An increase in fuel costs, governmental pressures, and UK business’s own commitments towards zero emission goals are driving a rapid increase in the share of electric vehicles (EV) in commercial fleets. The rise of EVs is dramatically changing fleet manager’s day to day responsibilities and risk management concerns.
Overall, there were 1.1 million electric cars in use on UK roads in April 2023 – up by more than 50% over the past year, according to The Society of Motor Manufacturers and Traders (opens a new window) (SMMT). Ownership of electric commercial vehicles has also risen, with vans up 67.3% and buses and coaches increasing by 34.9%. The number of zero emission trucks has almost trebled since last year – although they still account for fewer than one in 600 in use, the SMMT noted.
The cost of fleet electrification can be high, but battery electric vehicles (BEVs) can be cheaper to run over time than internal combustion engine (ICE) alternatives. With fewer moving parts BEVs may also require less maintenance and potentially have longer lifespans. The introduction of low emission zones and governments’ plans to phase out ICEs are further arguments for electrification.
Once an EV is on the fleet, there are a number of differences in the way they need to be managed compared with traditional petrol or diesel vehicles. The battery charging routines are particularly important as they can preserve the range capacity and consequently the value of the vehicle. The introduction of “battery passports” is set to help individuals check the ‘health’ of a battery.
A new routine for EV fleet managers
Ensure vehicles have sufficient charge when they are needed.
Ensure that charging has a minimal impact on a working day. The time an EV is plugged in is time the vehicle could be earning its owner money.
Use telematics to time charging sessions to coincide with the drivers’ breaks.
Use telematics to confirm that employees are only charging their batteries to 80% to ensure a productive balance of work availability against charging time (vehicle’s battery management software typically slows down the rate of charge at 80% to reduce the build-up of heat and to protect battery health) and does not fall below 20%.
Use telematics and routing software to manage where the vehicle is charged (fast commercial charging points, are usually more expensive than at home/office).
Use telematics to plan routes along charging facilities in remote areas.
EV fleet risk management
The UK EV insurance market is arguably still immature. Insurers have limited actuarial data on past EV losses and are therefore adopting a cautious approach.
Not all EV models can be serviced at any garage. Some manufacturers require repairs to take place at the groups’ body shops, which may be further away.
Insurers will generally offer courtesy cars but may not be able to provide an EV replacement vehicle. Meanwhile, insurers are adapting their underwriting strategy to the trend towards EVs, but they may need a bit longer to feel comfortable with EV-only fleets due to the fast pace of change in this area. Claims data on light commercial vehicles and for the company car sector is still limited.
As always, the cost of a vehicle, its top speed, how easy it is to repair, play a role in the premium calculation. Insurers are currently gathering data to get a better sense of potential claims costs but as manufacturers continue to expand their EV offering there is a lot of movement in this space. The same applies to the repair network as service providers adapt to the specific capabilities needed to service an EV.
Issues of concern
Insurers currently do not appear keen to underwrite fleets consisting solely of EVs.
ABI ratings for certain vehicles are very high and clients are not always aware of this, causing issues when trying to add young or inexperienced drivers, for example.
Repair networks and replacement parts challenges.
If an EV is involved in a road traffic incident, the repair is likely to take longer than for an ICE vehicle.
Write offs can become more prevalent with EV’s generally being more expensive.
Hidden costs and unforeseen exposures e.g. maintenance, charging, slip and trip of cables.
The cost of the repair for an EV is currently likely to be higher due to the additional labour content associated with testing and verifying systems to ensure electrical safety to both the repairer and the end user.
Additional costs of repair may make EVs more uneconomic to repair and therefore more likely to be categorised as a total loss, resulting in increased salvage costs, thus potentially affecting insurance premiums.
The claims process when involving EVs is more complicated than for ICEs due to a number of reasons, including:
In general, EVs can’t be towed as this will cause damage to the motor via the wheels
Damaged vehicles require a lot of storage space due to fire risk
First responders can easily identify when an ICE vehicle is a hazard e.g., on fire, but not necessarily the case when a battery is damaged and the possibility of coming into contact with electricity
Batteries can on average cost 35%-60% of the vehicle value and are not recyclable, leading to more right-offs
Claims costs for EVs are currently on average 25% higher than their ICE equivalents with repair times 14% longer
Training to mitigate the risk
The main difference when driving an EV is the stronger acceleration since there is no delay in output. Family-sized EVs can accelerate to 60 mph in 5 to 6 seconds while a similar ICO would take about 10 seconds. Some performance models from Tesla can get there in under 3 seconds. This could pose an increased risk of injury or damage particularly if the individuals are not familiar with the vehicle or are inexperienced drivers.
Over the past couple of decades, drivers have become accustomed to using their vehicles for hundreds of miles before even considering the need to refuel. Many new EV models have battery ranges in excess of 200 miles, fast-charging times of sub-30 minutes for 80% charge and the charging point network is expanding quickly.
Nevertheless, the driving style has a direct impact on battery depletion. Smooth acceleration and avoiding ‘harsh’ brakes will have a noticeable effect on the EV range. Cold weather conditions can negatively affect the battery range by 30% and heating or air conditioning have a similar range-draining effect. Limiting the top speed will extend the battery life.
Further, EVs are considerably quieter than other vehicles, which can pose an increased risk to other road users. In Europe, EVs are equipped with acoustic vehicle alerting system (AVAS) to alert pedestrians when a vehicle is close. However, the AVAS can be deactivated by the driver using a pause switch.
Drivers’ training can help reduce the risk of accidents. Maximising the battery life will help keeping maintenance costs at bay. Both can contribute to lower claims cost and therefore reduce the insurance premium. It is also advisable to give drivers a basic education on how the EV engine works including simple safety checks and basic maintenance. Damage to the battery can result in a total loss.
The good news
Generally, electric cars have fewer complex moving parts that can be damaged compared to an ICE. In addition, battery packs are reasonably well protected in accidents, reducing the risk of replacement.
While it is often thought that the presence of highly flammable lithium in an EV battery means they present a greater fire risk than an ICE vehicle, a study conducted in the US found that EVs actually present a lower fire risk than ICEs (opens a new window).
Further, EVs are typically less likely to be stolen and more likely to be recovered when they are. This may be due to their limited range and because charging them is relatively time-consuming.
Tesla cars receive over the air updates which may reduce the servicing needs. Some manufacturers share the vehicle data with independent repair service providers that have EV capabilities.
Recommendations:
Businesses are moving quickly towards EV fleets but struggling to get the same breath of insurance cover as for traditional fleets. Fleet managers should make use of opportunities to mitigate risk and make it more attractive to underwriters, for example by purchasing add-ons for repairs, recovery, specialist breakdown insurance or specialist accident recovery solutions.
Fleets may need to carry some additional capacity or have the ability to obtain vehicle cover for the longer periods of time EVs will be off the road during repairs.
When planning to move quickly towards electric fleet it is advisable to involve a broker/insurer/leasing company at an early stage to make sure the right insurance policies are in place when needed and future proof existing policies.
For more details on our products and services, please visit our Motor Fleet Risk page (opens a new window), or contact:
Steve Vachre, Head of Motor Practice Group
T: +447391385697
E: steve.vachre@lockton.com (opens a new window)
Scott McLuskey, Account Executive
M: +44 7931 732 639
E: scott.mcluskey@lockton.com
