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Above: Insurers face declining end-of-life vehicle salvage values due to fewer reusable EV components - and even face additional disposal costs for batteries.
salvage. It is analogous to the argument that dealers’ profits will fall in line with EVs’ relative lack of wearable parts because, in salvage terms, there are fewer components to carve up and sell. “The conundrum the insurance industry has is that the traditional business model has been turned on its head,” adds Brundle, “traditionally, they have selected partners that will disassemble and resell components, such as catalytic converters, engines, gearboxes, drivetrains. There’s always been a value to an end-of-life vehicle and, naturally, some of that value has gone back to the insurer. “Now they’re in a situation where those value chain parts have gone and, worse still, they’re left with a cost problem to get rid of the batteries, because there’s a cost to process lithium-ion batteries. They’re upside down on revenue at
“I don’t blame the
insurance industry for setting premiums where
they’ve set them... I think it’s up to the rest of the industry to find a way through to keep the costs down.”
the back end and it’s adding to the pressure on premiums at the front end.”
Insurers are adjusting to EVs along with the rest of the industry and there are clearly plenty
of reasons why the policies are more expensive. “I don’t blame the insurance industry for setting premiums where they’ve set them at the moment,” says Hollick, “I think it’s up to the rest of the industry to find a way through to keep the costs down as best we can.”
His advice to fleets is to pick an insurer that you believe knows how to set EV policies and, if not, shop around.
“A lot of insurers have got risk teams,” he adds, “so have a chat with them about policy setting and finding ways to keep a lid on costs on this topic. And don’t throw the baby out with the bathwater if you do see a large premium increase. It’s worth dialogue and discussion about the rationale behind it.” That said, we noticed that experts almost universally cite Thatcham’s figures. They are far from a poor source and there is little else publicly available, but you have to wonder if the insurance industry is hanging its hat on them alone, and whether protectionism is hindering a wider sharing of data that could lead to greater understanding and a more mature market. Peter Milchard, head of motor risk at insurance broker Howden and an AFP board director, believes transparency helps to foster a greater understanding of why policies cost as much as they do. “People are not very good at explaining why vehicles are being written off,” he says, “maybe if they [fleets] were to know that, if it’s a three- month wait for a vehicle to be repaired, that’s three months of storage charges.
Above: There is a shortage of technicians with EV skills, which increases both the time and cost in workshops. 30 | September/October 2024 |
www.businesscar.co.uk
“If you’re a repairer, your business is about volume of vehicles. The longer you’re having to sit them in an already congested compound, the fewer vehicles you can take on. So, you could argue, is it the insurer? Is it the repairer network? I think there’s a combination of a lot of things, but I don’t think anyone’s been very good at trying to explain that to the end user.”
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