In Focus: How are motor insurers addressing popularity of electric vehicles?

WE ASKED: How are traditional motor insurers adapting their business strategies to comply with regulations and address the growing popularity of electric vehicles and sustainable transportation?

Eibhlin Swan, head of claims customer delivery, Allianz Commercial 

Insurers are very in tune with these changes. For example, at Allianz we enhanced our fleet proposition in 2021 to provide cover for electric vehicles, including third-party liability during charging as well as damage for cables, connectors and electric wall boxes located at the insured’s premises or employee’s home.

We’ve also created guides for fleet managers and brokers to provide education on the differences of electric fleets. Across motor claims, we’re also championing the use of green parts – non-safety critical items – to make a practical and positive environmental impact in our repairs. We’ve introduced several initiatives to support our repair network, including training and development on new vehicle technology and encouraging our repair shops to work towards PAS 2060 Standard for Carbon Neutrality to demonstrate their commitment to sustainability.

As an employer, we’ve just launched our new salary sacrifice scheme offered by ElectriX and CBVC Vehicle Management. This gives all employees the opportunity to purchase electric or plug-in hybrid vehicles. And excitingly as one of the world’s largest automotive insurers, we have a natural interest in supporting the latest developments in urban mobility and are proud to sponsor Formula E, which is the perfect platform to promote changing technology and sustainable innovation.

Kelly Ogley, chief executive, A-Plan

The one constant about the regulatory environment is change. Insurance businesses that have always put the client front and centre of their purpose have less of a challenge, but the work required to demonstrate the right outcomes and satisfy the regulator is not to be underestimated. It’s the whole financial services industry that is facing regulatory change, not just insurance.

When it comes to general insurance pricing practices, we are seeing the industry flex to adapt. The cost of living crisis is clearly front of mind, with many insurers who trade on the aggregators introducing ’budget’ products that remove some ’non-essential’ elements of cover, such as windscreen, in order to reduce prices. It’ll be interesting to see how this plays out as the anecdotal evidence suggests the average consumer is not aware of the limited cover they are potentially buying. Despite these changes, the inflationary impact on claims costs is still a huge concern, resulting in significant premium increases across the board.

Electric vehicles are a real conundrum – every insurer wants to demonstrate their ESG credentials and be a leader in insuring the transition to clean energy, but the harsh truth right now is that electric vehicles are significantly more expensive to insure than ICE vehicles.

This is simply because they represent a much higher exposure than their petrol and diesel cousins. Fire risk, availability of parts, heightened repair costs, more expensive transportation risks all add to the exposure. The market is learning all the time and we will get there – I’m sure.

During such a period of change, the importance of advice is highlighted once again. Consumers can not hope to be up to speed with these market changes and need a helping hand more than ever. 

Rodney Bonnard, UK Insurance Leader, EY

The regulatory environment for UK insurers is constantly evolving and this means firms are used to adapting to new rules and regulations. Over the past year, insurers have seen the introduction of the general insurance pricing practices regime and the Consumer Duty – both substantial pieces of regulation which have significantly impacted firms’ strategies and pricing approaches.

These new regulations require insurers to place consumers at the heart of every decision, ensuring fair and equitable pricing for both new and existing customers and driving better consumer outcomes overall. As a result, insurers are introducing new systems and processes to allow greater flexibility around premium setting and easily interact with and support their customers.

In addition to regulatory changes around consumer outcomes and pricing, the growth of electric vehicles is continuing to shape new strategies and products in motor insurance. The continued increase in popularity of electric vehicles in the UK has seen insurers adapt strategies and introduce products tailored to electric vehicle owners.

While there is still a long way to go before electric vehicles or hybrids become the primary vehicle on the road, it is important for motor insurers to monitor this shift and shape their future strategies accordingly.