As the take-up of electric cars is expected to accelerate rapidly in future, driven by consumer demand and government policies aimed at tackling climate change, a new report from insurer Allianz Global Corporate & Specialty (AGCS) stated that the transition will lead to a fundamental change in risk for manufacturers, suppliers and insurers alike.
The development is also expected to have a significant impact on automotive product liability insurance.
“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.”
A new AGCS publication, The Electric Vehicles R-EV-olution: Future Risk And Insurance Implications[DG(1], highlights that the use of electric cars is expected to soar in future as their cost gradually declines, the choice of available new models likely doubles within five years, their driving range increases and consumers, as well as governments, demand greener low-emission vehicles. The International Energy Agency has predicted there could be more than 100 million electric cars on the roads in 2030 – up from around seven million today – with annual sales in the region of 20 million, driven by growth in China[DG(2] – already the world’s largest market – the European Union (second largest), Japan, Canada, the US and India, in particular.
New risk exposures
While the coronavirus crisis may dampen the outlook for global electric car sales for 2020 and beyond, the anticipated long-term growth also brings a range of technical and operational risks, both from a product liability perspective and in other areas:
Safety and reliability: Tests conducted by the Allianz Center for Technology Automotive (AZT Automotive) have shown that the high voltage components of electric cars are well-protected and will not be affected in most crashes. Statistical evaluation of Allianz claims also shows that electric vehicles are less likely to be involved in accidents today – they typically drive short distances with limited mileage overall. However, any damage sustained can be, on average, more expensive than for conventional cars.
“If the battery in an electric car has to be replaced, it can result in a total loss in many cases. In addition, the fact that they can only go to specialist repair shops can contribute to costs,” says Carsten Reinkemeyer, Head Of Vehicle Technology And Safety Research at AZT Automotive.
Battery life and performance are critical issues for electric cars. Given the high cost of replacement or repair of battery units, a failure to live up to performance guarantees will pose questions around liability for manufacturers and suppliers.
Fire threat: As with conventional vehicles, defective electrical components and short circuits can spark a fire, while lithium-ion batteries may combust when damaged, overcharged or subjected to high temperatures. High voltage battery fires can be very intense and difficult to extinguish, and can also release high levels of toxic gases – such fires can take 24 hours or longer to control and be made safe. Due to the relative rarity of such fires to date, response and rescue services have limited experience of dealing with such incidents.
Environmental issues: Despite their green credentials, environmental issues can represent a potential liability and reputational risk for vehicle manufacturers and suppliers. A rapid uptake in electric cars will require manufacturers to source sustainable supplies of critical components and raw materials as they ramp up production. For example, battery technology will drive a huge increase in demand for cobalt and lithium, outstripping current supply – lithium supply has been predicted to triple by 2025. Effective recycling and reuse of materials will therefore be essential. Environmental and social concerns will also put emphasis on the sustainable sourcing of minerals, as well as traceability and transparency of supply chains. High voltage batteries could also pose a pollution risk, if not properly disposed of.
Speed to market and potential defects and recalls: Manufacturers are under pressure to accelerate the transition to electric mobility. The combination of new technology, short development cycles and new 3D/4D printing in production could result in an increase in defects and quality issues, triggering product recalls for the automotive industry – which are already among the largest and most complex of any sector, according to AGCS claims analysis.
Cyber concerns: Electric cars are likely to have increased connectivity and reliance on data, sensors and software, including artificial intelligence, to manage vehicle systems and aid driving. As with conventional vehicles, increased connectivity is likely to give rise to cyber vulnerabilities, including the threat of malicious attacks, system outages, bugs and glitches. There have already been product recalls in the automotive sector as a result of cyber security.
Insurance implications and claims complexity
Electric mobility will have many implications for insurance – in particular automotive product liability insurance – and claims, as technology creates new risks and exposures, and as liability shifts within the supply chain.
“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,” Ricken explains. “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.”
Fire and explosion risks associated with high voltage batteries could give rise to claims for commercial property insurers, in particular if multiple cars are charged in underground car parks. Claim scenarios are manifold – ranging from overheated battery leads resulting in fires and property damage to breakdown, leading to fire, as a result of electronic failure of the battery management system.
Insurers may also expect to see a potential increase in product recall/liability claims from new technologies, components, faster development times and shorter testing periods. Last, but not least, there will be employers’ liability exposures – such as potential toxic fumes and fire risks during 3D printing or the handling of lithium batteries related to fire and contamination.
Medical Council Pays Insurance Claims To Dead Doctors’ Dependents
In fulfillment of the provision of the law governing medical practice in the country, the Medical and Dental Council of Nigeria (MDCN) has started paying insurance claims to the families of doctors who died in service.
The Council therefore pleaded with the Directors of Medical Services in the states and the Nigerian Medical Association (NMA) to furnish it with a detailed compilation of doctors who died, rather than relying only on newspaper publications to be aware of such cases.
The Registrar and Chief Executive of MDCN, Dr. Tajudeen Sanusi, stated this in Abuja, during the presentation of cheques to the families of dead doctors.
In attendance were NMA President, Prof. Innocent Ujah and Executive Vice Chairman of Dykes Insurance Brokers Limited, Dau Kenny Tekenah.
The deceased doctors were Patience Selumun Tsavande of Benue State University Teaching Hospital, Makurdi; Oluwamayowa Nofisat Alaka of the Lagos State University Teaching Hospital (LASUTH), Ikeja, and Stephen Urueye of Lagos University Teaching Hospital (LUTH), Idi-Araba.
“The insurance for doctors has been there in our subsidiary legislation, that is, the code of medical ethics. The latest is 2007 and stipulates that every registered practitioner must have what we call constitutional indemnity. We have not been able to enforce it because of the absence of the enabling law. The enabling law was signed into law in 2014. The execution started in 2016. We have been dragged severally before the ICPC (Independent Corrupt Practices and Other-Related Offences Commission). People were accusing us of selective implementation. We said well, when you have a law like this, you start with the younger colleagues. As at the time they were coming in, we enforce it. That was what happened.
“For most of these cases, we were not informed directly. We just read in the papers and we felt we owed them that responsibility, since they have that insurance. The cheques had been ready before Covid-19 came up. But because of the exigencies of duties, we have not been able. And because of that, the cheques got stalled and we had to return them to the broker for revalidation. For doctors that have their properties registered with the National Health Insurance Scheme, this is part of the requirements to be fulfilled before they can be accredited by the NHIS. After knowing about the cases from newspapers, we try to link up with the institutions where these doctors practice, and check the records.”
FG Pays 2020 Group Life Insurance Premium
The Nigerian Council of Registered Insurance Brokers (NCRIB) confirmed that the Federal Government has paid the 2020 Group Life Insurance for all Federal Government workers in full.
The Vice President of the Council, Tunde Oguntade made this known while speaking to members of the National Association of Insurance and Pension Correspondents (NAIPCO) shortly after the association’s Annual General Meeting in Lagos.
Oguntade, who represented the NCRIB President, Dr (Mrs) Bola Onigbogi, also called on the Federal Government to engage the services of the registered insurance brokers in order to mitigate the risk of contract failures.
He expressed displeasure at government’s failure to engage insurance brokers in its insurance arrangements, stating that the Council will continue to engage the government on the need for them to always engage the services of the brokers in their insurance arrangement.
According to him: “The 2020 Group Life is off the schedule because full premium has been paid on the account for the current year, there’s no lapse in cover at the moment.
“On government contracts what we are trying to do at NCRIB is to talk to ministers through our liaison committee and leadership that the contract failure thing you have all over the federation if you have insurance and you have Brokers arranging them for you, of course all those contracts failure will not be there because contracts failures are sometimes premeditated and they do not want to listen to us.
“We have been talking to them about all these roads, bridges and rails under construction on the importance of the government to engage the Brokers. If they don’t want the contracts to fail they know what to do. Imagine someone who go to roadside agent to ask for insurance policy. It’s the NCRIB that puncture that thing and say this is wrong. We will continue to do our best to engage government as long as government is willing to do the right thing, NCRIB will be there to support them.
On the issue of deepening insurance, he said there are several ways that can be done.
“You have online models which is referred to as technology, you have physical, and you have referrals. If somebody tries to get you online, you are bouncing, tries referrals, you you are bouncing, he will try the last option which is physical correct. There’s nothing that is wrong. The fact that I want to see someone physically is that I wish to convince the person that I have the skill, I have tried to get to you through technology, people have tried to make impact for me to meet you but to no avail, let me now put my face to the picture so that you will be able to see. When you see people going to the market, it doesn’t mean that they do not have technology,” he added
On application of technology in their operation, Oguntade said what NCRIB has done is to ensure that all its members are ICT savvy.
“What we have done in the NCRIB is that you cannot be a member without being information and communication technology (ICT) savvy. NCRIB has moved from manual to digital. Very soon renewal this year will be by the portal. Our members are well trained. You cannot say somebody is a Broker without being technology savvy. NCRIB is in tune with what the government is doing and we are in tune with what is happening in the outside world. You should expect more from the NCRIB, “ he said.
Also speaking at the event, NCRIB’s Executive Secretary, Fatai Adegbenro
said on the area of government contacts, the Council is in very close contact with government agencies, stating that every year the Council writes to inform them on the need to engage the services of the registered insurance Brokers even as he noted that the Council’s collaborative relationship between with the National Insurance Commission (NAICOM) is very high now to make sure that fake Brokers are eliminated in the system
“Everybody knows that in every clime we have fake teachers, fake police, fake lawyers and what have you. You cannot whisk that away in any society, but the cooperative effort between NAICOM and NCRIB, a lot of thing is being done to minimize it to the barest minimum.
NCRIB To Meet Buhari On Needs To Engage Brokers’ Services
The Nigerian Council of Registered Insurance Brokers (NCRIB) intends to meet with President Muhammadu Buhari as part of efforts to deepen insurance penetration in the country.
The Executive Secretary of the Council, Fatai Adegbenro, disclosed this while addressing members of the National Association of Insurance and Pension Correspondents (NAIPCO) after the association’s annual general meeting in Lagos.
Adegbenro stated that the planned visit to the Presidency is aimed at sensitising the government on the need to engage the services of the registered insurance Brokers, to protect the assets and liabilities of the government.
He said that “We will continue to engage the government agencies from time to time. But for the COVID-19, our President would have paid a visit to the Presidency with the view to sensitising the government on the need to engage the services of the registered insurance Brokers, to protect the assets and liabilities of the government. It is not only the assets you protect, you protect liabilities as well because there are a lot of loans being taken to execute government projects. When these projects fail, whether you like it or not, you must pay back the loan, so you have to protect all these things.
“We are engaging the people to embrace the benefit of insurance. Insurance is key. Insurance in other climes, nobody wait for the government. It is very easy because people larch on ignorance to say government has not done this or that. Government cannot do everything even in the United States of America (USA). If they suffer loss, they don’t go to government, the people call on their insurance companies for compensation. We are doing everything to ensure we minimise reliances on government here,” he said.
On technology, he the the Council is doing everything within its powers to ensure that members are full upgraded to global trends in business operations in order to stay afloat amidst the ongoing COVID-19 pandemic, even as he hinted that’s very soon members renewals will be done online.
His words “In the area of technology, if you say some members are not technologically savvy, yes, but in the real sense of it since the lockdown we have been meeting with our members; some of you have had the opportunity to come here and meet us. Our membership is spread all over the country and we have been organizing trainings for our members. Nobody can claim to know everything, even the public you are reaching out to, your client might not be IT savvy hence you see them going there. When after sending mails to clients and there is no response you have to move out to reach out to them and our members have been dealing with them online.”
He said, “going forward, all the renewals of our members should be done online because this is the new normal as the Vice President has said. Everybody is now falling online and the Council has organised two trainings on IT on “how to use IT to drive your business” because if you are not there, there’s no way you can remain relevant because NCRIB needs the members to remain afloat. Every association’s strength is determined by the number of membership.
Corroborating this earlier in his speech. The NCRIB’s Vice President, Tunde Oguntade said what NCRIB has done is to ensure that all its members are ICT savvy.
“What we have done in the NCRIB is that you cannot be a member without being information and communication technology (ICT) savvy. NCRIB has moved from manual to digital. Very soon renewal this year will be by the portal. Our members are well trained. You cannot say somebody is a Broker without being technology savvy. NCRIB is in tune with what the government is doing and we are in tune with what is happening in the outside world. You should expect more from the NCRIB, “ he stressed.