Batteries, cybersecurity, fires: the growth of the electric car comes with new risks and disaster scenarios for manufacturers, subcontractors and insurers
Electric car adoption is expected to accelerate rapidly around the world, thanks to rising demand and government policies to combat climate change. The future of mobility is clearly electric, but the transition will radically change the panorama of risks for manufacturers, subcontractors and insurers, and it will have a significant impact on liability for auto products, according to a new report. from the insurer Allianz Global Corporate & Specialty (AGCS).
“From the supply networks to the products themselves, including the production processes, the entire automotive sector will have to face multiple emerging risks in order to successfully complete the transition to electric vehicles,” says Daphne Ricken, senior underwriter. Civil liability at AGCS. Electric car growth forecasts raise questions about product faults and performance, rising repair costs, new fire and cyber risks, and even difficulties in sourcing and reprocessing components and essential raw materials for batteries. “
Entitled The Electric Vehicles R-ev-olution: Future Risk And Insurance Implications, the new publication by AGCS highlights that the use of electric cars should increase sharply thanks to the gradual drop in costs, with the supply almost doubling models, improving range, but also the demand for cleaner vehicles from consumers and governments. The International Energy Agency predicts more than 100 million electric vehicles on the roads in 2030, compared to some 7 million today, with annual sales of 20 million, driven in particular by growth in China (already largest market in the world), in the European Union (second market), Japan, Canada, the United States and India.
Coronavirus Crisis Could Darken Prospects for Global Electric Car Sales for 2020 and Beyond, but Long-Term Growth Predictions Raise Several Questions Related to Technical and Operational Risk in Product and Other Liability areas :
Safety and reliability: tests by the Allianz Center for Technology (AZT) have shown that the high-voltage components of electric vehicles are well protected and will not be affected in most accidents. The statistical assessment of claims by Allianz also revealed that electric vehicles are currently less exposed to accidents. Generally, they make short trips and have low mileage, but repairs are more expensive than on conventional cars.
“In many cases, if the battery needs to be replaced, the car will be declared a total claim,” notes Carsten Reinkemeyer, director of research in technology and vehicle safety at AZT Automotive. In addition, the fact that these vehicles must be entrusted to specialized repair shops can increase costs. “
Battery life and performance are key issues for electric cars. If the performance guarantees were not respected, one could wonder about the responsibility of the manufacturers and subcontractors, as well as the cost of repair or replacement of the batteries.
Fire hazard : As with conventional vehicles, faults in electrical components and short circuits can cause a fire. In addition, lithium ion batteries can catch fire when damaged, overcharged, or subjected to high temperatures. High voltage battery fires can be very intense, difficult to extinguish and emit large quantities of toxic gases: it can sometimes take more than 24 hours to control them. As these fires are relatively rare at the moment, the rescue and intervention services have limited experience in these types of incidents.
Environmental issues: Despite their ecological advantages, electric vehicles pose environmental questions that are sources of potential risks for the liability and reputation of car manufacturers and subcontractors. The rapid adoption of the electric car will force manufacturers to seek a sustainable supply of essential components and raw materials to increase their production. Battery technology will significantly increase the demand for cobalt and lithium; the supply of the latter should triple by 2025. The recycling and reuse of materials will therefore be decisive. Environmental and social issues will also relate to the sustainable supply of minerals, as well as the traceability and transparency of supply chains. High-voltage batteries can also present a risk of pollution if they are not properly treated after use.
Accelerated marketing and potential faults: manufacturers are forced to accelerate the transition to electric mobility. According to AGCS analysis, new technologies, combined with short development cycles and 3D / 4D printing in production processes, could increase the number of defects and quality problems. This would result in product recalls in the automotive sector, which are already among the largest and most complex.
Cyber risks: electric vehicles should be more connected and more dependent on data, sensors and applications, including artificial intelligence, for the management of their systems and driver assistance. As with classic cars, the increased connectivity is expected to increase computer vulnerabilities, such as exposure to cyber attacks, crashes, bugs and other faults. In the automotive sector, cybersecurity issues have already caused product recalls.
Insurance implications and claims complexity
Electric mobility will have many repercussions on insurance, particularly on claims, as technology will create new risks and new exposures, and responsibility will shift across the supply chain. The growth of the electricity market will, in particular, have a significant impact on product liability insurance.
“Auto parts and components will be more integrated,” said Daphne Ricken. A three-piece assembly in a classic car could become one piece in an electric car. This integration raises questions about the interaction between these parts and the responsibility of the manufacturer or subcontractor in the event of a fault. In addition, auto parts increasingly contain embedded software. The increasing complexity of the automotive supply chain and dependence on software and technology manufacturers will generate new exposures and divide responsibilities within the value chain. ”
The risk of fire and explosion from high-voltage batteries, especially when many vehicles are recharged in underground parking lots, could give rise to claims for property damage insurance. There are many fire disaster scenarios: overheated battery cables causing damage, electronic failure of the battery management system causing a breakdown, etc.
Insurers can also expect an increase in product recall and liability claims related to new technologies and components, as well as reduced development times and test periods. Last but not least, let’s not forget the risks of civil liability of the employer, due, for example, to the emission of toxic fumes and fire during 3D printing, or the handling of exhibiting lithium batteries contamination.