News Non-Life06 Jun 2024

Thailand:General insurers form group to study EV insurance

| 06 Jun 2024

The Thai General Insurance Association (TGIA) has established a working group to study insurance for electric vehicles (EVs), according to Dr Somporn Suebthawilkul, president of the TGIA and CEO of Dhipaya Group Holdings.

He said that the TGIA would issue the results of its analysis to association members for them to exercise caution in offering EV insurance, according to local media reports.

EV insurance is considered a new risk in the general insurance arena in Thailand,

With insurers facing expensive claims for repair costs, many insurers are beginning to be cautious about the new insurance line,

Mr Wasit Lamsam, SVP of Muang Thai Insurance and chairman of the TGIA’s Motor Insurance Committee, says that the growth of EV sales took off with China-manufactured EVs. He adds that the insurance industry can see that the EV trend will rise more and more. In addition, EV manufacturers are beginning to set up production bases in Thailand. “And insurers don't want to be left behind.”

To boost sales, the business model of several EV manufacturers is characterised by free insurance for car buyers in the first year, and in some instances even up to two years. The insurance is sold in partnership with the manufacturer. It can be said that almost every brand has free insurance for the first year of the new brand, except Tesla. During this period, the premiums are paid for by the EV manufacturers.

EV buyers can pick their insurer from a list of insurance companies with the insurers selected on the basis of the lowest insurance premiums.

Every insurance company competes to be on the preferred list of EV car manufacturers.

Mr Wasit said, “Because most EV cars are new cars, insurance companies have not yet seen the claim rates. So I understand that there is still enough profit. But now, there are clear signs that the loss ratio of EVs in the market has increased significantly, reaching the level of 90-100%, which is close to a loss.” The costs of repairs and spare parts for EVs are 50-60% higher than for combustion vehicles.

After the free-premium period is over for an EV, insurers have to renew or sell their EV insurance products through normal channels, such as agents or brokers, There are increased sales costs, such as commissions payable at rates of 18%. Other risks are that the value of an EV depreciates rapidly, leading to a reduction in the insured sum.

Mr Wasit says that currently, there are 120,000-130,000 insured EVs in Thailand. However, this number rises to 150,000 when electric motorcycles are counted. The 150,000 vehicles, represent a total premium income of THB4bn ($109m) to THB5bn.

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