David Humphreys, automotive director, insurance UK and Ireland, LexisNexis Risk Solutions
But the more risk assessment criteria available to the market to build a clearer view of the risk, the more chance insurance providers have to price accurately and fairly and to compete effectively. So, in such a fiercely competitive market, what could be the next big insight to help motor insurance providers further refine their underwriting and pricing strategies? As more electric vehicles hit the road, could it be risk related to familiarity of the vehicle?
There is currently no easy way for insurance providers to understand at the point of quote whether an individual has experience of driving a particular car type. There is a familiarity aspect to driving, and when a change occurs in how a vehicle operates it can take time to get used to that change. Wrapped into this is vehicle performance. It would make sense for insurance providers to know whether historically, a new customer has been consistent in car type and power and has recently transitioned to a sports car, for example, or indeed from an internal combustion engine powered car to an electric vehicle.
The UK Government is consulting on a 2030 deadline for a ban on sales of new diesel and petrol cars(2). As of the end of December 2024, there are over 1,360,000 fully electric cars in the UK. This means that around 4.01% of the c.34 million cars on UK roads are fully electric(3). Furthermore, 23% of U.K. motorists surveyed last year for the EY Global Mobility Consumer Index Report, were considering switching to an electric vehicle(4). Insurance providers are already working hard to understand differences in risk between ICE and Electric vehicles. Understanding the change in vehicle type for the driver could bring additional perspective.
LexisNexis Risk Solutions initial research suggests that there is a difference in claims experience when people drive one type of vehicle and then move to another type(5). It is pronounced when a driver switches vehicles from combustion to electric resulting in a different acceleration capability.
The transition from petrol or diesel cars to EVs is happening. For drivers, the transition is not as simple as it has been in the past when vehicles all operated and performed in much the same way. EVs take some getting used to. So, for insurers it raises a key question: does transitioning to an EV correlate with an increased collision claims frequency? The answer could be vital for risk assessment and pricing strategies.
Driving experience with EVs is currently limited to the early adopters. From rapid acceleration and regenerative braking to quiet operation, EVs can initially feel a little alien to those who have become very used to driving ICE vehicles. Anyone who has driven or been a passenger in an EV will know they can deliver maximum torque nearly instantaneously. Even those with modest power can excel in initial acceleration and deliver smooth and responsive acceleration on motorways.
Because EVs slow without braking, drivers can use the accelerator to start and stop in almost all traffic conditions. In addition, EV brake pedals may feel less resistant than those in ICE vehicles, due to the simultaneous activation of regenerative and friction braking systems. These are just some of the differences drivers will experience.
So how could familiarity with vehicle type be understood by insurance providers?
Recent innovations have enabled insurance providers to shed light on the status and history of vehicles at the point of quote, via one gateway. This means a faster and fuller insight into valuation, MOT, maintenance history and more without needing to call out for data from multiple sources. They can also better understand the presence and performance of Advanced Driver Assistance Systems (ADAS).
By bringing in policy history data, the next step could be to create a timeline view of previous vehicles owned and to start comparing the attributes of those cars to help inform quotes to form insights that could be used in real-time.
Clearly this could have great value in understanding the risks associated with the transition to EVs. But as stated earlier, insurance providers and their customers may benefit from the insights associated with any significant change in car type. If an individual changes their car from a family saloon to a sports car with a 2 litre, fuel injection engine, the risk may seem obvious, but what if that individual has previously owned sports cars and is very familiar with the driving style? It may be more accurate to build ownership history into the risk assessment process in that case.
By the same token, drivers unaccustomed to the dynamics of high-performance vehicles may find themselves at greater risk of accidents, especially if they underestimate the car’s power or overestimate their ability to control it.
By considering patterns in vehicle ownership and examining how these shifts might signal changes in driving behaviour, insurance providers could soon have the ability to assess these risks more effectively.
|
