A colossal shift coming: EVs, auto claims & underwriting
By 2025, 3% of all registered vehicles in the U.S. will be electric. This share is projected to reach 8% by 2030.
As electric vehicles (EVs) increasingly make up a larger share of vehicles on the road, and in turn a larger share of cars involved in accidents, the impact on repair shops and auto insurers will be indelible.
And it won’t only be felt on the claims side, according to Ryan Mandell, director of claims performance for auto physical damage at Mitchell, an Enlyte company. The shift to EVs will be felt in underwriting as well, he says, adding this will impact the entire lifecycle of a policy.
“It is not just how you manage this on the claims side and the different things you need to consider when repairing the vehicle,” Mandell says.
For example, the Kia Soul is available with both electric and internal combustion engines (ICE), which begs the questions: Are these different vehicles being underwritten the same and are their policies priced similarly?
“We are seeing some carriers trying to get out in front of that, but when you look at the underwriting process it is a very traditional look. They say ‘We have to have three years’ worth of data. We are using symbols to underwrite these vehicles,’” Mandell says. “But this is evolving so rapidly, I think this is going to be a challenge for underwriters moving forward, especially as we see electric variances of ICE vehicles. What is the strategy for when you are faced with an identical grading scenario, but you have an ICE variant and an EV variant? That is something the insurance industry really needs to be keenly aware of as we move into this next phase of EV adoptions.”
During the coming decade, EV purchases are anticipated to explode. In the second quarter of 2022, EV sales in the U.S. increased 66% compared with the year prior. By 2025, 3% of all registered vehicles in the U.S. are expected to be EVs, according to Bloomberg. This share is projected to reach 8% by 2030. As it stands, EVs make up around 1% of all vehicles in the U.S., according to Car and Driver.
As electric car sales rise, so will the percentage of repairable claims attributed to electric vehicles. From 2019-2022, the frequency of repair estimates for fully electric nearly doubled from 0.41% to 0.74%, according to Mitchell.
More interconnected systems
When comparing repair shop scanning results, full EVs throw nearly twice as many fault codes compared with ICE vehicles. Further, newer EVs see even more fault codes, according to Enlyte, which reported a 95% increase in fault codes when scanning 2017 and newer EVs compared with models made in 2016 or earlier.
“The more electrified a vehicle becomes, usually the costs become higher and the systems become more complicated and interconnected,” Mandell says. “As you remove that internal combustion engine from a vehicle, you now have things that are being accomplished solely by semiconductors and digital communications.”
Since the systems are more interconnected, if one part of a car is impacted by a collision then other systems further down the line will need to be diagnosed and potentially recalibrated.
For example, the complexities of an EV’s cooling systems far surpass those on most ICE vehicles, according to Jeff Poole, manager and subject matter expert team lead for I-CAR.
So how does a more complex cooling system impact claims?
“Think about an internal combustion engine: You have coolant in the front of the vehicle, it runs through a radiator, runs through the engine and keeps it cool,” explains Mandell. “With an electric vehicle, you have a variety of components that need to be kept cool. That battery has to be maintained at a certain temperature. You also have potentially more than one motor that has to be kept at stable temperatures. You know have coolant that runs throughout the body of the vehicle.”
Now consider a simple impact to the bottom left fender on an EV. For an ICE vehicle, unless there was structural damage, it typically won’t be considered a serious problem. However, on EVs this type of damage could require getting into the cooling system and potentially having to remove components on the rear of the vehicle to deal with front-end damage.
“While the concepts of how EVs operate are similar in broad strokes, there are many unique nuisances that necessitate anyone handling or working them have intimate knowledge of the vehicles to ensure that proper decisions are made at each step in the recovery, transport and repair, including damage assessment and estimate (repair plan) operations,” I-CAR’s Pool says.
Dealing with EV batteries
As the lifeblood of an EV, handling the battery with care is of utmost importance. It also adds to the cost of repairs. As seen in Florida and on shipping vessels, mishandled lithium-ion batteries can also result in fires that are difficult to extinguish.
An important thing to note about EV batteries is that they aren’t similar to the battery under the hood or in the trunk of an ICE vehicle. Using a “skateboard” design, most EV batteries are housed under the vehicle.
“One of the major challenges the industry faces is truly knowing the state of health and stability of the internal battery cells, particularly when we have collision energy, impact forces, flood/water intrusion, or unknown factors involved,” Poole says.
In most repair scenarios, the battery will remain in the vehicle with the high-voltage (HV) system shut down, according to Poole. However, some repairs will necessitate the removal of the HV battery.
“Under any and all circumstances, protect it from direct exposure to sparks and excessive heat. If the battery is removed use the appropriate battery lift or correct mobile table to facilitate removal, storage and installation of the battery,” he says.
If the battery is to be handled while out of the vehicle appropriate tools and equipment (multiple attachment points /rigging/ lifting) apparatus need to be used to avoid damage. If removed, the battery should be protected from sparks, dirt and other contamination, and kept in a cool, not cold, dry place.
“Think of yourself as a battery cell, we tend to like a narrow temperature band in our homes and most working conditions relative to potential temperature variations in the ambient outside temperature, Poole says. “Too hot or too cold and we do not function as well, batteries are similar.”
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