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February 16, 2023

Electronic vehicles present new insurance challenges

With many federal and state governments pushing for lower carbon dioxide roadway emissions, electric vehicle (EV) demand is expected to soar during the next decade. This has commercial fleet owners wondering what a world without gas- and diesel-powered vehicles might look like, particularly when it comes to the potential exposures EVs could create.

The following are unique factors that could make insuring EVs costlier than standard automobiles:

  • Cyberthreats—Like most new cars and trucks, EVs offer connected car technologies, such as Wi-Fi, data sharing, and semiautonomous systems that leave them vulnerable to cyber threats. However, the public charging stations EVs rely on to recharge their batteries add another layer of risk because they may serve as an entry point for malware attacks, data theft, system outages, bugs, and glitches.
  • Battery problems—Battery manufacturing defects can lead to large-scale vehicle recalls, putting fleet owners at an increased risk of business delays. Additionally, under certain conditions, lithium-ion batteries that power EVs can ignite or explode.
  • Pedestrian accidents—One selling point of EVs is they run quieter than gasoline-powered vehicles. Unfortunately, this lack of audible engine noise may also put pedestrians at greater risk of being hit if they fail to hear an approaching EV.

Several other concerns will need to be addressed before EVs become scalable, including:

  • Scarcity of repair shops and parts—Very few auto shops can handle EV repairs, so it may be difficult to find timely service.
  • Costlier repairs—Most EV parts cost significantly more than parts for gas-powered vehicles.
  • Extreme weather concerns—It’s unclear how much of a role extreme weather will play in EV battery performance. Under severely hot temperatures, batteries, on rare occasions, have been known to ignite or explode. Under cold temperatures, batteries hold their charges for a shorter period of time.
  • High voltage hazard—A number of high-voltage electric cables run throughout the body of EVs. When an accident occurs, exposed cables could cause serious injury to passengers or first responders trying to free crash victims from damaged vehicles.

Although it probably won’t happen overnight, EVs seem positioned to dominate roadways sometime in the near future. Commercial fleet owners who start thinking about EV insurance challenges today will be better positioned to thrive in a post-fossil-fuel landscape.

For more risk management guidance, contact us today.

This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. © 2023 Zywave, Inc. All rights reserved.

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