Spotlight: Electric vehicles charge ahead

Electric vehicles continue to make major inroads in the car market. Saxon East assesses the prospect of accelerated EV growth in 2025 and what it means for the insurance industry

Touring the production lines of one of China’s largest electric vehicle companies in Beijing, AXA UK CEO Tara Foley was impressed during her November visit.

In the fiercely contested electric vehicles market, the Chinese are making a big impact, with Chinese manufacturer BYD overtaking Tesla in 2024 as the world’s largest electric vehicle maker.

Rapid growth in Chinese EV production is expected to bring down the price of electric vehicles and encourage mass adoption.

I have seen insurers embrace EVs. The vehicles are here to stay, and they’re going to become a bigger population of the vehicle park in the UK.

Steve Browne, AXA

The shift towards affordable EVs is particularly timely, as the UK Labour government aims to boost electric vehicle adoption with a ban on new petrol and diesel cars by 2030, a deadline that had been pushed back five years under the previous administration.

To support this transition, Chancellor Rachel Reeves announced in the November Budget favourable car tax rates for zero-emission vehicles and a £200 million investment for charging infrastructure.

And on Christmas Eve, Transport Secretary Heidi Alexander launched a consultation to gather industry views on how best to deliver on the manifesto commitment to restore the 2030 phase-out date and make the transition to zero-emissions vehicles a success.

The future of driving is electric, and the momentum is building – but are UK insurers ready to meet the challenge? 

Tailoring products

Insurance Post spoke to several insurers – AXA, Admiral, Ageas, Aviva and Allianz – about their product innovation and adaption (see table, 'Insurers' EV evolution'). Overall, insurers believe they are adapting their products to meet the evolving demands of EV ownership.

Steve Browne, UK technical director, AXA casualty and casualty motor, explains: “I have seen insurers embrace EVs. The vehicles are here to stay, and they’re going to become a bigger population of the vehicle park in the UK.

“And I think most insurers, AXA included, are actually interested in insuring them for the purposes of getting some data around how they perform to help assist with pricing and so forth. Because if you don’t have the data, you can’t price.”

Data management

With data being so important, it is imperative insurers get all the updated information for the different makes and models.

EV carmakers are releasing new flagship models all the time.

To stay on top, Admiral is in regular contact with its network of repairers and pays close attention to motor industry communications and updates.

Aviva also uses the accident repair network it owns to discuss repairs, parts supply and new vehicle technology.

The one common theme is that all insurers use industry-funded research centre, Thatcham Research, to supply them with information. 

Dan Harrowell, principal engineer, advanced technologies at Thatcham Research, explains that all vehicles go through a series of safety assessments called Vehicle Risk Rating.

These tests are aimed at encouraging vehicle manufacturers to offer cars that can be insured. Importantly, some of these tests are specific to EVs.

For example, Thatcham’s repair assessment process takes into account how much it would cost to replace the battery, which is a significant component of EVs.

Processes such as this serve a dual purpose: they help insurers understand the challenges of repairs on all models, included the latest ones, while helping vehicle manufacturers understand what affects insurance costs.

Harrowell says: “This data, alongside the other risk intelligence we provide to insurers, provides the highly accurate understanding insurers need to underwrite new and emerging technologies.”

Being able to offer ‘like-for-like’ will become critical for policyholders’ financial circumstances.

James Roberts, head of insurance sales, Europcar

Replacement vehicle

In the event of an accident, insurers aim to repair the vehicle without unnecessary delays and give the customer a satisfactory vehicle replacement.

Ageas UK claims director Stephen Linklater says the insurer will offer an EV if the repairer has one available, but customers are generally happy to use non-EV cars.

AXA has a similar policy – if the EV is available and the customer wants it, an EV replacement can be organised.

Browne is conscious that providing like-for-like EV replacements could become an expensive part of the repair process, and most customers would prefer to keep the premiums lower.

Browne adds: “The feedback from most customers is that if it’s a short repair time, they’re not that fussed about having a like-for-like electric vehicle, provided they are getting their vehicle back on the road within a reasonable time. So that’s what we’re more focused on.”

But the picture is changing, says James Roberts, head of insurance sales at Europcar. “As EV ownership grows, customers will be less willing to compromise,” he says. “And for salary sacrifice or fleet customers, there is a ‘benefits in kind’ (BIK) consideration and personal tax liability for driving an internal combustion engine (ICE) vehicle which will make that conversation more complex. Being able to offer ‘like-for-like’ will become critical for policyholders’ financial circumstances.”

Novo Insurance director James Allenby also believes like-for-like replacement is important.

Novo Insurance started in 2015, initially focusing on EV accident monitoring and claims management. The firm brokes EV insurance products and has its own EV repair centre.

Allenby says that firstly, many EV buyers are white-collar professionals who are crystal clear about why they bought an EV and want a like-for-like replacement.

It sounds obvious, but still with insurers now, you speak to a claims agent, and they don’t know an EV from a non-EV to a milk float or a kid’s bike.

James Allenby, Novo Insurance

Secondly, he highlights the BIK considerations. A member of staff with an EV company car using an internal combustion engine replacement vehicle would have to update the tax authorities within two weeks, according to Allenby, and would face higher tax charges.

“Insurers may have a view on it, but in terms of day to day, there is a lack of awareness, even now, as to why people are buying these cars,” he says.

Allenby emphasises that staff training and knowledge are crucial, noting that his team is highly trained in EVs.

Insurance claims agents generally lack that deep level of understanding, he believes.

The agent’s knowledge is critical for the customer journey: it influences whether the car is sent to a qualified EV specialist for repairs and if they have the necessary tools, training, and understanding to work on the vehicle properly.

He says: “It sounds obvious, but still with insurers now, you speak to a claims agent, and they don’t know an EV from a non-EV to a milk float or a kid’s bike.”

Repair specialists

Repairs is another important area, one where insurers typically work with their own specialist network and Thatcham.

Thatcham’s Harrowell says vehicle manufacturers are well-equipped to handle major EV repairs, such as diagnostics damage.

He notes that the independent repair sector is playing ‘catch up', especially in terms of investment and training, but this can be expected with fast-emerging technologies.

Browne says AXA has partnered with suppliers and made sure they have the skills and expertise to handle repairs, with a wide enough geographical reach to satisfy its customer base.

AXA is also working with organisations that set repair standards for EVs to understand what qualifications are needed.

Browne says: “I think the industry is fairly well placed.”

However, Allenby believes much of the marketplace is still using volume-backed repair networks with standard labour rates.

Allenby explains his customers go to their EV repair centre or manufacturer-specific repairers.

“How on earth can you expect one of those sites to repair what is effectively an iPad on wheels correctly, with the correct tools and experience, when they’re not getting the correct financial support from the insurers?” he asks.

EV vans

An emerging sector in the market is EV vans and last-mile deliveries, an area where insurance coverage can be patchy.

Insurers remain confident they are on course. Aviva offers EV products for individual owners and business users, while Admiral offers the same cover levels and benefits as cars. Ageas does not cover last-mile deliveries.

Allenby points out that insuring EV vans is not straightforward: “If you think ensuring EV vehicles pretty tough, magnify that by 10 and magnify the problems by 10.”

There’s a lack of data on the risks and repair costs associated with EV vans, making it difficult for insurers to assess them.

Additionally, EV vans can be expensive, Allenby says. The Mercedes-Benz eSprinter is between £70,000 and £80,000, making it expensive for insurers to repair. They are hesitant to offer cover, he believes.

Gerry Ross, Allianz UK head of commercial motor, recognises last-mile delivery, a notoriously expensive part of the logistics process, has evolved to meet consumer behaviour and expectations.

He says numerous start-ups and manufacturers are now focusing on mass-producing EVs, particularly utility vehicles, due to their lower production costs.

Ross believes there is a risk with EV vans that, like vehicles in general, insurers could fall behind.

He concludes: “Every insurer has different underwriting priorities but the main risk for those who still have limited appetite for EVs is that at some point they’ll have no choice but to insure them as this is the general direction of UK legislation.

“As a result, they could lose market share by being behind the curve as the car park transitions to mainly EVs.

“This will be exacerbated by a lack of insight when underwriting the vehicles, further risking profitability and market share when there is a critical mass in the market,” Ross says.

EVs may only be a small percentage of insurers’ vehicle book, but the message from the experts is loud and clear: get on board now or face being cut adrift in the future.

 

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