The urgent need to cut carbon emissions is prompting a rapid move toward electrified mobility in the UK. According to Society of Motor Manufacturers and Traders (SMMT) data, 267,203 of the 1,614,063 cars registered on UK roads in 2022 were new battery electric vehicles (BEVs) representing a 40.1% sales increase over 2021 and a total market share of over 16.5%. As the UK aims toward widespread BEV adoption, this rate is expected to increase significantly in the coming years.
Although the advance of technology has rapidly evolved the landscape, nothing has caused such a fundamental shift in vehicle design as the electrified powertrain. For BEVs to achieve the desired environmental benefits of being emissions-free at the tailpipe, they must have a significant minimum use phase. And despite newer BEVs having high levels of standard-fit Advanced Driver Assistance Systems and passive safety technologies, they are not risk- or incident-free.
The UK’s premier automotive risk intelligence company, Thatcham Research, recently delivered its Impact of BEV Adoption on the Repair and Insurance Sectors report, highlighting the risk-affecting factors BEVs present to the insurance workflow. Funded by the UK Government’s innovation agency (Innovate UK), the report explains how insurers build their financial models around BEVs, examines concerns regarding the repair network, and analyses the total economic value around the widespread adoption of BEVs in the UK.
The major takeaway from the report is that no part of the Motor Insurance Claims process is unaffected by BEVs. The workflow impacts are profound and will, over time, force a wholescale industry adaption that much of the Motor Insurance industry is yet to acclimatise to. The implications still need to be quantified on repair capacity, training and skills, cost, and the lifetime sustainability of BEVs. However, the Motor Insurance industry already sees BEVs performing differently from ICE vehicles in the market.
BEV claims are already ~25.5% more expensive than their ICE equivalents and take ~14% longer to repair. It is impossible to quantify whether total loss rates are higher for the current generation of vehicles as there are too many confounding factors. Though, the most significant challenges identified by the report concern the insurance claims flow originating from high voltage (HV) battery damage.
BEV design largely sees the HV battery and related systems positioned in the floor of the vehicle chassis with mounting points under the side sills, making them vulnerable to collision damage. A Thatcham Research designed assessment scored the likelihood of HV battery damage occurring in crashes which attributed a low/medium/high probability to each damage zone.
The results indicated that BEVs with single-zone body damage have an HV battery damage probability of 1.5% to 7.5%. In comparison, BEVs sustaining damage to multiple zones have a 25% to 35% HV battery damage probability. Damage to the vehicle’s underside was considered to represent an 85% probability of HV battery damage.
Data-driven modelling produced for this report shows that in 2022, 9,400 vehicles on UK roads were involved in an accident which could result in battery inclusion in post-accident repair assessment. This figure is estimated to reach up to 260,000 vehicles annually by 2035.
Vehicle Damage Assessors (VDAs), who perform a detailed analysis of the damage condition of a vehicle, have a process of assessing and costing repair and use industry-standard software to document their findings. The UK government guidelines state that damaged BEVs with a suspected damaged HV system should be stored in an outside quarantine area 15 metres from other nearby objects where assessors will monitor the fire risk for up to 48 hours after an incident.
HV batteries represent a substantial percentage of the original vehicle value, typically costing between £14,200 – £29,500. They negatively impact the economic model of vehicle repair when HV system damage is identified due to their cost as a percentage of the car’s market value. A depreciation curve based on battery cost versus average used value shows that battery replacement expenditures exceed most BEVs used value after only one year.
Thatcham Research‘s report also shows that VDAs have very few tools/techniques to sufficiently assess HV battery damage as part of the damage assessment, especially if the damage is relatively minor or not apparent without close inspection. The Association of British Insurers (ABI) Code of Practice for the Categorisation of Motor Vehicle Salvage provides a framework against which UK Insurers apply salvage codes to vehicles. Despite this, total losses or write-offs are one of the most considerable elements of spend during post-accident BEV claims, which results in a higher insurance premium for BEVs and a potentially higher total ownership cost for the consumer. Additionally, the lack of value the UK ecosystem can recover from decommissioned batteries means little salvage value for a written-off BEV. These cost increases present a significant risk to BEV uptake, reducing potential economic and sustainability gains of widespread BEV adoption.
Thatcham Research emphasises that these challenges are not insurmountable and, with immediate stakeholder action in the form of credible cross-industry plans to address the challenges, a sustainable ecosystem can be created for BEVs in their use phase as well as battery repair/refurbishment paths to second-life applications and cost-effective recycling. Additional investment in further research is needed to identify technical solutions and practical interventions to support accelerating those solutions. With the support of the wider industry, including government, vehicle manufacturers, insurers, repairers, and recyclers, solutions can be established that allow for sustainable BEV adoption.
Read Thatcham Research’s Impact of BEV Adoption on the Repair and Insurance Sectors report.