Future of mobility is electric, but not risk-free

The global push for electric cars will bring fundamental change in risk for manufacturers, suppliers and insurers as government policies on climate change and consumer demand could see some 100 million vehicles on the road by start of the next decade, compared with just seven million today.

Figures from the International Energy Agency further forecast annual sales in the region of 20 million, driven by growth in the world’s largest market, China, the European Union, Japan, Canada, the US and India.

According to Allianz Global Corporate & Specialty, this will have considerable implications for insurance – in particular automotive product liability – and claims, as technology creates new risks and exposures, and as liability shifts within the supply chain.

“From supply chain networks to production processes to the product itself – the automotive industry will have to respond to many emerging risks to make the transition to electric vehicles happen,” says Daphne Ricken, senior underwriter liability at AGCS. “The anticipated growth of electric cars brings the prospect of new defect or performance issues; more expensive repair costs; new fire and cyber threats; and even reputational issues around sustainable sourcing and disposal of critical components and raw materials for batteries.

“Electric vehicles will consist of fewer but more integrated parts and components. What may have been three parts in a conventional car could be only one part in an electric car. However, the lower number of parts is increasingly connected through sensors and embedded software, adding a new layer of complexity and raising questions around how these parts interact and which producer or supplier is liable for a potential defect or faulty control. The increased complexity of the automotive supply chain and the reliance on software and technology producers will lead to new exposures and split liabilities in the value chain.”

Dampened sales amid COVID-19 will be temporary. Beyond that, anticipated long-term growth also brings a range of technical and operational risks, both from a product liability perspective and in terms of safety and reliability; fire risk; environmental issues; and cyber concerns.

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