Although new energy vehicles are rapidly being accepted by more and more consumers, there has been no exclusive insurance coverage tailored specifically for these models to date. These new provisions are expected to give further support to the development of the industry.
The battery pack alone – whether it is a large (in EVs) or a smaller one (in PHEVs) – is a costly component that could easily make a minor crash turn into a total loss. The NEV policies have comprehensive coverage for motors, battery packs, and the systems that control them, such as the BMS and inverters.
As EV adoption surges, insurers are venturing into new frontiers like battery life insurance, which protects against degradation and replacement costs, and cybersecurity insurance, which mitigates risks associated with hacking connected vehicles.
Deeper cooperation of EV insurers and carmakers may help to support better outcomes for all parties. Global sales of electric vehicles (EV) are growing fast and emerging as a new risk pool for the motor insurance industry. Close to 14 million EVs were sold globally in 2023, up 35% year-on-year and accounting for 18% of all car sales (see Figure 1).
At the time, we were not aware of the association’s plans: to create specific insurance policies for NEVs (new energy vehicles). The first ones were presented on December 27. IAC set the rules for such exclusive insurance policies at the beginning of the month, and the Shanghai Insurance Exchange did not waste time.
EV adoption creates new insurance risk features due to changes in driving behaviours, usage, repairability and vehicle features. The EV insurance market is forecast for double-digit growth in the coming years but underwriting profitability is challenging. Despite high premiums, insurers saw combined ratios of over 100% for EV insurance in 2023.