- Government policies on climate change and consumer demand could see the number of electric cars reach 100 million by start of next decade compared with seven million today.
- New risk challenges to manage for automotive industry and their insurers: potential defect and performance issues; more complex and costly repairs; new fire and cyber threats; and even sustainable sourcing and disposal of critical components and raw materials.
- Increasing complexity of supply chains and use of new technology will have a strong impact on product liability insurance in the commercial insurance segment.
Around the globe, the take-up of electric cars is expected to accelerate rapidly in future, driven by consumer demand and government policies aimed at tackling climate change. The future of mobility is clearly electric, but the transition will lead to a fundamental change in risk for manufacturers, suppliers and insurers alike and will have a significant impact on automotive product liability insurance, according to a new report from insurer Allianz Global Corporate & Specialty (AGCS).
“From supply chain networks to production processes to the product itself – the automotive industry will have to respond to many emerging risks to make the transition to electric vehicles happen,” says Daphne Ricken, Senior Underwriter Liability at AGCS. “The anticipated growth of electric cars brings the prospect of new defect or performance issues; more expensive repair costs; new fire and cyber threats; and even reputational issues around sustainable sourcing and disposal of critical components and raw materials for batteries.”
A new AGCS publication, The Electric Vehicles R-EV-olution: Future Risk And Insurance Implications, highlights that the use of electric cars is expected to soar in future as their cost gradually declines, the choice of available new models likely doubles within five years, their driving range increases and consumers, as well as governments, demand greener low-emission vehicles. The International Energy Agency has predicted there could be more than 100 million electric cars on the roads in 2030 – up from around seven million today – with annual sales in the region of 20 million, driven by growth in China – already the world’s largest market – the European Union (second largest), Japan, Canada, the US and India, in particular.
New risk exposures
Safety and reliability
Tests conducted by the Allianz Center for Technology Automotive (AZT Automotive) have shown that the high voltage components of electric cars are well-protected and will not be affected in most crashes. Statistical evaluation of Allianz claims also shows that electric vehicles are less likely to be involved in accidents today – they typically drive short distances with limited mileage overall. However, any damage sustained can be, on average, more expensive than for conventional cars.
“If the battery in an electric car has to be replaced, it can result in a total loss in many cases. In addition, the fact that they can only go to specialist repair shops can contribute to costs,” says Carsten Reinkemeyer, Head Of Vehicle Technology And Safety Research at AZT Automotive.
Battery life and performance are critical issues for electric cars. Given the high cost of replacement or repair of battery units, a failure to live up to performance guarantees will pose questions around liability for manufacturers and suppliers.
Fire threat
Environmental issues
Speed to market and potential defects and recalls
Cyber concerns
Insurance implications and claims complexity
Electric mobility will have many implications for insurance – in particular automotive product liability insurance – and claims, as technology creates new risks and exposures, and as liability shifts within the supply chain.
“Electric vehicles will consist of fewer but more integrated parts and components. What may have been three parts in a conventional car could be only one part in an electric car. However, the lower number of parts is increasingly connected through sensors and embedded software, adding a new layer of complexity and raising questions around how these parts interact and which producer or supplier is liable for a potential defect or faulty control,” Ricken explains. “The increased complexity of the automotive supply chain and the reliance on software and technology producers will lead to new exposures and split liabilities in the value chain.”
Fire and explosion risks associated with high voltage batteries could give rise to claims for commercial property insurers, in particular if multiple cars are charged in underground car parks. Claim scenarios are manifold – ranging from overheated battery leads resulting in fires and property damage to breakdown, leading to fire, as a result of electronic failure of the battery management system.
Insurers may also expect to see a potential increase in product recall/liability claims from new technologies, components, faster development times and shorter testing periods. Last, but not least, there will be employers’ liability exposures – such as potential toxic fumes and fire risks during 3D printing or the handling of lithium batteries related to fire and contamination.
Press Contacts
About Allianz Global Corporate & Specialty
Allianz Global Corporate & Specialty (AGCS) is a leading global corporate insurance carrier and a key business unit of Allianz Group. We provide risk consultancy, Property-Casualty insurance solutions and alternative risk transfer for a wide spectrum of commercial, corporate and specialty risks across 10 dedicated lines of business.
Our customers are as diverse as business can be, ranging from Fortune Global 500 companies to small businesses, and private individuals. Among them are not only the world’s largest consumer brands, tech companies and the global aviation and shipping industry, but also wineries, satellite operators or Hollywood film productions. They all look to AGCS for smart answers to their largest and most complex risks in a dynamic, multinational business environment and trust us to deliver an outstanding claims experience.
Worldwide, AGCS operates with its own teams in 32 countries and through the Allianz Group network and partners in over 200 countries and territories, employing over 4,300 people. As one of the largest Property-Casualty units of Allianz Group, we are backed by strong and stable financial ratings. In 2019, AGCS generated a total of €9.1 billion gross premium globally.