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Electric premium

Implications of electric vehicle adoption on insurance.

What EVs mean for the insurance industry

Electric vehicles form a key part of many countries’ ambitions to reach net zero. But what does it mean for the insurance industry, where motor makes up a fifth of the global non-life insurance pool?

In our latest report, we see several challenges ahead.

First, insurers need to adjust their product offering to cover for EV specific requirements – such as damage to batteries and home chargers.

Second, new pricing models need to be developed, factoring in the differences in car characteristics and changes in driving behaviour.

Third, there is potential for more frequent claims as users adjust to the fast acceleration and quiet operation of electric vehicles – as well as distinctive features such as regenerative braking.

So what can the industry do to mitigate these issues? Our report outlines three steps that could help to keep claim costs down.

Insurance companies could partner with equipment manufacturers to increase their understanding of battery technology.

Training repair specialists and building out repair networks could shorten fix times and allow greater control of costs.

And greater recycling and repairing of batteries would increase salvage levels and provide a more sustainable way of operating.

While change is coming, it will likely be gradual: indeed, HSBC’s autos team are more conservative than the consensus view on the longer-term adoption of EVs in Europe. Nonetheless for the insurance industry – and the investors in it – it is not too soon to start planning for an electric future.

Would you like to find out more? Click here* to read the report. Please note, you must be a subscriber to HSBC Global Research to access this link.

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