Rising S’pore EV registrations prompt insurers to evaluate premiums and coverage

Plugging into Lion City’s 80% emission cut goal, EVs bring progress and new risks for motorists.

As motorists actively contribute to Singapore’s ambitious drive toward carbon neutrality by mid-century, it is imperative to cultivate a mindful approach towards electric vehicle (EV) coverage. Amid the rising registrations of EVs in the Lion City, insurers like Allianz Insurance Singapore underscore the need for a nuanced perspective.

Jing Yean Wong, chief technical officer of Allianz Insurance Singapore, has pointed out that the transition to EVs makes it crucial for motorists to deeply contemplate coverage aspects. These include specific risk factors, including coverage for battery-related incidents, protection against cyber hacking damages, and support for depleted batteries during journeys.

“Many people are worried about the risks of fire in electric vehicles. This is one of the most highlighted risks for new owners because EVs are powered by a lot of batteries and contain a lot of electrical components,” said Wong.

This strategic consideration aligns with the overarching goal of reducing peak land transport emissions by 80% by 2050.

Singapore is already seen to accelerate towards a sustainable future, with motorists encouraged to proactively address these facets to ensure comprehensive and responsible participation in the EV transition.

“However, from the present data and research, the occurrence of fire amongst EVs is lower than that of traditional internal combustion engines (ICE). Though EV fire still does happen, and when it happens, it tends to be reported more frequently in the media. That’s why we always have different perceived risks and the fire risk of EV seems higher,” Wong told Insurance Asia.

Wong said that as the cost of purchasing an electric vehicle approaches that of internal combustion engine counterparts, the evaluation of insurance premiums becomes paramount. Key factors influencing this evaluation revolve around two components of an insurance premium: frequency and severity.

Last November, it was observed that EV registration reached 10,983, higher by 557 from the previous month. The year-to-date figure is larger than 2022’s 6,531 and 2021’s 2,942, data from the Land Transport Authority (LTA) showed.

The main differentiator in insurance costs for EVs, compared to traditional vehicles, is the severity of claims. “Repairing an EV does require higher expertise and a fully certified technician, which sometimes can raise the labour costs,” Wong explained.

“And it’s also a shortage of labour that we see in many markets having a certified EV repairer. And thirdly, we also often see that repairing EVs can take a longer time compared to repairing a conventional ice vehicle. So longer time spent in the workshop also equates to higher costs,” he added.

Still, the Allianz executive remains optimistic that as EV adoption grows, spare parts will become more readily available, technicians will become more certified, and repair costs will decrease, making insurance more affordable for consumers.

The availability of public EV charging infrastructure also plays a crucial role in addressing “range anxiety” and encouraging EV adoption.

According to Euromonitor International’s Voice of the Consumer: Mobility Survey 2023, poor charging infrastructure is the second most common reason people refuse to buy an EV.

The fear of running out of power before finding a charging station is a significant concern for potential EV owners. While some countries, such as Norway, Sweden, and the UK, have seen strong EV adoption, the rollout of public charging stations has not kept pace.

The European Union’s 2014 Alternative Fuel Infrastructure Directive recommends a ratio of 10 EVs per charging station, but many countries fell short of this target in 2022.

Facilitating the growth of public EV charging stations is vital, particularly for urban dwellers in apartments where home charging is impractical. But the challenge lies in the high costs and the relatively small market share of EVs, which reduces the appeal of private investment in charging infrastructure, emphasised Euromonitor.

What to consider when choosing EV coverage plans

When it comes to choosing insurance for electric vehicles, consumers should pay close attention to the benefits, terms, and coverage of the policies. Wong told Insurance Asia that the EV insurance market is still in its infancy, with new products and coverages continually emerging.

“As Singapore moves towards a more sustainable mobility landscape, the role of insurance companies in promoting and supporting the adoption of electric vehicles (EVs) is pivotal. Currently representing only 2% of the total cars on the road, EVs make up an impressive 20% of newly registered cars each month, with a peak of around 22% in September. This notable increase, despite Singapore’s commitment to a 0% growth in the car population, signifies a clear shift towards EVs,” he said.

Wong stressed on the importance of insurers staying updated on regulatory requirements, ensuring insurance solutions evolve to meet the changing needs of customers.

Allianz’s introduction of the Electric Motor Protect, an EV insurance policy tailored to the unique needs of EV owners, is an example of how insurers transition toward a sustainable future. “Within the wider Allianz Group, in September, we announced the first inaugural net-zero transition plan. Globally, via our 2030 intermediate target, Allianz committed to engage with 20 million motor retail customers to support the transition to electric mobility, and to replace all of the internal company vehicle fleet with electric fleet,” Wong said.

Insurers are strategically incentivising responsible driving to reduce claims frequency on the road. “On responsible driving, the insurance industry incentivises drivers who are accident-free via higher ‘No Claims Discount’, commonly known as NCD, up to 50%. By providing a unique EV motor insurance product and covering the new risks that arise, Allianz hopes to support our customers in transitioning into EVs and ultimately align with the country’s emission reduction goals,” Wong added.

Outlook for EVs in 2024

Looking ahead, Wong expressed confidence in the continued growth of EV usage and ownership in Singapore. Regulatory initiatives, such as the Singapore Green Plan, coupled with increasing consumer demand for sustainability, are expected to drive the transition.

“I have no doubt that EV usage and ownership will continue to increase, from both regulatory, such as the Singapore Green Plan, and also from consumer demands due to sustainability concerns. There will also be more vehicle makes and models available in this space in the market, increasing the supply and choices to the drivers. In my perspective, the transition to electric vehicles is inevitable, and it’s more of a question of when and how fast,” he said.