Ensuring the climate transition: electric vehicles are the future. How will this change commercial auto insurance? : Risk & Insurance

From battery fires to cyberattacks, here are insurers’ concerns about EV risk.

Insurers, start your engines. The adoption of electric vehicles is on the rise – and it will only accelerate.

In August, California announced it would ban the sale of gas-powered vehicles in 2035. New York and Virginia, where a 2021 law requires the state to adopt California standards, soon followed.

While the move is necessary in the fight against global climate change, some insurers wonder how the transition to electric vehicles will affect personal and commercial auto lines. On the business side, fears about battery fires, increased accident risk, and cyberattacks are common.

Electric Vehicles vs Gasoline Vehicles

While gasoline and electric vehicles share a number of similarities, there are a few concerns unique to electric vehicles that insurers are watching out for.

“There are different risks than a combustion engine risk, which are better understood by the insurance market,” said Stephen R. Hackenburg, national property and casualty practice leader at Aon.

A major concern that is already making headlines: battery fires. Videos of Tesla vehicles catching fire have circulated widely on the internet.

“While both types of vehicles can be subject to battery fires, the composition of electric batteries can react differently, resulting in variations in damage,” said Sandee Perfetto, senior manager, personal line base products and solutions. subscription at Verisk.

The good news for insurers? Despite these additional risks, electric vehicles may prove to be safer than those powered by gasoline engines. EV batteries have a 0.03% chance of igniting compared to a 1.5% chance for their gas-powered counterparts, CNBC reported.

“Electric motors are simpler than a combustion engine,” Hackenburg said. “In a way, you could argue that electric vehicles are less likely to have fewer associated risks from a product perspective than a combustion engine.”

Some insurers worry that the quiet hum of electric vehicles could create additional liability risks, as walkers or joggers may not hear a car approaching until it’s too late.

“Another consideration is the quietness of electric vehicles compared to gasoline-powered vehicles, which could lead to increased risks for pedestrians,” Perfetto said.

Aside from the vehicles themselves, Hackenburg wonders if power grids across the United States can support thousands of utility vehicles — or even just commuter cars — that will need to be recharged. According to a May report by Reuters, it would take more than $2 trillion in investment to prepare America’s power grids for the demands of electric vehicles.

“Without a massive upgrade to the power grid infrastructure, I’m very skeptical that an all-electric scenario would work,” Hackenburg said.

Cyber ​​risks abound

Insurers are also concerned about the cyber risks they may pose. Like most new cars and trucks, electric vehicles feature connected car technologies like wifi, data sharing, and semi-autonomous systems. The fear is that these systems could be hacked and used to take control of the car or shut down the security systems.

“If you could somehow hack into a vehicle and affect the security systems, or worse cause a subsequent accident, that’s the kind of thing I think about and worry about,” said Hackenburg.

Hackers are already targeting electric and autonomous vehicles. Between 2018 and 2021, attacks on electric vehicles increased by 225%, according to Forbes reports.

“In general, an increased risk of mass hacking may exist with automated vehicles in general, not specifically with electric vehicles. As vehicles are designed with more technology to provide additional security and convenience, the opportunities for hacking at distance are increasing,” Perfetto said.

Additionally, the charging systems found in electric vehicles could pose cybersecurity risks. Like other connected technologies and Internet of Things devices, electric vehicle charging stations are vulnerable to cyberattacks.

“Electric vehicles may be more vulnerable to cyberattacks than other vehicles with similar automation due to connection to charging stations to replenish batteries,” Perfetto said.

“Electric cars can be connected to public charging stations in shopping malls and in public car parks where data can be transferred.”

This fear is particularly acute for owners of commercial fleets. If someone hacks into a charging station in a commercial fleet, they will likely be able to access all vehicles.

“The potential for mass hacking is likely to be greater if vehicles have the same technology in a fleet, while being vulnerable to the same charging stations and malware,” Perfetto said.

“Mass hacking affecting a fleet via common technology or charging stations could lead to increased property damage claims for car dealerships, garage owners and owners of large electric vehicle fleets.”

It should be noted that the chances of a mass hacking event are low. Developers of electric and autonomous vehicles have considered the potential for mass hacking and hijacking events and have programmed vehicles with safeguards to protect against these risks.

“The way the systems are designed is that there is a very specific pathway for input for actuation of the vehicle, and if there is a fault or a command that is not recognized as coming from the good source, vehicles go into degraded mode; They stopped. In the worst case, you stop on a roadway. You don’t turn it into a remote control car,” said Steve Miller, broker and chief innovation officer at the Insurance Office of America. Risk & Insurance® in March.

Nevertheless, insurers will need to consider the risks posed by electric and autonomous vehicle technologies. Commercial fleets will likely need to purchase cyber insurance policies to protect against exposure. And they will have to determine who is liable for damages in the event of a hack.

“Insurers need to consider existing cyber exposures and changes in theft or other losses that may occur due to computer incidents,” Perfetto said.

“Non-motor policies must take into account the new risks associated with charging stations. Will the liability risks traditionally associated with auto insurance be transferred to automakers or parts suppliers? » &

Insuring the Climate Transition is a series that explores the critical role insurance will play in decarbonizing the economy and adapting policyholders to the effects of global climate change. You can read other stories from the series here.

Courtney DuChene is a freelance journalist based in Philadelphia. She can be reached at [email protected]

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