Key guidance:

• Collaboration between insurers and fleet operators is essential for effective risk management.
• Fleet operators should share as much relevant data as possible with insurers to help negotiate appropriate and effective policy terms.
• Telematics and operational data can help insurers better understand and assess risk.
  • Both electric vehicle (EV) data and historical internal combustion engine (ICE) vehicle data can help demonstrate a strong risk profile to insurers.
• Tailored insurance arrangements are important, as standard insurance policies may not fully address the specific requirements of public sector fleets.

Role of insurance in EV fleets

Insurance plays an important role in supporting the safe and effective adoption of electric vehicles (EVs) within public sector fleets.

Industry bodies such as the Association of British Insurers (ABI) contribute to the development of policy and guidance relating to electric vehicles. This work is supported by major insurers across the sector, helping to ensure a collaborative approach to managing risk and responding to emerging trends associated with fleet electrification.

Electric vehicles often benefit from advanced safety technologies, including Advanced Driver Assistance Systems (ADAS), and are increasingly achieving high safety ratings through the European New Car Assessment Programme (Euro NCAP). However, fleet operators should ensure that drivers receive appropriate training to understand and use these systems effectively, helping to maximise safety, improve efficiency and support the successful operation of electric vehicles.

Challenges of insuring EVs

Insuring electric vehicles (EVs) presents several challenges. One of the most significant is the high cost of repairs, which can be driven by longer repair times, a shortage of specialist technicians and the high cost of replacement parts.

• The EV repair market can experience fluctuating costs due to the limited availability of historical data and evolving repair practices.
  • Cost variability has also been influenced by global supply chain disruptions, which have led to delays in obtaining replacement parts.
• During repair periods, insurers may need to cover the cost of replacement or courtesy vehicles. Longer repair times for EVs can increase these costs and extend claim durations.
  • The cost of providing replacement vehicles can also contribute to higher insurance premiums at renewal.
• The complexity of EV systems and components can increase the cost of replacement parts and vehicle repairs.

Battery-related considerations can also affect insurance costs. There is currently uncertainty around battery residual values, second-life applications and end-of-life recycling economics. As a result, insurers often place a strong emphasis on risk mitigation. However, ongoing research into battery reuse and recycling may create opportunities for future policy and market developments.

Fire risk in EVs

Fire risk is an important consideration for insurers of electric vehicle (EV) fleets, particularly where public sector organisations operate large numbers of vehicles in urban areas and depot environments.

• Misconceptions about EV fires continue to persist, often driven by incidents that are not directly related to electric vehicles.
• Although battery electric vehicles are generally less likely to catch fire than internal combustion engine (ICE) vehicles, battery fires can be more complex to extinguish when they occur.
• Fire and rescue services require specialist training and procedures to respond effectively to battery-related incidents, highlighting the importance of robust fire risk management and response planning.

Renault has developed systems to suppress thermal runaway, which is an important step in preventing battery-related fires. If this technology is adopted by other manufacturers, and insurers have data on its risk mitigation effectiveness, this could help address risks associated with EVs.

Risk mitigation strategies

Insurers are more likely to offer favourable terms to fleet operators that share operational data, claims data and planned fleet replacement information. This enables insurers to develop more accurate risk assessments and provide policies that are better tailored to fleet requirements.

Key risk mitigation measures include:

• Using telematics and data-driven insights to help reduce accident rates and insurance claims.
• Implementing black box technology, driver training programmes and onboard cameras to improve driver behaviour monitoring and vehicle safety.</li

Market dynamics and cost considerations

The insurance landscape for electric vehicle (EV) fleets is influenced by the availability of data, market maturity, confidence in new technologies and the ongoing development of insurance products and policies.

• Unlike internal combustion engine (ICE) vehicles, EVs have a more limited history of insurance and claims data, which can make risk assessment and pricing more complex.
• Although EVs are generally cheaper to operate than equivalent ICE vehicles, insurance costs can remain a barrier for organisations considering fleet electrification.
• Despite benefiting from advanced safety features, EVs are often placed in higher insurance categories, which may not always reflect their real-world risk profile.

However, organisations that implement robust risk management measures, share relevant data with insurers and maintain strong fleet safety performance may not experience significant increases in insurance premiums when transitioning to electric vehicles.