Australia’s Electric Vehicle Transition Continues
Australia’s shift to electric vehicles (EVs) is gaining momentum, with brokers observing more combustion engine car fleets making the switch. As of July this year, the Electric Vehicle Council (EVC) reported that EVs accounted for about 9% of all car sales in Australia. By the end of 2023, the EVC estimated there were 180,000 EVs on the roads. However, with over 20 million registered motor vehicles in the country, the uptake remains relatively slow.
Insurance Risks and Costs: A Barrier to Faster Adoption?
One significant factor potentially slowing down EV adoption is insurance risks and associated costs. Luke Kelly, director of Fuse Fleet Underwriting, highlights that the relative immaturity of the EV market means insurers often lack sufficient data to price insurance effectively, leading to higher premiums. The expense of EVs and their repairs is another concern.
Fuse Fleet has identified seven key insurance factors for brokers and fleet managers to consider when purchasing EVs:
- Repair Costs: EVs often feature specialized components like lithium-ion batteries, which can be costly to replace or repair.
- Availability of Parts: Some EV models may have limited access to replacement parts, affecting repair expenses and turnaround times.
- Technology and Safety Features: Advanced features in EVs, such as autonomous driving systems, can drive up repair costs.
- Battery Degradation: Insurance policies may need to account for battery lifespan and replacement expenses.
- Charging Infrastructure: The availability of charging stations can impact the risk of accidents related to running out of power.
- Model-Specific Factors: Certain EV models may be more prone to theft or specific types of accidents.
- Market Value: Accurately assessing the current worth of EVs is crucial for insurance coverage.
Some EV models, like the MG ZS and Nissan LEAF, have their charging ports at the front, which could potentially increase insurance costs given that most accidents involve the front of the vehicle.
Other Challenges to EV Uptake
The EVC also points to the lack of a New Vehicle Efficiency Standard in Australia as another impediment to EV adoption. This standard, implemented in other countries, ensures car manufacturers increase the supply of EVs. News reports indicate that BYD, Australia’s second-largest electric car brand, plans to open 30 more retail stores, potentially improving vehicle availability.
As Australia continues its transition to EVs, understanding and addressing insurance-related challenges will be crucial for sustaining growth in this sector.
