Sponsor segment – Electric vehicles – the risk conversation

Thursday 11 February 2021

Risk and insurance managers have an important part to play in identifying the significant impacts of the array of issues on the sustainability agenda and advising how their organisations could respond. The sustainability agenda is one of utmost importance to many, which is why we will be exploring many of these topics in the coming months; beginning with electric vehicles.

The transition to electric vehicles is a key policy. At Zurich Municipal we are aware of many councils who are moving towards a fully electric vehicle fleet, or who may be trying out vehicles on a ‘test and buy’ basis.

What are the pros and cons?

There are clear environmental benefits of electric vehicles. They will help achieve the national target of carbon net zero by 2050, along with likely lower fuel costs, and reputational benefit.

However, there are increased investment costs in transitioning to an electric fleet, primarily the purchase or lease of vehicles and charging infrastructure, and higher repair charges. Also consider; additional electricity costs, availability of electricity sources, availability of charging infrastructure, vehicle charging times, and the (as yet) limited range of vehicles.

Insurance costs and issues

Electric vehicles and fleets are still in their infancy, so motor insurance costs are likely to increase rather than reduce. Insurers will consider the additional costs of repair or replacement - on average adding £1,000 to accidental damage costs in the event of a claim. There is also additional insurance for batteries and charging points.

If employees take vehicles home, will your organisation install charging points at their home address? Is their home environment suitable, or will a cable have to run out to the vehicle parked on the street? Do you have to consider any third-party liability risks involved, for example, tripping hazards? Also, will there be any implications for the employee’s home insurance?

If vehicles are kept at depots or office sites, do you have a charging infrastructure? Many organisations are adding charging points and building new charging structures, sometimes powered by solar. Are you aware of these new additions across your assets and any implications for your other insurance lines?

The move to electric fleets is a clear and positive development within the sustainability and environmental agendas, which Zurich Municipal supports. However new and different risks need to be managed to ensure your organisation can achieve maximum benefit from these progressive projects.

Below are some questions risk practitioners can ask to get involved in the debate, manage the risks and opportunities, and help decision-making:

  • Is your organisation considering moving to an electric fleet?
  • Will it be a wholesale move to electric or a phased in approach?
  • Have you and the fleet manager discussed the risk and insurance issues?
  • Have rising insurance costs been factored into the cost benefit analysis?
  • Are you installing charging infrastructure on your sites? If yes, what are the risks and implications?
  • Are you installing charging points at employee homes? If yes, what are the risks and implications?
  • Are there any contractual terms to be aware of if the vehicles are leased?
  • Do you need to insure the charging points? Where are the charging points – in depots, on the street, at employees’ homes?
  • Do you require cover for batteries?
  • If you arrange cover with a deductible, have you considered the effect on the insurance fund of those self-insured costs?
  • Have you spoken with your insurers about the issues? Are they aware of the transition to electric vehicles?
  • If replacement vehicles are part of the cover, can an electric vehicle be provided within service level agreement timescales?

Rod Penman (rod.penman@uk.zurich.com) is Head of Public Services and Alix Bedford (alexandra.bedford@uk.zurich.com) is Risk Proposition Manager at Zurich Municipal.

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