With the government pushing for electric vehicle adoption, insurers assume it to emerge as a key segment in the coming days.
In March, 2020, IRDAI had announced that insurers will have to offer a discount of 15% on motor third-party premium for electric vehicles to incentivise their use.
While the discount announced by IRDAI is a good incentive to start with, Adarsh Agarwal, appointed actuary at Digit General Insurance, remarked that EV insurance offers a huge opportunity for insurers due to lower risk. “EVs have lesser exposure on highways and so have a better risk,” he stated. However, he pointed out that in terms of challenges, the theft of batteries in certain locations can increase the loss ratio on insurers.
Animesh Das, Head (Product Strategy), Acko Insurance, urged that the number of EVs on the roads are very less as it is mainly early adopters who are opting for them. This means that the risk of an EV being involved in accidents will be much lower than an equivalent traditional vehicle, offering a good opportunity for insurers to make some profit within the auto insurance sector.
As per IRDAI data, the motor business continued to be the largest general insurance segment with a share of 36.50% in 2019-20 followed by health segment with 30.10% market share.
Currently, the EV insurance product is similar to the traditional motor vehicle insurance product, but with a rise in EV sales IRDAI is expected to allow further differentiation in the product construct, stated Amitabh Jain, Head (Health & Motor Underwriting & Claims), ICICI Lombard. “Some of the differentiating factors in an EV are the presence of battery (which entails major part of the EV’s cost) and the charger. We are evaluating the scenario and may approach the regulator for approval to offer add-on covers for battery and charger,” Jain further added.
