Electric vehicles or EVs are becoming ubiquitous on Indian roads. From being 1 per cent of all sales in 2019, Electric battery-operated vehicles now account for 6 per cent of sales. That is a rapid growth — from around 2 lakh unit sales in 2019 to 13 lakh units sold in 2023 so far. Before the festive season closes, we can expect the ‘noiseless buzz’ of electric vehicles increasing on road.
The options for insuring such vehicles and the industry response to the variations are still in their early days. Small but incremental changes to policies are being designed to address the unique aspects of EVs. HDFC Ergo, Bajaj Allianz and Royal Sundaram offer EV-specific policies. Magma HDI insurance also offers battery secure add-ons for private cars.
ICE Vs EV
Compared to an ICE vehicle (internal combustion engine), bulk of the EV vehicle cost is captive in battery and electric motor. The external charging set-up is also just as crucial to insure. The operational factors are also different. In addition to drunk driving, EV insurance looks for improper charging stations, voltage fluctuations and other mishaps, which can wreck 90 per cent of the vehicle by value. Roadside assistance takes on a whole new meaning with EVs, which can find themselves easily out of charging-point range.
The cost of insuring an EV typically runs higher compared to an ICE vehicle. There is a 15 per cent discount on EV vehicle insurance, which limits the premium, but EV insurance will be on the higher side compared to ICE. The cost of the vehicle, and hence the IDV, will be higher. The replacement costs and the maintenance costs and the labour charges will also be higher for the infant vehicle industry. This, assuming that any repair or maintenance can be executed in the first place.
Inclusions and exclusions
A comprehensive or own damage insurance, beyond the mandatory third party insurance, should be the common preference. Damage to the policyholder vehicle on account of theft, fire or natural calamities gets covered in own damage and additional services like legal cover for third party damage is covered in comprehensive cover. Personal accident covers are also included in comprehensive packages. Raodside assistance and cashless claim processing may be enhanced in comprehensive cover. These features addressing fire, third party legal claim and natural calamities gain heightened risk application in EVs owing to battery pack, manual charging and electric motor.
Roadside assistance, including for breakdown, energy or accident are included in some policies. EVs range from 300 to 400 km on well-charged long drive. Unless the charging ecosystem scales up significantly, the chances of getting stuck will be high and insurer assistance will be a key tool. EV insurance can service breakdowns around select cities with comprehensive insurance.
Apart from regular add ons, battery covers and motor cover, sold as separate add-ons in most policies address the critical component risks. The battery cover includes the charger and the battery. Mechanical and electrical breakdown are covered, which is the primary risk from a cost standpoint in an EV. If the OEM supplied materials are not used in charging, or used for other purposes, surges and voltage fluctuations are not covered in insurance. Similar to an engine cover, motor cover protects against water ingress damaging any component. Any manufacturer fault, recall or warranty period damages are also not covered.
The current motor insurance product range normally suits ICE engines from a risk perspective. But an EV insurance tailored for the specific differences can suit a EV vehicle owner from battery and performance standpoint.