Testing times for insurers on electric vehicles

This article first appeared in Insurance Day, February 2022.

By 2025, according to UBS Global Research, 20% of all new cars sold globally will be electric, jumping to 40% by 2030 and to virtually every car sold globally by 2040.

The growth of the electric vehicles (EVs) market in the UK is expected to accelerate ahead of the 2030 ban on new petrol and diesel vehicle sales.

But while the benefits of EVs have been discussed at length, as with any new technology, there are several multifaceted potential risks which are likely to present challenges in establishing where liability, and ultimately responsibility for recompense, rests. Liability insurers and their insureds will need to give careful consideration to these emerging risks and related potential claims.

Lower noise levels

A sound generator known as an Acoustic Vehicle Alert System (AVAS) has been mandatory for all new electric and hybrid vehicles (HVs) registered in the UK from 1 July 2021. The AVAS activates a specified level of noise when the EV is reversing, parking or driving at speeds below 12mph to alert visually impaired pedestrians of their proximity and allow acoustic mapping. This also assists other vulnerable road users such as cyclists and children.

However, concerns remain that drivers might be able to pause their AVAS, thereby switching off the sound. While all new electric vehicles registered in the UK from 1 September 2023 will be prohibited from installing an AVAS pause switch, there have been calls for this change to be implemented sooner and for older vehicles to be retrofitted.

Software malfunctions and cyber attacks

As the technology, software and systems employed within EVs become increasingly sophisticated, connected and automated, this is likely to give rise to increased potential for cyber risks, including software malfunctions and also malicious cyber-attacks on EVs and their charging stations, targeting for example their operating systems and user billing details.

Sophisticated hackers may also seek to communicate with an EV’s charging station, a network of vehicles and even the electricity network at large, with potential safety implications for road users. Segmentation technology has been proposed and the Electric Vehicles (Smart Charge Points) Regulations 2021 should help to reduce this associated risk.

Fire hazards

Views are divided on the different types of EV batteries. Both nickel manganese cobalt (NMC) and lithium-ion phosphate (LFP) batteries can potentially overheat with the risk of intense fire. These batteries also store substantial amounts of energy that could give rise to an explosion if not dealt with correctly, even after being discarded.

While such fires are currently relatively rare, the main difficulty may be determining if the EV’s battery or the charging point itself is to blame when the fire starts when an EV is charging.

Workplace hazards

The Health and Safety Executive (HSE) has identified that EVs and HVs also introduce hazards into the workplace in addition to those normally associated with general repair and maintenance. These include the presence of high voltage components capable of delivering a fatal electric shock, even when a vehicle is switched off, and that vehicles may move unexpectedly due to magnetic forces within the motors.

There are manual handling risks associated with battery replacement, given for example just the weight or the potential for the release of toxic liquids/chemicals and explosive gases if batteries are damaged or incorrectly modified. Studies have shown particulates may be released causing disease, particularly in older batteries. The HSE has also highlighted the potential for the electrical systems of EVs to affect medical devices such as pacemakers.

Electromagnetic fields

Following research undertaken several years ago, electromagnetic fields (EMFs) have been considered "possibly carcinogenic to humans" by the World Health Organisation (WHO).

It remains to be seen whether there is a longtail risk of exposure to the EMFs emitted by EVs and chargers. EVs and their components are subject to general product safety guidelines and legislation. However, there are currently no binding regulations in place requiring vehicle manufacturers to ensure that their vehicles meet certain standards in respect of the EMFs produced.

Impacts on insurers and the complex matrix of potential defendants

The risks highlighted provide for numerous potential types of claims and a complex matrix of potential defendants with split liability exposures, including but not limited to vehicle, battery, software and charging point manufacturers, as well as charging point operators and EV owners.

Insurers may see a rise in product recalls and product liability claims including those under the Consumer Protection Act 1987, alleging product defects.

In the defence of a product liability claim, consideration should be given to obtaining expert evidence as to whether the cause of any alleged damage was due to the product itself, a related component, or perhaps an unrelated cause. To mitigate these risks manufacturers, suppliers and their insurers should review and factor safety considerations into the design, manufacture, testing, marketing, user manuals and shipping and delivery of these products.

Although product liability insurance is likely to be the main focus for EV related losses, other types of liability insurance (such as employers’, public, cyber, motor, property and environmental) could also be affected. This is already being recognised with the emergence of bespoke policies to address these risks, helping to facilitate the transition to EVs and the benefits they offer.

Related item: Electric vehicles and local authorities

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