January 11, 2023

The Rise of the (Electric) Machines

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I was watching the local news the other night as I normally do after work. There was this story, a real tragic happening (I’ll spare the details), that involved several police officers.

The b-roll contained several shots of the officers doing investigative work, and in the background, I couldn’t help but notice the police cruisers. They were different. They weren’t the standard domestic makes I’ve come to expect. A closer shot of one of the cars confirmed what I thought I was seeing.

The cars? They were Teslas

All of them. 

And this wasn’t a big city. No. This was a town with less than 11,000 people. 

We’ve known this sort of thing was coming. Vehicle manufacturers have announced in recent years that they will stop manufacturing internal combustion engines (ICEs) leaning instead toward electric vehicles (EVs). As the technology catches up, improves, and becomes less expensive, wider scale adoption is unavoidable.

The Inevitable

EV adoption has increased. In 2022 alone, registrations for electric vehicles have gone up 60% in a market where registrations in general have gone down 18%. In 2021, President Biden issued an executive order to convert most of the 380,000 federal vehicles to 0 emission vehicles by 2035. 

Major companies have also made the decision to begin their EV switch. Companies are notoriously slow to make major moves like these; everything has to be measured and understood as deeply as possible.

In its recent climate pledge, Amazon made a vow to electrify its fleet by delivering at least 50% of their shipments on EVs by 2030. To do this, they plan to purchase 100,000 Rivian cargo vans. 

AT&T has decreased its emissions by 38% from its 2008 baseline using hybrid vehicles by pulling fuel inefficient vehicles off the road. 

Comcast began introducing Chevy Bolts into its 30,000 vehicle fleet in 2018 in order to completely eliminate their tailpipe emissions. That number, 30,000, represents one of the largest fleets in the country. 

Similar things are happening with companies like FedEx, DHL, Duke Energy, Hertz, and even the Hawaii Department of Transportation. 

Why am I painting this picture for you? It’s simple, really. EVs are here and they’re already making a sizable impact to insurance. 

How?

The Implications

EVs bascially reinvented the wheel. Minus the four wheels, nearly everything on an electric vehicle had to be redesigned to work on an all-electric battery-centric system. 

This means everything that goes into them is more expensive than their ICE counterparts. For instance, a traditional ICE vehicle has a coolant system placed in the front of the vehicle. Water flows through the radiator to get cooled and cycles back to the engine to cool it. 

In an EV, the coolant system is much more intricate and has to span the body of the vehicle. Most EVs have a battery on the bottom build; the battery bank spans most of the length of the automobile, is usually shaped like a skateboard, and rides just inches above the ground. That battery gets hot and has to be cooled.

The motor, or motors in multi-motor models, usually ride near each axle and also have to be individually cooled. 

To further paint this picture, let’s take a look at a common scenario. In most ICE vehicles, a front left fender impact is a relatively simple fix even if the cooling system is impacted. 

In an EV, this is not usually the case. Because the cooling system spans the length of the vehicle, a simple impact to the fender could have implications for the entire cooling system. Even worse, since the battery could be near the impact zone, it would need evaluated and possibly replaced. 

Ryan Mandell, director of claims performance for auto physical damage at Mitchell, recently stated this isn’t just going to be expensive and complicated on the claims side. A big financial shift is coming to underwriting, too. 

“We are seeing some carriers trying to get out in front of that, but when you look at the underwriting process it is a very traditional look. They say ‘We have to have three years’ worth of data. We are using symbols to underwrite these vehicles,’” Mandell said. “But this is evolving so rapidly, I think this is going to be a challenge for underwriters moving forward, especially as we see electric variances of ICE vehicles. What is the strategy for when you are faced with an identical grading scenario, but you have an ICE variant and an EV variant? That is something the insurance industry really needs to be keenly aware of as we move into this next phase of EV adoptions.”

Insuring a fleet of them is like an expensive game of “the floor is lava” where missteps are ripe to be had, and the answer to the puzzle hasn’t completely been revealed. So while the benefits are many, EVs present unique challenges we have yet to completely figure out. A fleet of EVs presents a challenge beyond what most companies are ready for this early in the game. 

And it is just that. It’s still early for electric vehicles. As mentioned before, many companies have made a promise to eliminate tailpipe emissions by embracing these new technologies, but many are looking at 2030 and beyond. Part of this is to let the technology mature while financially planning the expenses that are to come. 

The Takeaways

Electric vehicles are poised to be part of the new normal as we move forward. They present challenges the industry hasn’t settled on how to fix yet. The tech is new, complicated, and expensive both in terms of parts and how complicated things are to work on. 

As manufacturers stop making internal combustion engines, companies with fleets will be forced, sooner or later, to move to EVs. Because of this, insurers will need to figure out what insuring them is going to look like. Hopefully, as the technology progresses, costs for parts and labor will even out and a new normal will emerge. 

Key in all of this, especially while things are so new in the EV space, is making sure your subs have the right coverage, especially if they are using EVs on your worksite. How do you this?

When your subs and vendors give you their certificates of insurance, or COIs, it’s best practice to make sure their auto coverage meets what you expect. It is completely within your rights to ask if they are using EVs to verify coverage limits AT MINIMUM can pay for damages should they occur. 

This can be quite the practice in chasing if you’re doing this process manually. If you are doing it manually, for the love, please stop…especially if you’re tracking lots of COIs. Want to know how to achieve maximum levels of burnout? That’s how. 

Partner with myCOI to save time, frustration, and build a new sense of security knowing you’re covered properly. EVs don’t have to be something that scares you. If you know your subs and vendors are compliant, it’s just another day!

Let’s see how we can make your life easier. Book a free demo today and see what you can gain back in your day.

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