Technological advancements and increased risk exposure present significant challenges for insurers in the Philippines when insurance underwriting electric vehicles, as discussed by panelists at the Philippine Insurance Summit, according to S&P Global.
National government have been racing to incentivize consumer uptake of EVs while continually investing in the widespread rollout of the infrastructure needed for their success.
Many underwriters hesitate to cover EVs primarily due to uncertainties surrounding the battery and the associated risks, such as whether battery damage in collisions or fires should be included in coverage.
Falling EV prices, greater battery ranges, and sufficient charging infrastructure will contribute to the worldwide proliferation of EVs, growing the market for EV insurance in parallel.
The Automotive Association of the Philippines predicts a rise in total loss claims as collisions become more severe. This severity is attributed to the increased use of disposable plastic parts, which create a protective shell around passengers and drivers.
Underwriters may need to adjust premiums in response to extended battery lifespans, which could influence the fair market value of certain EVs (see How to Reduce the Premium in Car Insurance)..
Insurers are also reassessing depreciation guidelines. Currently, depreciation applies to vehicles over three years old, but discussions are ongoing about applying depreciation from the first year of EV ownership due to the battery’s role.
Philippine insurers face constraints in adjusting EV premium rates due to a lack of data for regulatory presentation.
Telemetry in EVs is expected to aid in underwriting motor vehicle insurance, addressing the challenge posed by the exclusion of driving habits from premiums.
There are currently 15,000 electric vehicles in the Philippines, including hybrids, making up about 1.5% of all vehicles.
Insurers noted that the growing adoption of EVs would lead to an increase in vehicles to insure. Given the higher prices of EVs, premiums will also be higher.
As the number of connected vehicles grows, so too will in-vehicle services and products, including insurance. As the world is gearing up for a shift to allow environment-friendly electric vehicles to replace traditional ICE vehicles, the changing landscape presents both challenges and opportunities for the motor insurance market.
The market is expected to grow at a CAGR of more than 19% during the forecast period.
Consumers will be able to buy auto insurance through a simplified or “no quote” purchase process when they buy their vehicle online. Access to customer data and direct-to-consumer vehicle sales will open up the auto insurance market to OEMs, allowing them to overcome longstanding operational challenges to their ability to capture recurring insurance revenue beyond the point of sale.
by Yana Keller
