A new report by Thatcham Research and Innovate UK, on the Impact of BEV Adoption on the Repair and Insurance Sectors, has found that all parts of the Motor Insurance Claims process will need to adapt to support transition to Battery Electric Vehicles (BEV).

The report says that although solutions exist for most, if not all, challenges highlighted, the rate of BEV adoption may be impacted, unless “credible cross-industry plans are urgently put into place.”

The report highlights the technical and practical differences between BEV and ICE (Internal Combustion Engine) vehicle insurance claims processes and examines potentially significant implications for motor insurers, their supply chains and in turn, consumer acceptance.

Thatcham says that the new technology means BEV incident claims are currently around 25.5% more expensive than their ICE equivalents and can take 14% longer to repair. 

The most significant challenges identified by the report originate from the high voltage battery. BEV batteries represent a substantial percentage of the original vehicle value and are therefore, rapidly presenting negative impact to the economic model of vehicle repair. Although there is a relatively small number of BEVs in the market, there is an understandable but concerning lack of affordable or available repair solutions and post-accident diagnostics.

Adrian Watson, head of engineering research, Thatcham Research, comments,  “Without meaningful change, there is a strong likelihood that claims costs will continue to rise disproportionally. Much of the motor insurance industry is yet to adapt to mass BEV adoption challenges, and the implications remain unquantified on repair capacity, training and skills, cost, and the lifetime sustainability of BEVs. This lack of awareness means many BEVs are often deemed irreparable, leading to premature write-offs because of high battery cost and the lack of value the UK ecosystem can recover from them.”

Currently, the cost of a replacement HV battery is causing a significant increase in the risk of ‘total loss’ or write-offs. The cost of HV batteries varies widely from high-end vehicles, ranging from around £29,500, to the low-end costing £14,200. The ‘depreciation curve’ of battery cost versus average used value, shows that the cost of a replacement battery is more than the used price of the vehicle after only one year.

Adrian continues, “These cost increases present a significant risk to BEV uptake, reducing potential economic and sustainability gains. Technical solutions do exist for most if not all of these challenges. However, it is vital that credible cross-industry plans are urgently put into place that focus on addressing battery cost, diagnostics, and the creation of a sustainable ecosystem for battery repair.”

UK Government guidelines state that due to potential fire risk, damaged BEVs awaiting repair should be stored in an outside quarantine area, at a safe distance of 15 metres from other nearby objects. As such, an outside storage space with capacity for 100 ICE vehicles, would allow for the safe quarantine of just two BEVs, representing a potential 98% reduction in repair capacity. The cost incurred through following recommended quarantine protocols of 48hrs will add a minimum of £60 to every claim, the report states.

If the vehicle cannot be safely stored at the repair centre there will be further costs associated with transportation to and from an alternative location, storage at the alternative location, along with a longer duration of hire vehicle. Adrian says,  “This could result in a measurable rise in associated claim cost and duration, negatively impacting on the BEV ownership experience. This presumed rise in cost is a result of just one element of the BEV claims process flow. However, there are many other factors which may also result in further insurance premium costs due to the differing processes that follow a BEV collision. These range from limited access to battery diagnostics to enable a better understanding of battery health and potential repair options, to the increased weight of a BEV creating challenges to roadside recovery and a requirement for bodyshops to make costly investments in specialised repair skills and equipment.”

The report’s authors suggest investment in further cross-industry work to identify more detailed solutions and to make direct recommendations about a range of interventions or support to accelerate those solutions. For example, by understanding the needs of vehicle manufacturers, repairers, insurers, and salvagers to optimise the supply of new / refurbished / recovered batteries in vehicle repair.

To access a fully copy of the report, please click here: www.thatcham.org/thatcham-research-innovate-uk-bev-report-2023/