Ask an Expert: How are EVs and new powertrains changing how insurers assess vehicle value and residual risk?

Q: With the rise of electric vehicles and new energy powertrains, what are the key considerations for insurers when it comes to understanding vehicle values and residual risk?

That’s a great question, and definitely a topic we’re fielding more often now as battery electric vehicles (BEVs) and plug-in hybrids start to grow their share of the market. From an insurance perspective, there are a few key things to think about when it comes to vehicle values and managing residual risk.

The first is battery health and obsolescence. While there’s a lot of noise in the market around battery degradation, the data we’re seeing, both locally and internationally, paints a somewhat more positive outlook. Many recent generation BEVs with recommended charging practises are retaining upwards of 90% and more battery health after several years and mileage far exceed one hundred thousand kilometres.

That said, it’s not just about how healthy the battery is — it’s also about how it compares to what’s replacing it. New BEVs coming to market very soon are now touting 800km+ ranges at competitive prices. So even if the older model battery still works well, its resale value is subject to obsolescence through technology advancement/innovation, much like what we see with the modern smart phone device.

Another thing we always flag is price volatility. The price shifts we’ve seen, particularly from category leader Tesla, where $10,000 was slashed almost overnight amid growing competition from new entrants, have real implications for insurers setting premiums or managing claims costs. When the new vehicle price drops dramatically, it pulls down the used market too.

That variability adds complexity when you’re trying to forecast what a vehicle might be worth in three, four or five-years’ time, especially for fleets or novated lease customers where insurance is often bundled in.

Also worth keeping in mind is the relative lack of historical data for BEVs. Most BEVs in the used market today are sedans or compact SUVs. That’s not a true cross-section of the Australian car market.

We’re just now starting to see the arrival of Utes, 7-seaters, and larger SUVs, which is where Aussie preferences sit. Until we’ve got more depth and diversity in the used BEV market, forecasting values will remain challenging and need to be monitored closely.

Lastly, charging infrastructure and consumer understanding are still big drivers. If someone buys an EV and then realises they can’t fast charge it at home — or it takes 45 minutes at a public station — those user experience gaps affect satisfaction and resale.

So from our side, it's about continually refining the data and being transparent about the assumptions we’re making. Because in this market, things are moving fast and so is what’s considered “valuable.”

Attributable to Adrian Givoye, General Manager at Redbook

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