Handling electric and semi-autonomous vehicle claims

Electric vehicles are more common than ever on our roads and as the drive for net zero carbon emission accelerates, the numbers will only continue to rise. They are forecast to comprise half of all new car sales worldwide by 2035, according to Goldman Sachs, with sales soaring to 73 million by 2040, up from around 2 million in 2020.

All good news for the planet and the fight against climate change, but the rise in electric vehicles with their semi-autonomous and connected software features creates new claims risks for the property and casualty insurance sector.

The role of the person behind the wheel

The computer data in semi-autonomous vehicles tells us the last time the driver touched the controls, which can help during claims handling to determine if the driver was negligent or if the vehicle malfunctioned. According to the National Highway Safety Administration, 94% of serious crashes are due to human error, but we don’t yet know if these statistics will change as more electric and semi-autonomous vehicles are adopted.

However, until we have fully self-driving vehicles, there will always be a human component. At what point should the person behind the wheel act when the vehicle begins to malfunction or crash into something or someone? The driver can’t just abrogate responsibility and sit back and watch a movie on their phone.

Who is responsible for maintenance?

Vehicle maintenance, including the last date of service, is an important consideration for insurance claim managers, and even more so in electric and semi-autonomous vehicles as any maintenance requirements that are not executed could have a negative impact on how the vehicle functions.

There may be fewer components in these vehicles than in traditional combustion engines, but they are more intricate, and are fully computer-based. It is important to know what the standard maintenance requirements are and how they affect safety. Are software updates automatically carried out or do they need to be bought, and who is responsible for upgrading systems, the owner, dealership or software company? These considerations will have an impact on who is liable for the claim.

Dealership liability

Dealerships could be exposed if it is argued that they have not given the buyer proper instruction on the vehicles’ connected features, or the owner could be liable for not reading the manual from cover to cover, opening a new aspect of liability in the commercial world. I would like to see training about semi-automated vehicles included in driver’s education courses or before purchase to familiarize the person behind the wheel with the semi-autonomous features and instruct them on how to navigate safely across the country.

Rising costs for clients and insurers

Claims are more complex for business owners than in personal lines, where you only need to establish what happened. Difficult repairs, a dearth of specially qualified mechanics, and a more complicated claims process to establish liability could lead to lengthy delays in settling claims and getting vehicles back on the road.

Insurers face increased costs to cover total vehicle loss if the battery or computer hub is damaged, and for providing clients with rentals for long periods as the vehicle is repaired or warehoused securely to determine liability during the claims process.

The lithium batteries that power electric vehicles are a fire risk, which is why mechanics working on them need additional training to be certified. The cost of this training is passed onto the insurance company or whoever is paying for the repairs.

These increased costs will be passed on to the insured and premiums will rise for all owners, whether they drive an electric or semi-autonomous vehicle or not.

The cybersecurity risk

Until now, cybersecurity has not factored into auto policies, but that could soon change. A computer-operated vehicle can be hacked just like any other system, although few owners are aware of this risk. In a National US Xcelerant Survey carried out last year, 56% of vehicle owners had Bluetooth, 41% keyless access, 38% GPS navigation system and 25% advanced driver assistance systems, but 41% thought it was ‘not very likely’ that their vehicle could be hacked through any of its connected features.

Specialty insurers are looking into including cyber coverage in the auto portion, but presently, a standard auto policy does not cover a vehicle being disabled by a cyberattack.

Electric vehicle chargers are also exposed to cyberattacks as well as run-of-the-mill vandalism. Again, it could be difficult to ascertain liability in such an event as there are many end users, software and equipment suppliers, and vehicle manufacturers who supply chargers to local vendors and big supermarkets. We need to put all parties on notice and examine contracts between companies to determine who is responsible for servicing charging points.

Electric and semi-autonomous vehicles are in new territory for property and casualty insurance, but there currently is not enough data for efficient and accurate claims handling. As more U.S. states adopt policies such as those in California, which will require all new vehicles sold by 2035 to be electric or plug-in hybrid electrics, it is imperative that the industry fully understands the emerging risks attached to the inevitable rise and eventual dominance of these super smart vehicles.

Rachel Kelly (rachel.kelly2@amtrustgroup.com) brings over 20 years of insurance claims experience in both commercial and personal Lines with various regional and national companies, including Safeco, Allstate, The Hartford and Preferred Governmental Claim Services. She joined AmTrust in 2017, and in her most recent role as senior claim manager, Kelly has been overseeing a staff of claim managers, driving technical results and superior customer service.

Related: 

Repair costs & labor issues squeezing auto insurers

Insuring semi-autonomous vehicles