Not all NBFCs and loan institutions have started financing electric vehicles (EVs) in India. As a matter of fact, financing EVs is still seen as one of the biggest hurdles in India’s aim of achieving its mobility electrification targets by 2030.
However, vehicle insurance, another aspect in helping the adoption of EVs in India, has started picking pace in the country as over 95% of the automobile insurance companies have started to offer EV insurance policies Ashwini Dubey, Head - Motor Insurance Renewals, Policybazaar, told Mobility Outlook, in a conversation.
He said, “As more and more OEMs start launching EVs in India, more insurance companies will start offering insurance covers for the same, and as the penetration starts to reach the rural parts of the country we might see insurance premiums going down in terms of EVs.”
Risk - The Key Differentiator
The biggest difference between insuring an EV and an internal combustion engine (ICE) powered vehicle is risk. Aswini explains that more than enough data is available around the risks involved in insuring ICE vehicles. However, there is not as much data around ensuring EVs in India.
Notably, as against 211,398 EV units retailed in the April-June 2022 period, only 26,833 units were retailed during the same period in FY22. Similarly, against 134,821 EV units sold in India in FY21, a total of 429,217 EVs units were sold in India in FY22.
“Insurance companies have been insuring ICE vehicles for decades now. They know the risks involved in insuring ICE vehicles very well. The same will be the case for EVs in a few years from now, “ explained Dubey.
The risk involved in insuring EVs will come down as more data becomes available in the country. For instance, the insurance cost of an electric scooter is almost equal to that of a ICE two-wheeler counterpart, whereas the insurance premium for an electric four-wheeler is higher than the insurance premium for its petrol/diesel/CNG sibling.
Also, a glance through some of the popular insurance marketplace websites reveals that there exists no option to avail quotes for an electric four-wheeler! The Mobility Outlook team also tried to source quotes for the Ola Electric scooter, but many online marketplaces did not have any such option.
EV Insurance Premium Will Come Down
OEMs, and insurance companies, as Dubey informed, are trying digital twin and simulation technologies to assess better the risks involved with EVs. For example, digital roads and EV models replicate real driving conditions, and vehicles are created and driven in simulations to understand better the risks involved with EVs in case they meet with an accident.
The data collected and observations made during these simulations will lead to decreased premiums involved while insuring EVs. For instance, there exists no clarity on insuring EV batteries at the moment among insurers, and batteries are to EVs what a motor is to an ICE vehicle. More importantly, EV batteries constitute 40 to 50% of an EV’s cost.
“Risk involving insuring body parts of an EV or an ICE will probably remain the same but there could be a big shift in insuring the internal parts of an EV like the batteries and the motor. This is where most of the research is targeted at the moment, and data for the same is being generated,” informed Dubey.
‘Pay As You Drive’ Insurance
Pay-as-you-drive insurance might boil down to be the biggest trend in the EV insurance ecosystem in India. While the likes of HDFC Ergo and Edelweiss have introduced 'Pay as you go' add-ons for existing insurance premiums, there is no clarity on whether the same applies to EVs.
On the other hand, Dubey believes that the ‘Pay as you go’ will be a major driving force in the EV insurance ecosystem as most EVs retailed in India come equipped with GPS and digital tracking chips. The same, as per him, will make it easier for OEMs and insurance companies to check whether the vehicle is being driven in accordance with the insurance norms or not.
Moreover, the new age ICE vehicles, especially commercial vehicles, might also see quick adoption of the ‘Pay as you go’ insurance add-on because of the telematics and vehicle health software and electronics being embedded in them.
Parthanil Ghosh, President – Retail Business, HDFC ERGO General Insurance Company, while launching the add-on, said, “The innovative solution we have launched will not only do away with ‘one-size-fits-all car insurance premium’ but will also empower customers to customise their own damage policy with better control over the premium, keeping intact the simplicity of the traditional motor insurance policy.”
Shanai Ghosh, Executive Director & CEO, Edelweiss General Insurance, had also briefed that Pay-As-You-Go add-on cover allows customers to get an attractive discount on their Own Damage (OD) premium depending upon their annual usage in terms of distance covered. The premium will be charged according to the kilometres traveled by car.