As the world becomes more connected and data-driven, insurers are looking to explore new ways to assess risk and offer personalised products to their customers. We caught up with Steven Williams, Head of EV Strategy at Direct Line to discuss how the shift from Internal Combustion Engine (ICE) vehicles to electric vehicles (EVs) is changing the face of the motor insurance sector.
Do the differences between EVs and ICE vehicles have an impact on insurers when they are calculating the cost of a policy?
There are over a thousand data points used when calculating an insurance premium and for insurers in the EV space, understanding the differences between EVs and ICE vehicles, and the impact they have on the road is vital. As with all new technologies there will be a transition period for drivers of EVs who will need to come to terms with changes such as much quieter cars when travelling and much faster acceleration than internal combustion engines.
As insurers we do also have a part to play when it comes to helping consumers move to EVs more smoothly and by developing EV specific propositions and value-added bundles we can help make the transition easier while also helping drivers to feel more confident about moving to plug in cars.
What are the key differences in risk profile between people who buy Internal Combustion Engine (ICE) vehicles and EV?
It is still too early to say as there is very limited data available and a lack of similar vehicles for direct comparison. As we move towards 2030 when new petrol and diesel cars can no longer be sold, we expect a greater uptake meaning more data will be available to give us a better view of the different profiles.
How will technology such as telematics and connected vehicles impact pricing for insurance policies?
Telematics has been around for a while and has traditionally been aimed at younger drivers looking for more affordable insurance. The technology is great to promote safer driving as it provides feedback on driving behaviours along with guidance on how to drive better. Historically drivers have been less keen to have a device installed in their vehicle so uptake in the UK has been fairly low. However, as cars become increasingly sophisticated and are fitted with the correct technology needed to support telematics, we expect it to play a bigger part in the UK insurance market.
This presents further opportunities for drivers to understand the benefits of telematics, such as being able to track where you’ve been, your average speed and other useful metrics such as fuel consumption and vehicle health. The data collected can also provide insurers with a more accurate view of the risk and therefore more accurate policy, and further opportunities to create tailored propositions that suit individual driver needs.
Customers value efficiency when it comes to payments, but they are also willing to undertake extra research to get a cheaper price. How do you think that will be reflected in the way people purchase and run their vehicles in the coming years?
As electric vehicles become more popular, the conversation about car ownership and usage is shifting towards sustainability. The move towards electric cars presents a great opportunity to rethink the way we own and use cars.
Historically new car sales have been split evenly between personal and commercial purchases, however with EVs, around 60%-65% of vehicles are now being bought on a commercial basis. This is largely due to a combination of the growth of car subscription services, the fact that more companies are choosing to electrify their fleets to meet their sustainability goals and of course the attractive tax benefits awarded to company car schemes (potentially the cheapest way for someone to personally buy an EV).
The other element that should be considered is the way in which drivers power their vehicles and how this process differs to ICE vehicles. Contactless has started to be rolled out which will start to bring the process in line with ICE refuelling methods, however there is still some streamlining to do to bring the process in line with ICE vehicles. One of the key benefits of EVs is the ability to charge the vehicle at home, via the drivers chosen energy source which is a total game changer in terms of the total cost of ownership. This is especially true for those who have chosen solar panels to generate their energy.
How important is customer experience in the payment process, should insurers be prioritising giving customers multiple payment options at checkout?
In today’s digital age, customers expect to be able to pay for their goods quickly and seamlessly. At Direct Line Group we are continuing to invest in our digital capabilities to make it simple for customers to interact with us whether this is on the phone, through a broker or online.
Find out more about driving payment innovation in the insurance industry here.