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BYD opens plant in Thailand with annual production capacity of 150,000 vehicles (Photo: BYD)
Thailand is a country in Southeast Asia that is rapidly developing EVs, and insurance has become crucial for the future growth of the EV market. Facing a loss ratio of over 90% for EV insurance, coupled with fluctuating prices in the new and used cars, insurance companies face challenges in setting appropriate insurance premiums.
EV insurance loss rate exceeded 90%
The Thai General Insurance Association (TGIA) has indicated that competition and the rapid depreciation of EVs may impact insurance value. The insurance loss ratio (overall amount of incurred losses to the insured amount), has surged to 90-100%. Additionally, maintenance and component replacement costs are 50-60% higher than those for ICE vehicles, affecting the profitability of insurance companies directly.
According to the Thailand Office of Insurance Commission (OIC), 23 insurance companies offer EV insurance. However, some companies have ceased providing EV insurance or have developed more stringent premium structures.
For instance, Japan's Tokio Marine Insurance's Thai branch modified its premium calculation method on July 1. Existing customers will still receive regular coverage with premiums based on their claims records. However, for new customers or those transferring their policies, the company has temporarily halted the current fixed-rate premium.
The biggest challenge in insuring EVs is the batteries. According to Lars Heibutzki, President and CEO of Allianz Ayudhya General Insurance, noted that batteries make up about 70% of an EV's price and are critical components with inherent risks such as fire hazards, high replacement costs, and technical service fees. "The fast pace of technological change can make parts obsolete quickly, affecting long-term insurability. However, the rapid growth of technological advancement also has led to a decrease in car prices because battery prices have significantly dropped," he added.
Moreover, the development of connectivity in EVs increases cybersecurity risks. The continuously evolving domestic EV market, combined with the influx of foreign investors, complicates risk assessment further.
Key reasons to be positive about EV insurance
Despite these concerns, Allianz Ayudhya remains optimistic about the growth of the EV insurance market in Thailand and highlights the reasons for their positive outlook:
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Government Incentives and Policies: The Thai government introduced various incentives and policies to promote EV adoption. The growing environmental awareness among Thai consumers has led many to choose EVs as a viable alternative to traditional vehicles in pursuit of sustainability and environmental benefits. Additionally, the improvements in battery life, recharge mileage, and charging speed have made EVs more practical for everyday use.
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The sharpening of the local EV Supply Chain: Numerous manufacturers have set up production facilities in Thailand, increasing the local EV capacity. The resulting market competition is driving down production and maintenance costs, making EVs more affordable for consumers.
The president of the Electric Vehicle Association of Thailand (EVAT), Krisda Utamote, has highlighted several challenges affecting the domestic EV market. Due to insurance issues, stricter loan standards from banks, and significant declines in EV prices, it is expected that EV sales in Thailand this year will be lower than in 2023, but still on a growth trend.
Krisda Utamote, president of EVAT ,stated that the drop in electric vehicle sales can be partly attributed to insurance companies imposing complicated requirements on electric vehicle policyholders. (Photo: Hsu, Tsu-lin)
According to the latest statistics from the Federation of Thai Industries (FTI), the first five months this year saw a 24% YoY decrease in domestic auto sales, totaling 260,365 vehicles sold. The battery EV (BEV) sales grew by 13%, reaching 28,000 units. However, BEV sales dropped by 31% in May, with only 5,117 units being sold.
Krisda attributed the decline in EV sales to three main factors: insurance companies imposing more complex requirements on customers wanting to purchase EV policies, banks implementing stricter loan standards for potential buyers, and significant price drops in EVs leading consumers to delay their purchases in anticipation of even lower prices.
Chen Namchaisiri, former chairman of the FTI and a Senator on the Senate committee on commerce and industry, suggested that insurance companies consider offering separate insurance policies for batteries and electric motors, with higher premiums for these components. He emphasized that "Insurance companies and EV manufacturers must adjust to the increasing popularity of electric cars."
Source: Bangkokpost
