In 2018, the entire transport sector produced more than 8 billion tonnes of CO2 – 24% of total carbon dioxide emissions worldwide – of which 75% came from road transport (both passenger and freight vehicles). As a result, road transport accounted for 18% of total CO2 emissions worldwide in 2018 (data from IEA Greenhouse Gas Emissions from Energy). This emphasises why new energy vehicles (NEVs) are so relevant today and explains why car manufacturers and governments are settings such ambitious targets around them.
To better understand the vehicle electrification revolution and its implications in terms of risk-assessment, we sat with Mobing Zhuang, Scoring and Analytics Expert at Swiss Re based in China, co-author of the recently published article "A comprehensive analysis of New Energy Vehicle risk characteristics" and the publication "A deep dive into the Chinese automotive space" (Swiss Re, 2020).
China is determined to be the global leader of the vehicle electrification trend. The approach is comprehensive; thus, the push is stronger, and the effects show sooner. On the consumer side, subsidies have been provided at a high percentage for almost a decade, together with other financial incentives. On the original equipment manufacturer (OEM) side, many domestic manufacturers have grown remarkably alongside the explosion of the electric vehicle (EV) market. Chinese OEMs like BYD and NIO are now top car manufacturers with some of the highest market values globally. To support the promotion and adoption of NEVs, China has also created the world's largest system of charging facilities. When it comes to insurance and vehicle services, EV has become the focus area for the respective domain. I talked more about the insurance regulation breakthroughs for EV in Swiss Re's recently published article "A comprehensive analysis of New Energy Vehicle risk characteristics".
NEVs are more diverse in a number of ways, such as power system designs, private and commercial usage, traditional and new OEMs, and others. Changes in vehicle risk are due to a combination of electrification and other effects, such as the sharing economy taking advantage of EVs, especially in China where ridesharing is very popular today. How can insurers fairly and properly insure a private vehicle that is partially used for commercial purposes? It is a very challenging topic. On the positive side, EVs are connected to the network through pre-installed and post-installed devices or software, so they collect a range of driving data. Fully unleashing the value of telematics data is a great opportunity for insurers to gain a competitive advantage.
For Chinese insurers, there have been many opportunities to explore these possibilities – and many lessons learnt. The industry is still seeking best practices in covering this emerging risk. In the above-mentioned article, we also go deeper into analysing policy trends in the Chinese insurance industry.
Yes, battery life should be a major concern if you are thinking of purchasing an EV. In the long-term, there are uncertainties surrounding both battery reliability and EV residual value. In China, OEMs are trying to launch various programmes to ease the anxiety of owners, such as extended warranties, battery-swaps, buyback programmes etc.
Regarding safety, although people tend to believe that EVs are more prone to fire due to the instability of lithium-ion batteries under extreme conditions (e.g. collision, water damage, strong heat), there are many studies claiming that EVs present a lower fire risk in comparison with ICE vehicles. Luxury EVs in serious accidents are likely to hit the news, thus may leave readers with a different impression. The risk characteristics of EVs are different to those of ICE vehicles due to the combination effect of the power systems, usages and owners.
Yes, NEVs are more likely to be connected because they are all recently produced and therefore equipped with modern technology. We know that telematics data is valuable for insurers from many perspectives: underwriting, pricing, claims investigation and more. Our experience in telematics data application is introduced in the publication "A deep dive into the Chinese automotive space" (Swiss Re, 2020).
It is also worth mentioning that Chinese data protection legislation is becoming increasingly robust. Full compliance in retrieving, processing and applying data will be an important task for insurers to accomplish.
Swiss Re and Movingdots have been developing a deep interest in the new energy vehicle industry for many years now and have their own unique solutions in diversified motor-related insurance products, such as:
Beside these, we have developed:
Together with our clients, we will continue to explore the insurance needs of the NEV industry and provide customised solutions.
Mobing Zhuang works for Swiss Re P&C Solutions as Scoring and Analytics Expert in the Automotive & Mobility Solutions (AMS) team. She applies data engineering, analytics and software development skills to projects, including New Energy Vehicles telematics scoring, extended warranty pricing and truck fleet solutions. Her passion is discovering insights through data and improving efficiency, accuracy and productivity. Mobing has seven years of experience in analytics, in the area of environmental research and actuarial consulting. Mobing received a master's degree in data science from the UW Seattle and a PhD in environmental engineering from the University of Cincinnati.