Insurers lag consumers as EV interest grows
CONVERSATIONS ABOUT electric vehicles, EVs, are taking place everywhere.
One friend, a motor vehicle loss adjuster and accident reconstructionist, told me that he is now completing a course about EVs.
In the Financial Gleaner of November, Business Reporter Karena Bennett wrote expansively about National Commercial Bank’s plan to back EVs.
Fortune’s Term Sheet writer Lucinda Shen wrote a fascinating piece about the record-breaking IPO of electric vehicle maker Rivian. It went public last Wednesday with no significant revenue and a loss US$994 million for six months ending June 30. However, the company’s valuation, US$66.5 billion, was “in striking range of traditional US car makers Ford and General Motors”.
The Gleaner resumed its discussion about EVs the day after the IPO.
Not to be outdone, t wo New York Times reporters in Glasgow, Scotland, the site of this year’s United Nations Climate Conference, wrote that “at least six major automakers – including Ford, Mercedes-Benz, General Motors, and Volvo – and 30 national governments pledged last Wednesday to work toward phasing out sales of new gasolene and diesel-powered vehicles by 2040 worldwide, and by 2035 in ‘leading markets’.”
These things caught my attention because I had decided to write about the risks associated with the insurance of electric vehicles last Sunday. This was less than six months after I wrote my first piece, which was inaccurately headlined ‘The Cost Implications of EV Coverage’. At the last minute, I decided not to write the follow-up to that piece.
Helping to save lives was more important. The article that I wrote sought to explain that in addition to placing their families and their own lives at risk, anti-vaxxers could also endanger their life and health insurance plans.
My June article cited an Office of Utilities Regulation May 2021 document that put Jamaica’s EV population at 10. A source from one local car dealer that sells hybrids – a hybrid is a vehicle that is powered by a conventional engine, an electric motor, and a hybrid battery – told me last week that consumers are showing increasing interest in EVs. The fact that one local bank began offering loans to buy EVs from November 1, at lower interest rates than those for vehicles with internal combustion engines, confirms the growing trend.
Checks conducted with two leading local motor insurers revealed that while they are aware of the significant threats that climate change poses to their business, they do not appear to have assessed the peculiar risks associated with EVs or developed rules for the insurance of these vehicles. Motor premiums account for about half of the premiums that non-life insurers write. I have prepared today’s article for readers as well as prospective buyers of EVs who would like to have a general understanding of the risks associated with these vehicles from an insurance perspective.
The information that follows originated from the website of the European operations of a global insurance company and was edited for local use. There are at least two public charging points for EVs in the parish of St Andrew. As the number grows, the risk considerations and insurance implications that will emerge are likely to fall into the following groups:
1. Property fires can occur when the vehicles are being charged, particularly in confined spaces such as underground or multistorey car parks and garages. It is not known if the local fire safety officials have developed safety-management guidelines to handle these risks. However, free information is available from authoritative sources on the Internet.
2. Chargers should be installed by trained and accredited engineers and in compliance with recognised codes of practice: They then need to be included on site- maintenance schedules, including regular inspections, so damage is quickly identified.
3. The charger location needs to be safe and secure to minimise risk from unauthorised use, vandalism, or theft.
4. Fires involving lithium-ion batteries tend to be intensive and to present unique challenges to firefighters as they can reignite after initial extinguishment. Are our local fire services equipped to safely extinguish these fires?
5. The level of technology in vehicles and charging stations is advancing all the time. As vehicles and chargers become more reliant on software, data connectivity, and artificial intelligence, the risks of vulnerability to software glitches, system failures, or even malicious cyberattacks will increase.
6. Repairs costs and repair times for EVs, compared to conventional vehicles, will be higher.
7. Because EVs are much quieter than other vehicles they can cause a risk to vulnerable road users such as cyclists and visually and hearing impaired pedestrians.
8. Driver training will be an important consideration as it is with conventional vehicles. EVs, unlike internal combustion engines, can reach their top speed instantaneously. This can create risk for drivers who are unfamiliar with the technology. Conversely, these vehicles are brought to a controlled stop by a process called regenerative braking. When pressure is removed from the accelerator, the vehicle comes to a stop.
Prices for EVs will be higher than the equivalent model internal combustion engine vehicles. This means that owners are likely to pay more money for motor insurance.
The other side, of course, is that EV buyers will reduce their carbon footprint and contribute in a minute but tangible way to the decrease of harmful emissions into the atmosphere.
It is these emissions that are responsible for the problem of global warming that poses major threats to small island developing states like ours. ‘Every mickle makes a muckle’. Scientists at the Mona GeoInformatics Institute at the University of the West Indies have developed computer models that show sea-level rise of at least one metre in the waterfront area of downtown Kingston by the year 2100.