The study provides an overview of insurance and repair processes when an electric vehicle (EV) is damaged in an accident.
Covered regions include North America (the United States and Canada) and Europe (including the United Kingdom). The key challenges that repairers and auto insurers face when repairing an electric vehicle and the factors that increase EV insurance premium costs are discussed. Regulatory measures and OEM initiatives in North America and Europe that will reduce EV repair costs in the future are also included. Rising consumer awareness, government regulations, and subsidy programs boost the adoption of EVs worldwide. This, in turn, will lead to an increase in EV road accidents and EV-specific insurance claims year over year. Batteries, inverters, and charging units are critical EV components. A minor collision or damage to these components will raise concerns around ignition and safety, leading to repairs/replacement. OEMs do not follow a standard procedure that will ensure the quality and safety of a repaired EV battery. Any negligence during the repair process could lead to short circuits, fire, or explosion, and make repair shops liable for damages. Authorized parts availability, costly battery and electrical parts, quarantine requirements for damaged battery storage, additional labor hours required for EV repairs, and the lack of standard repair procedures contribute to the higher claim severity cost of EV batteries and increase the possibility of write-offs. OEMS must train dealers, vehicle damage assessors, and technicians on vehicle architecture, wiring structure, and battery pack design to improve repair efficiency and safety. OEMs such as Nissan, GM, Ford, and Tesla have initiatives in place to simplify battery design and introduce EV battery repair kits. They are also making EV replacement parts available through their authorized repair shops. Governments in Europe and North America are creating regulatory frameworks to give third-party vehicle service providers access to vehicle data. Such initiatives will expedite replacement or repair services and reduce the possibility of premature EV write-offs in the future.
Author: Dorothy Amy
The Impact of the Top 3 Strategic Imperatives on EV Insurance Write-offs in NA and Europe
Internal Challenges
Why
- Traditional internal combustion engine (ICE) vehicle claims have dominated motor insurance for the past several years.
- Standardized repair assessment procedures and defined methodologies for repairable claims made the process easy for ICE vehicles.
Frost Perspective
- Electric vehicles (EV) present new challenges in terms of nonstandard vehicle structure and battery designs, raising safety concerns even in the case of minor collisions.
- Repairability challenges force insurers to set high insurance premiums for EVs.
- It is critical for OEMs to create modular EV designs that are diagnosable and repairable in the future.
Industry Convergence
Why
- With many EV manufacturers following a direct-to-consumer sales approach, there is a definite communication gap between repairs, dealers, insurers, and automotive manufacturers.
- In the case of an accident or a collision, vehicle data, design blueprint, and repair procedures are required to efficiently repair EVs.
Frost Perspective
- Industry collaboration between OEMs and insurers is crucial to develop data-driven and usage-based insurance packages for EVs to offset high premium costs and fast-track the claim process.
- OEMs should expand their collision repair networks and offer rigorous training to repair shops in terms of vehicle diagnostics, battery repairs, and safety procedures.
Competitive Intensity
Why
- With a fair share of EVs being written off by insurance companies, there is the question of how to discard these vehicles safely without damaging the environment.
- Salvage and recycling companies are competing to repair, resell, reuse, and recycle written-off EVs.
Frost Perspective
- Europe is more environmentally conscious when handling damaged and written-off EVs. Salvage operators and car dismantlers in the region are developing safe storage spaces to quarantine EVs involved in an accident.
- In the United States, New Jersey passed a bill to regulate Li-ion battery recycling and safe disposal of EV batteries, boosting competition among local recycling companies.
Scope of Analysis
- The study investigates the challenges that repairers and auto insurers face when repairing an electric vehicle and the factors that contribute to the increase in EV insurance premium costs.
- This study also analyzes the regulatory measures and OEM initiatives in NA and Europe that are aimed at reducing EV repair costs in the future.
- Repairable claims refer to claims where the vehicle has sustained damages that can be fixed or within the repair cost limit set off by the insurers.
- Write-offs refer to vehicles that have sustained severe damages that cannot be fixed, or repair costs exceed 70% to 80% of the actual cash value (ACV) of the vehicle.
- Battery electric vehicles (BEVs) are considered for EV write-off analysis alone.
- The drivers and restraints analysis is provided from 2024 to 2030.
Growth Drivers
| Driver |
|---|
| High-risk battery and high-voltage components: Batteries, inverters, and charging units are critical EV components. A minor collision or damage to these components will raise concerns about safety and the cost of repair. If the repairer or mechanic is not aware of a specific repair process or is unable to fix the damage, an insurer might write off a damaged EV. |
| Significant repair and claim severity costs: Authorized parts availability, expensive battery and electrical parts replacements, quarantine requirements for damaged battery storage, additional labor hours required for EV repairs, and the lack of standard repair procedures contribute to the higher claim severity costs in EVs and increase the possibility of write-offs. |
| Increasing EV penetration: Rising consumer awareness, government regulations, and subsidy programs are boosting the adoption of EVs worldwide. This, in turn, will lead to a year-over-year increase in EV road accidents and EV-specific insurance claims. |
Growth Restraints
ICE vehicles to dominate the near-term future:
Though battery EV adoption is growing, the majority of light passenger vehicles will continue using ICEs until 2030, which will mean more ICE vehicle collisions and write-offs than that of EVs.
Regional government policies making battery data accessible:
The European Union (EU) and California governments took a proactive lead in making vehicle data available to third-party service companies in the automotive industry, to reduce premature EV write-offs and repair vehicles.
EV repair methods will evolve in the future:
OEMs such as Nissan, GM, Ford, and Tesla have simplified battery design and introduced rigorous training tools for efficient EV repair. OEMs are also ensuring availability of replacement parts through authorized repair shops. These initiatives are expected to reduce premature EV write-offs in the future.
Why is it Increasingly Difficult to Grow?
The Strategic Imperative 8™
The Impact of the Top 3 Strategic Imperatives on EV Insurance Write-offs in NA and Europe
Scope of Analysis
EV Insurance Claim Categories—Repairable vs. Write-off
Growth Drivers
Growth Restraints
EV Insurance Write-offs—Key Findings
Scenarios Leading to Insurance Write-offs in EVs
EV Damage Type Leading to Repairs or Write-offs
EV Battery Repair Issues
OEM Initiatives that Address Repair Costs and Write-offs
Regulations Impacting EV Repair and Insurance
Percentage of EV Write-offs in 2023
ICE vs. Electric Vehicle Sales
Post-incident EV Repair and Write-off Process
EV Repair Process Challenges
Insurer Metrics—Claim Severity & Claim Frequencies
Top Reasons for Increased Insurance Premiums
Tesla’s In-House Insurance Strategy
Process for Handing Written-off EVs in NA & Europe
Written-off EV Hotspots
Regulations Impacting EV Insurance & Repair, NA
Average Claim Severity & Claim Frequency, NA
Average EV Premium, NA
EV Insurance Trend Analysis, North America
Regulations Impacting EV Insurance and Repair, Europe
Average EV Premium, UK
Sustainable Best Practices for Damaged EVs in Europe
EV Insurance Trend Analysis, Europe
Methodology for Calculating EV Write-off Percentages
Factors that Result in Vehicle Write-offs
Repairable Vehicle Claims vs. Write-offs Percentage, 2023
Reasons for Write-offs in 2023
Key Takeaways and Future Recommendations
Growth Opportunity 1—Low-cost Battery Repairs
Growth Opportunity 1—Low-cost Battery Repairs (continued)
Growth Opportunity 2—Repair Streamlining and Simplification
Growth Opportunity 2—Repair Streamlining and Simplification (continued)
Growth Opportunity 3—Auto Salvaging Maximization
Growth Opportunity 3—Auto Salvaging Maximization (continued)
Best Practice Recognition
Frost Radar
Benefits and Impacts of Growth Opportunities
Next Steps
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| Deliverable Type | Market Research |
|---|---|
| Author | Dorothy Amy |
| Industries | Automotive |
| No Index | No |
| Is Prebook | No |
| Keyword 1 | Europe Ev Insurance Write-Off Analysis |
| Keyword 2 | Electric Vehicle Insurance Market Growth |
| Keyword 3 | Strategic Analysis Of Ev Insurance |
| Podcast | No |
| WIP Number | MH4F-01-00-00-00 |
Growth Opportunities in EV Insurance Write-Offs in NA & Europe
Battery Safety Concerns, Nonstandard Vehicle Designs and Complex Repair Procedures are Top Challenges. Strategic Partnering among OEMs, Insurers, and Repairers will be Crucial to Reducing Premature EV Write-offs.
17-Apr-2024
Global
Market Research