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.
Falekulo Emerges New MD Of Nigeria Re
Mr Olugbenga Falekulo has been appointed as the new Managing Director of Nigeria Reinsurance Corporation, as part of efforts to ensure that the Reinsurance firm continue in its quest for transparent and accountable management of insurance in the country.
Falekulo, with over 25 years of experience spanning across the sector, said he brought his wealth of experience and professionalism to the fore.
The new Managing Director stated that he and his team are prepared to take Nigeria Re to the next level in the market.
Although he did not disclose the strategic plans the new new management have put together, he assured that Nigeria Re is taking a new dimension in the insurance industry, promising that a new era is here for the company.
He has BSc in Insurance, Masters in Business Administration, and he is also a.member of the Chartered Insurance Institute of London.
Prior to this appointment, he had worked with NICON Insurance, Great Nigeria and Continental Re. He left Continental as an Exexutive Director before in 2014 and went into his private business.
He is well travelled and has attended so many courses within and outside Nigeria. He is married with children.
Nigeria Reinsurance has Mr Mela Audu Nunghe as its Chairman, Falekulo as Managing Director/Chief Executive Officer, Mr Olusegun Ilori as Executive Director, Finance & Administration, Mr Alexander Ayoola Okoh, the Director-General of Bureau for Public Enterprises (BPE) as Non-Executive Director, and Mrs Yvonne Isichei as Non-Executive Director (Independent).
Nigeria Reinsurance was established under the Nigeria Reinsurance Corporation Act No. 49 of 1977. It commenced operations on January 1, 1978, as Nigeria’s flag reinsurer, wholly owned by the Government of the Federal Republic of Nigeria. In 2002, the Corporation was transformed from being a Federal Government wholly owned Corporation to a privatised company with the government retaining some shares. The Corporation, which has been in operation for over 40 years, is in the business of assuming risks, providing reinsurance services and risk management solutions to its clients.
Pension Fund Assets Now N12. 7trillion, Contributors 9. 4million
By Sola Alabadan
The pension fund assets accumulated under the Contributory Scheme in Nigeria was N12.66 trillion as at 30 June 2021, while the number of registered contributors has grown to 9.38 million, the Director General, National Pension Commission (PenCom), Aisha Dahir-Umar, said.
She stated this at the workshop organised PenCom for journalists in Lagos on Monday. The theme of the workshop was “Positioning the Pension Industry in a Post COVID Era”.