About
Avoid slow learning – accurately assess EV risk before the first claim
Innovation presentation
International and national policy measures to reduce carbon emissions, increasing environmental consciousness of consumers, as well as steady technological improvements are seen to be contributing to an accelerated transition to electric vehicles (EVs): according to the Paris-based International Energy Agency (IEA), more than one in four car sales worldwide is expected to be an electric vehicle by 2030.
The presence of EVs on the roads poses new challenges to insurers: in absence of claims experience and with EV technologies developing quickly, conventional risk models fall short of reflecting differences in risk between ICE vehicles and modern EVs, thus diminishing insurers capabilities to accurately price EVs.
Electric vehicles are, in fact, different in many ways: not only is the technology inside a modern EV fundamentally different from traditional combustion engine vehicles, but the transition to low-emission vehicles is often accompanied by a change in driving behavior and typical usage profiles. As this new technology is one of the key ingredients of the future mobility mix, insurers need to build a strategy to strengthen their capabilities in assessing the risks of EVs.
The Swiss Re EV Risk Score acts as a risk modifier to a conventionally derived risk premium for internal combustion engine (ICE) vehicles. By providing a pricing support tool in the shape of numerical scores, we enable insurers to extend their traditional risk model developed for ICE vehicles to electric vehicles without having to build a dedicated risk model from scratch.
With our score, insurers can benefit from an improved risk segmentation and better pricing transparency for EVs, ultimately providing more competitive and fair premiums to EV drivers.
Uniqueness of the project
Conventional risk models of motor insurers are often tailored to a given market and portfolio mix and are based on large sets of claim data collected over years or even decades of vehicle exposure. However, considering the short timeframe in which EVs have become available and affordable, there is still insufficient historical exposure upon which reliable risk models can be built. Furthermore, even if such data did exist, it often does not reflect rapid changes in EV technology, which can have significant implications on the claim behaviour of new electric vehicle models. Therefore, new approaches to motor pricing are required where a stronger focus is placed on predictive risk assessment that allows the identification of EV-specific risk drivers and how they impact future claim propensity.
Considering the changes in EV design, technology, and usage scenarios, Swiss Re's approach to modelling the emerging risks is founded on two pillars: the exploration of claim data of EVs and a forward-looking analysis of the major risk drivers. The latter focuses on distinguishing parameters for each EV – both regarding vehicle features and driving behavior – and evaluates their impact on the overall risk profile. With the identification and quantification of the most relevant risk factors from an insurance perspective – always under consideration of market-specific variations – we obtain a comprehensive picture on the risk performance of each EV model.
The final EV Risk Score provided for different coverage types enables motor insurers to perform a realistic calculation against their traditional premium rating and ascertain whether a discount or increase of a classically derived risk premium is justified. No matter whether they are completely new to the EV space or have already started to write a small number of EVs, the Swiss Re EV Risk Score guides insurers towards a comprehensive risk prediction right from the beginning of their EV journey.
