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Around the globe, the take-up of electric cars is expected to accelerate rapidly in future, driven by consumer demand and government policies aimed at tackling climate change.

The future of mobility is clearly electric, but the transition will lead to a fundamental change in risk for manufacturers, suppliers and insurers alike and will have a significant impact on automotive product liability insurance, according to a new report by insurer Allianz Global Corporate & Specialty (AGCS).

“From supply chain networks to production processes to the product itself – the automotive industry will have to respond to many emerging risks to make the transition to electric vehicles happen.

“The anticipated growth of electric cars brings the prospect of new defect or performance issues; more expensive repair costs; new fire and cyberthreats; and even reputational issues around sustainable sourcing and disposal of critical components and raw materials for batteries,” says AGCS senior underwriter: liability Daphne Ricken.

The, ‘The Electric Vehicles R-EV-olution: Future Risk And Insurance Implications’, highlights that the use of electric cars is expected to soar in future as their cost gradually declines, the choice of available new models likely doubles within five years, their driving range increases and consumers, as well as governments, demand greener low-emission vehicles.

The International Energy Agency has predicted there could be more than 100-million electric cars on the roads in 2030 – up from around seven-million today – with yearly sales in the region of 20-million, driven by growth in China – already the world’s largest market – the European Union (second largest), Japan, Canada, the US and India, in particular.


While the coronavirus crisis may dampen the outlook for global electric car sales for this year and beyond, the anticipated long-term growth also brings a range of technical and operational risks, both from a product liability perspective and in other areas.

In terms of safety and reliability, tests conducted by the Allianz Center for Technology Automotive (AZT Automotive) have shown that the high-voltage components of electric cars are well-protected and will not be affected in most crashes.

Statistical evaluation of Allianz claims also shows that electric vehicles are less likely to be involved in accidents today – they typically drive short distances with limited mileage overall. However, any damage sustained can be, on average, more expensive than for conventional cars.

“If the battery in an electric car has to be replaced, it can result in a total loss in many cases. In addition, the fact that they can only go to specialist repair shops can contribute to costs,” says AZT Automotive Vehicle Technology and Safety Research head Carsten Reinkemeyer.

Battery life and performance are also critical issues for electric cars. Given the high cost of replacement or repair of battery units, a failure to live up to performance guarantees will pose questions around liability for manufacturers and suppliers.

In terms of fire threat, as with conventional vehicles, defective electrical components and short circuits can spark a fire, while lithium-ion batteries may combust when damaged, overcharged or subjected to high temperatures.

High-voltage battery fires can be very intense and difficult to extinguish and can also release high levels of toxic gases – such fires can take 24 hours or longer to get under control and be made safe. Owing to the relative rarity of such fires to date, response and rescue services have limited experience of dealing with such incidents.

There are also environmental issues. Despite their green credentials, environmental issues can represent a potential liability and reputational risk for vehicle manufacturers and suppliers.

A rapid uptake in electric cars will require manufacturers to source sustainable supplies of critical components and raw materials as they ramp up production.

For example, battery technology will drive a huge increase in demand for cobalt and lithium, outstripping current supply – lithium supply has been predicted to triple by 2025. Effective recycling and reuse of materials will therefore be essential.

Environmental and social concerns will also put emphasis on the sustainable sourcing of minerals, as well as traceability and transparency of supply chains. High voltage batteries could also pose a pollution risk, if not properly disposed of.

There is also the factor of speed to market and potential defects and recalls. Manufacturers are under pressure to accelerate the transition to electric mobility. The combination of new technology, short development cycles and new three dimensional (3D) / four dimensional printing in production could result in an increase in defects and quality issues, triggering product recalls for the automotive industry – which are already among the largest and most complex of any sector, according to AGCS claims analysis.

Electric vehicles also pose cyber concerns. These are likely to have increased connectivity and reliance on data, sensors and software, including artificial intelligence, to manage vehicle systems and aid driving.

As with conventional vehicles, increased connectivity is likely to give rise to cyber vulnerabilities, including the threat of malicious attacks, system outages, bugs and glitches. There have already been product recalls in the automotive sector as a result of cybersecurity.

Meanwhile, electric mobility will also have many implications for insurance – in particular automotive product liability insurance – and claims, as technology creates new risks and exposures, and as liability shifts within the supply chain.

Fire and explosion risks associated with high voltage batteries could give rise to claims for commercial property insurers, in particular if multiple cars are charged in underground car parks.

Claim scenarios are manifold – ranging from overheated battery leads resulting in fires and property damage to breakdown, leading to fire, as a result of electronic failure of the battery management system.

Insurers may also expect to see a potential increase in product recall/liability claims from new technologies, components, faster development times and shorter testing periods.

Lastly, there will be employers’ liability exposures – such as potential toxic fumes and fire risks during 3D printing or the handling of lithium batteries related to fire and contamination. 

EDITED BY: Chanel de Bruyn

Credit to Engineering News.