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The compound annual growth rate (CAGR) of insured electric vehicles (EVs) was 59.3 per cent between 2018 and 2022, while the total number of insured vehicles under personal motor insurance grew by 2.7% annually on average over the same period, says Korean Re in a blog posted on its website.
About 157,000 EVs were insured in South Korea in 2022, accounting for 0.9% of the total insured cars under personal motor insurance policies.
The blog, titled “Review of the Electric Vehicle Insurance Market in Korea”, also says that the number of insured EVs has been surging recently in line with the proliferation of EVs across the country.
By age group, drivers aged 40-44 took up the largest portion (17.4%) of the total insured drivers of EVs, followed by aged 45-49 (14.9%) and aged 35-39 (14.5%), whereas for conventional vehicles, the 50-54 age group has the highest proportion at 15.2%. More than 55% of EV drivers purchased their motor insurance via the Internet compared to 42.5% for non-electric cars. It is generally cheaper to buy car insurance online, and relatively younger drivers of EVs are presumed to prefer the internet-based channel especially given higher insurance premium rates for EVs.
Insurance
Insuring EVs tends to be more expensive primarily because their actual cash value is higher than that of non-electric vehicles. In 2022, the average actual cash value of EVs that are five years old or less was 1.8 times higher than that of conventional vehicles. The average premium per car under personal motor insurance for EVs in Korea was KRW890,000 ($692) in 2022, 1.26 times higher than KRW707,000 for gas-powered vehicles. In particular, the premium for the own damage coverage was much higher for EVs due to the high actual cash value and replacement costs.
The cost of repairing or replacing parts of EVs is typically higher compared to non-electric vehicles. In 2022, repair costs under the own damage car insurance coverage averaged KRW2.7m for EVs, 1.4 times higher than internal combustion engine vehicles. Even a minor accident that damages the battery pack of an EV may require the entire battery to be replaced. It costs KRW15-20m on average to replace a damaged high-voltage battery in an EV. Although the price of an EV battery pack has been declining lately, it still represents a large portion of the car price.
Other parts of EVs such as electronic control devices and sensors cost more and take longer to be repaired compared to non-electric cars. It is for these reasons that the amount of claims under the own-damage coverage is generally higher for EVs than their conventional counterparts.
Risks
In the case of fire or explosion, both EVs and gas-powered vehicles pose fire and explosion risks. In the event of a collision, EV batteries have the potential to ignite or explode, while an internal combustion engine vehicle’s gas tank also holds the risk of catching fire or exploding. The loss frequency of EVs was lower compared to non-electric cars. From 2018 to 2022, there were 29 incidents of own damage losses for EVs arising from fire or explosion, indicating that 0.78 out of 10,000 EVs got involved in a fire or explosion accident. The rate was higher at 0.9 for conventional cars.
However, EVs can be exposed to a higher risk of accidents compared to non-electric cars due to their fuel efficiency and longer average driving distances, according to the Korea Insurance Development Institute. A study conducted by AXA also says that EVs are involved in more traffic accidents than conventional petrol and diesel cars because of the driving behaviour of the individuals operating these vehicles.
The primary factor contributing to the accidents is the rapid and abrupt acceleration of EVs, which often catches drivers off guard, particularly those who are inexperienced with such vehicles.
Another notable characteristic of EVs is their quiet operation. Specifically, the engine is almost silent when starting, which can lead to serious collisions in an urban environment where many pedestrians cross roads using their hearing without looking properly.
Source: Middle East Insurance Review
