Insuring Electric Vehicles: The Challenges
【Summary】The rapid growth of electric vehicles in India has led to the development of EV-specific insurance policies. Insuring EVs can be more complicated and costly compared to traditional internal combustion engine (ICE) vehicles. The high cost of EVs, including the battery and electric motor, as well as the need to insure the charging setup, contribute to higher premiums. EV insurance also covers unique risks such as improper charging stations and voltage fluctuations.
Electric vehicles (EVs) have become increasingly common on Indian roads, with their sales accounting for 6% of all vehicle sales, up from 1% in 2019. The growth has been rapid, with 13 lakh units sold in 2023 so far, compared to around 2 lakh units in 2019. As the festive season approaches, we can expect to see even more electric vehicles on the road.
The insurance options for EVs are still in the early stages, with insurers working on designing policies that address the unique aspects of these vehicles. Companies like HDFC Ergo, Bajaj Allianz, Royal Sundaram, and Magma HDI Insurance offer EV-specific policies and add-ons to cover the battery and other components.
Compared to internal combustion engine (ICE) vehicles, the cost of insuring an EV is typically higher. This is due to the higher cost of the vehicle itself, as well as the higher replacement and maintenance costs. In addition, the risks associated with EVs, such as improper charging stations and voltage fluctuations, can cause significant damage to the vehicle. Roadside assistance also takes on a new meaning with EVs, as they can easily run out of charging-point range.
A comprehensive insurance policy, in addition to the mandatory third-party insurance, is recommended for EV owners. This type of policy covers damage to the vehicle due to theft, fire, or natural calamities, as well as providing additional services like legal cover for third-party damage and personal accident coverage. Roadside assistance, including breakdown and energy assistance, is also included in some policies.
In terms of add-ons, EV owners can opt for battery covers and motor covers, which protect against the risks associated with these critical components. The battery cover includes the charger and the battery itself, while the motor cover protects against water ingress and manufacturer faults. However, it's important to note that certain risks, such as surges and voltage fluctuations caused by using non-OEM materials for charging, are not covered by insurance.
Overall, while the current motor insurance products may suit ICE engines, there is a need for EV-specific insurance that takes into account the unique characteristics and risks associated with these vehicles.
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