric vehicles were coming so we dedicated a whole team to the R&D side of this and we purchased vehicles quickly, probably earlier than any other rental provider. By doing that we’ve been able to gather data early and create thought leadership that has allowed us to make an association between AX and EV. And we’re getting insurers and brokers coming to us, asking us for information.”

Read more: LV= forms partnership for electric vehicle charging

Brokers do have an opportunity to be early movers in this space and to create genuine brand association, he said, and that’s the biggest opportunity he can see for them at the moment. Right now, LV= stands out by a country mile, he noted, and they’ve thrown a lot of resources at EV so, there’s a lot of catching up to do for some of the other brands.

The key that brokers looking to make a name for themselves in the EV space must recognise, he said, is the need to focus on service when it comes to EV drivers. EV drivers need to feel reassured that their broker is along with them for the journey and will be able to assist and support them on the way. It’s not just about understanding the risks, but also about how to deal with customers at the moment of truth, which is a claim.

“When that accident happens, do you have the right capability within your repair network? Can you provide a like-for-like vehicle?” he asked. “Because for EV drivers, those are the main considerations.”