Insurance requirements for electric fleets

Haulage expert, Newcastle.

The growing presence of electric cars on our roads, as the UK moves toward a total ban on new petrol and diesel car sales, is well known and gathering pace. In fact, electric vehicle (EV) car sales grew by 76.3% in 2021¹ – but similar pressures and trends in the haulage sector are less well known.

As part of its net zero strategy, the UK government has committed to phasing out new, non-zero emission heavy goods vehicles weighing 26 tonnes and under by 2035, with all new HGVs sold in the UK to be zero emission by 2040.² Meanwhile, last mile delivery fleets fall under a separate commitment to phase out petrol and diesel cars and vans before a total ban on new sales comes into force in by 2030.³

Electric fleets: change already underway

For the haulage industry, this is no small challenge. The UK’s 493,600 heavy goods vehicles transport 98% of all food, agricultural and consumer products. And in an industry characterised by tough competition and low margins, individual operators’ transition to EVs will need to be carefully planned.⁴

Even so, given the short timescales available to transform such a crucial industry, moves to electrify fleets are already underway. For instance, in a UK first, Tesco has started using electric articulated trucks as part of its heavy-duty haulage fleet. It has invested in two 37-tonne fully-electric HGVs to transport food and other products between Wentloog rail terminal outside Cardiff and its distribution centre in Magor, Wales.⁵

In some ways, Tesco’s move is a proof of concept - an opportunity to test electric HGVs in the field, looking in particular at range and the trucks’ potential for use in fleets across the UK – as part of its own commitment to help boost investment in EVs in the haulage sector.

No doubt fleet operators across the UK will be watching with interest, but the shift to EVs will bring change in other crucial areas too, including commercial fleet insurance.

Electric fleets: what are the insurance risks?

Comprehensive haulage and logistics insurance and commercial fleet insurance is an important part of running a successful haulage fleet. As is promoting effective risk management. In an effort to help protect operations and assets, and defending against liabilities.

However, the move over to EV HGVs changes the profile of fleet assets and operations, which in turn means insurers will be looking closely at the implications for risk and insurance. Particularly for haulage firms taking the lead in transitioning to EV fleets, that is likely to bring some uncertainty in the short term:

• Immature market: The fact that no UK haulage operator yet runs a full-scale EV fleet means that insurers have little to no historical risk and claims information on which to base pricing and underwriting decisions. It also means that specialist cover for EV fleets remains rare compared with traditional commercial fleet insurance – which could prove a barrier for early movers.
• Rapid evolution: Given the UK government’s commitment to an EV transition in the haulage sector, it seems inevitable that the insurance market will evolve rapidly in response to demand. However, in the medium term, we do not yet know how EV fleet cover will change over time – what risks will emerge and how insurers will respond. That raises the possibility of diverse electric fleet insurance pricing, cover terms and risk appetites, as well as the likelihood that haulage firms seeking favourable terms will need to work harder in presenting risks to insurers.
• Uncertainty over premiums: At present, electric trucks are more expensive than their petrol or diesel counterparts, which means potentially higher premiums. Although this may be short term, while the comparative cost of breakdown and maintenance across large fleets remains largely unknown. However, that may change over time, with the total cost of ownership of EV fleets expected to reach parity with diesel fleets by 2026.⁶

It goes without saying that these risks and more should be taken into account by haulage firms planning for an EV future – particularly those leading the way.

Electric fleets: what are insurers saying?

It may be early days, but insurers are already starting to assess some of the pros and cons of EV fleets from an insurance perspective. Some of these emerging viewpoints, which may impact on insurance, include:⁷

• Lower maintenance costs: Electric vehicles are less mechanically complex than their diesel and petrol cousins, which may mean fewer breakdowns and reduced costs for day-to-day maintenance.
• Higher retained value: There is some evidence from the electric car market that EVs may retain more value over time compared with diesel and petrol, which could have implications for the asset value of fleets as they age.
• Training will be crucial: As drivers transition to electric HGVs, training is likely to be vital to familiarisation with new technologies and safe operation. For instance, EVs are quieter than diesel and petrol HGVs and feature instant acceleration – both issues that could have safety implications.

Again, insurer views on electric fleets are likely to evolve quickly as the transition to EV HGVs gathers pace, so keeping an eye on developments is likely to be an important consideration.

Electric fleets: charging point risks

Another key risk associated with electric fleets is likely to be around charging points - especially given that this has emerged as a key risk in the more mature electric car market.

As a result, it is likely that EV fleet insurance will need to address issues such as:⁸

• Damage to third party property or injury to third parties: The main exposures here are slips, trips and falls, so operators will need to consider charging locations and how to reduce the risk of people tripping over the charging cable.
• Damage to charging points and associated equipment: Charging equipment could be at risk from theft or malicious damage, so risk management and insurance will need to reflect this – thinking in particular about physical security and loss of revenue if vehicles cannot be charged, as well as the likely cost of repairing or replacing EV charging points. Electrical vehicle charging point insurance may need to be considered.
• The infrastructure surrounding charging stations: For example, think about how power is supplied to EV charging stations and what happens if it fails.
• Cyber risks: It is also important to think about the cyber security of EV charging points, which can be maliciously exploited to seriously harm the equipment, power grid, or both - and could even see personal data fall into the hands of hackers.
• Added complexity to daily fleet utilisation: Whilst home charging point’s boosts supply of charging options for car and LCV fleets it will not be the case for HGV’s. Ensuring vehicles are sufficiently charged for their journeys will be vital to reducing the risk of HGV’s being stranded and at increased risk on our highways. Technology is available to aid the planning of fleet utilisation for EV’s and thus should be a major part of businesses fleet risk mitigation strategy as HGV fleets start to be electrified.

Insurance for EV fleets is undoubtedly still in its infancy so, if you are unsure, take advice as part of your planning. Keen to learn more? Visit our transportation hub for extra resources and insights.

We’re here to help you effectively manage your fleet. That’s why we’re For the Transporters.

^{1 heycar.co.uk/blog/electric-cars-statistics-and-projections
2 gov.uk/government/news/uk-confirms-pledge-for-zero-emission-hgvs-by-2040-and-unveils-new-chargepoint-design
3 theguardian.com/business/2021/oct/20/ambitious-uk-plans-for-electric-vehicles-welcomed-with-reservations
4 rha.uk.net/News/Guidance/Road-Haulage-Facts-and-Stats
5 commercialfleet.org/news/truck-news/2022/01/04/tesco-deploys-uk-s-first-electric-articulated-hgvs
6 trans.info/en/electric-lorries-in-uk-to-reach-total-cost-of-ownership-parity-with-diesel-equivalents-by-2026-264843
7 allianz.co.uk/news-and-insight/insight-and-expertise/ev-is-the-future-but-are-fleet-managers-ready-to-transition-.html
8 marshcommercial.co.uk/articles/how-to-jump-start-the-switch-to-electric-vehicles/}