Insurers in Singapore have sold more electric vehicle insurance products in the past year. However, the nascent electric vehicle market in the country remains small and that makes it challenging for insurers to lower the price of premiums. Asia Insurance Review spoke to motor insurers in the country about what is needed for the market to grow.
Brokers like G&M have recorded increasing sales of electric vehicle (EV) insurance products in Singapore. It has received 50% more requests from its clients for such products y-o-y. EV insurance products made up 3.8% of all sales recorded by the broker in 2021 and currently makes up 9% of sales in 2022 according to the company.
Allianz Singapore said it issued its first EV policy in July 2021, with almost 800 policies issued as of end June 2022. Apart from initial policies covering Tesla EVs, the company has seen a 50% increase in non-Tesla EV policies issued between January and June 2022 compared to the period from July to December 2021, indicating a more widespread demand for EVs in Singapore.
“EV ownership in Singapore is still relatively low, but we have seen a slight increase in take-up this year compared to last year and we expect it to pick up in tandem with the government’s push for green vehicle ownership in the coming years,” said Income general manager for consumer business Fabian Ng.
“While motor insurance premiums differ between vehicle makes and models, premiums for EVs currently available in Singapore are comparatively higher. Apart from the low number of EVs in the market, the higher premiums are also mainly due to EV components being more expensive because of the low demand and supply of EV parts. We are monitoring the use of EVs and collecting data that will allow us to better calibrate premiums,” he said.
Despite the increasing demand for EVs, Mr Ng said the overall volume is still relatively low. Thus, there is a lack of concrete data to establish patterns and trends and that makes it challenging to price risk.
“In addition to the Singapore government’s plan to phase out all internal combustion engine vehicles by 2040, all players in the EV ecosystem, including EV car makers and car mechanics that are skilled in EV maintenance, will need to work together alongside insurers to encourage large-scale adoption of EVs in Singapore. This will, in turn, enable insurers to better calibrate and price risk to support more equitable and potentially lower premiums,” he said.
Nuances in underwritingThe EV market also makes up under 1% of all vehicles in the country with close to 5,000 vehicles so far according to G&M CEO Douglas Chia. While the principles for covering EV vehicles are similar to vehicles with combustion engines, there are significant differences underwriters will have to take note of.
“One issue that will result in expensive costs for repairs is that the batteries of most EVs are not modular. If you damage a part of the battery, it’s the whole thing and that’s effectively changing the entire engine of a car. However, some batteries are modular. That means you can piece them together if you damage a part of it,” he said.
He said batteries are usually located at the bottom the vehicles which makes it less likely to be impacted in a collision. Drivers may also buy coverage for additional components to cover damage to chargers and cyber insurance to cover vehicles from cyber attacks.
“EV manufacturers like Tesla are quite protective of intellectual property. It is not easy to get a hold of diagnostic machines for Tesla vehicles. Options for repair are limited and majority of the repairs are done by authorised dealers. This comes at a cost which is significantly higher. These costs ultimately get passed back to the insurers when a claim is made. If repair costs are higher due to the lack of options for repair, it is the workshop that’s making the money and the costs get passed to the consumer,” he said.
Setting the right price
Mr Chia said premiums for vehicles like the Tesla Model 3 Standard could range from S$1,500 ($1,088) to S$4,000 for a standard risk driver. The smaller insurers tend to keep prices in the lower range while traditional insurers with a larger base will usually set premiums from S$2,500.
“The insurance industry insurance is very saturated in Singapore. It always ends up in a price war. New insurance companies are aggressive and need market share. They need top line growth to pay the bills,” he said.
As the EV population in Singapore remains low, he has met several car clubs and owners of EVs to consolidate more business for partner insurers. This includes the Tesla Owners Club with around 300 members according to Mr Chia. He hopes to negotiate lower prices for premiums if he manages to attract enough customers from the car clubs.
“The underwriters will still consider the usual motor underwriting factors such as availability and cost of spare parts, acceleration speed and drivers’ profiles. However, for EV insurance policies, there are additional considerations such as (and not limited to) the cost of replacing the vehicle battery, frequency of software update, autonomous driving capability and charging cable propensity to malfunction. We have also observed that driver profiles of EV drivers tend to be younger, as they tend to be the early adopters of EVs,” said Allianz Singapore technical department senior actuarial manager Justeen Wong.
He said EV insurers face challenges in collecting sufficient EV-related claims data. While demand for EVs is increasing, there is limited data for analysis. There is also a growing debate of who will be accountable in the event of an accident involving an autonomous driving vehicle – the owner of the vehicle or the manufacturer.
“Over time, we expect the affordability of premiums improve as the number of EVs increase, as the costs of spare parts and labour are likely to fall. Improved autonomous driving capabilities could also reduce the number of accidents, which would in turn reduce premiums too,” said Mr Wong. A