"The Biggest Issue in Electric Vehicle Insurance is the 'Battery'... Clear Rights Relationships Needed"

Hyundai Motor Company's electric vehicle Ioniq 6 [Image source=Yonhap News]

[Asia Economy Reporter Changhwan Lee] As the electric vehicle market rapidly grows, it is also significantly impacting the auto insurance market, with forecasts suggesting that conflicts mainly related to batteries will intensify.

According to the Insurance Research Institute's report "Issues and Tasks of Electric Vehicle Insurance" on the 23rd, the biggest recent issue surrounding electric vehicle insurance is the battery, a core component of electric vehicles.

A recent point of contention is the scope of compensation for battery damage. Previously, whether to compensate the full new product value for battery damage was an issue, but it was decided to deduct the depreciated amount similarly to engines, and replacement costs are compensated through the "Battery New Product Value Compensation Special Contract."

There is also the issue of ownership rights over used batteries when compensating for battery replacement costs. As the used battery market expands, some electric vehicle companies are implementing used battery return policies, which may conflict with insurance companies' subrogation rights over residuals and could affect the loss ratio and premiums of electric vehicle insurance.

Additionally, the government is promoting amendments to the Automobile Registration Decree to allow separate registration of vehicle ownership and battery ownership to introduce battery subscription services, which is expected to require changes in auto insurance coverage and compensation.

The report emphasized that changes in the electric vehicle-related industry and systems, such as the expansion of electric vehicle adoption, growth of the used battery market, and introduction of battery subscription services, are expected to have a significant impact on electric vehicle insurance, necessitating continuous review.

Hwang Hyun-ah, a research fellow at the Insurance Research Institute, stated, "As an immediate task, it is necessary to clarify the rights related to batteries in response to used battery return policies and the introduction of battery subscription services, and to revise auto insurance terms and conditions and premium calculation standards to provide appropriate insurance services."

She added, "Since electric vehicles are expected to continue increasing in the future, it will also be necessary to consider reorganizing auto insurance's property damage liability and comprehensive coverage items to focus on electric vehicles from a long-term perspective."