Korea Insurance Research Institute, Changes in Auto Insurance Risks Due to Increase in Electric Vehicles
[Asia Economy Reporter Ki Ha-young] With the surge in electric vehicles (EVs) driven by various countries' eco-friendly policies, there are calls for insurance companies to review additional risk assessments unique to EVs and claims processing procedures that address changing risks.
According to the report "Changes in Auto Insurance Risks Due to the Increase in Electric Vehicles" recently published by the Korea Insurance Research Institute on the 31st, the EV market is expanding as countries promote EV adoption and accelerate infrastructure development. The International Energy Agency (IEA) reported that while global new vehicle registrations decreased by 16% year-on-year last year due to the impact of COVID-19, new EV registrations increased by 41% to 3 million units.
In particular, with global EV adoption expected to expand by 2050, risk factors such as battery explosion and fire hazards, software errors, and cybersecurity issues?previously not considered for internal combustion engine vehicles?are emerging.
In fact, EVs have a higher risk of explosion and fire than internal combustion engine vehicles due to the instability of their core component, the battery, and the use of expensive electronic components means that the scale of damage in accidents tends to be larger.
Additionally, EVs integrate various software systems, which pose risks of system errors or malfunctions, and risks may arise during software updates. According to research by financial advisory firm Stout Risius Ross, half of the EV recalls in 2019 were due to software defects, with 30% of those caused by errors in software interactions.
Above all, EVs face cybersecurity risks such as system hacking, and since hardware and software are combined, it may be difficult to determine the manufacturer’s liability. As autonomous vehicles and connected cars based on EVs become widespread, the importance of cybersecurity risks is expected to increase, and with manufacturers’ product liability expanding from hardware to various outsourced software producers, responsibility may become unclear.
The Korea Insurance Research Institute advised, "As software and technology producers increasingly participate in EV manufacturing and EV systems become more complex, insurance companies need to enhance their evaluation systems for additional EV-related risks and improve claims handling capabilities. Cybersecurity can be a critical criterion for EV safety, so it is necessary to identify cyber risks and establish appropriate countermeasures through continuous monitoring."
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