Thailand’s rapidly expanding electric vehicle (EV) market could face setbacks if insurance companies refuse to provide coverage for EVs, says the Thai Automotive Industry Association (TAIA).
Tokio Marine Safety Insurance announced on Tuesday that its current insurance premiums would “temporarily” not apply to new EV customers or those transferring their policies, as it would consider new premium rates on a case-by-case basis.
The country’s second largest auto insurer by market share issued the clarification in response to online posts indicating that it had stopped insuring EVs. It said the services were still available but were subject to the changed conditions.
Wide fluctuations in EV prices and high claim values have reportedly led insurers to rethink how to offer coverage.
Tokio Marine said that for its existing customers who want to renew policies, it would base renewal premium rates on claim records.
According to local media reports, the Thai General Insurance Association recently cautioned its members about EVs. It noted that spare parts in some cases were 50-60% more expensive than for combustion-engine cars. As well, many damage claims were for 90-100% of a car’s value.
Experience in many countries has shown that even minor collision damage to an EV’s battery pack can result in the entire unit needing to be replaced. The battery pack typically accounts for about half the cost of an electric vehicle.
Suwat Supakarndechakul, president of the TAIA, said two insurers had reportedly decided to discontinue offering policies for EVs.
“We are monitoring the situation to find out what happened with the two insurance companies,” he said, without naming the firms.
Mr Suwat said the TAIA planned to meet with global EV makers, who are also association members, as well as the Thai General Insurance Association (TGIA) to look into the issue.
Most of the EVs sold in Thailand are imported from China. The number of EVs produced domestically is small, according to the TAIA.
But many Chinese EV companies have pledged investments worth billions of baht to develop factories in Thailand, aiming to use the nation as their export base, while helping the government achieve its goal of making the country the EV production hub of Southeast Asia.
Surapong Paisitpatanapong, vice-chairman of the Federation of Thai Industries and spokesman for its Automotive Industry Club, said it remains unclear whether two insurers want to stop offering EV coverage.
“We don’t know whether this stemmed from problems regarding paying compensation to customers,” he said.
No cancellations yet
A source at the Office of the Insurance Commission (OIC) who requested anonymity said no insurers have officially announced the cancellation of their EV insurance services.
A total of 23 insurance companies still provide EV insurance, said the regulator.
“As for the Tokio Marine case, there may have been a misunderstanding about the cancellation of its EV insurance service. Recently the company clarified it is adjusting the conditions for existing customers and is not only accepting transfers of black-plate cars,” the OIC source said.
TGIA president Somporn Suebthawilkul said the association is asking its members to present their methods for calculating EV insurance premiums.
Based on data from the US, Europe, China and Japan, the average EV premium is 30-40% more expensive than for a combustion engine car, while in Singapore it is 50% more expensive.
A source from Bangkok Insurance who requested anonymity said the company’s EV insurance conditions remain unchanged, but admitted it is carefully vetting applications before approving coverage for EVs, as the prices and value of some brands fall by a lot every year.
A price war among manufacturers, mostly Chinese, is further complicating the issue for car owners as well as insurers. An insurer that assesses the replacement value of a car at, say, 1 million baht and prices the premium accordingly, might find the same model being priced new at 750,000 baht a few months later. But it would still be on the hook for the higher sum if the vehicle was in a serious accident.
Auto loans intact
Kasikorn Leasing (K-Leasing), an auto loan subsidiary of Kasikornbank (KBank), said the company continues to provide loans for both internal combustion engine (ICE) cars and EVs.
K-Leasing considers the risk profile, including the age of the vehicle and the customers’ ability to service debt repayments, said managing director Tirachart Chiracharasporn.
“The type of car is another factor to take into account in terms of loan collateral. Collateral for EVs will be higher than for ICE cars, and this also relates to the types of EV insurance,” he said.
Car buyers believe EVs are less expensive in terms of fuel costs than ICE cars, but the cost of EV insurance premiums is higher, said Mr Tirachart.
He said insurers have adjusted the criteria for EV insurance from June 1 this year, including premiums, battery claim conditions and driver profiles. As a consequence, auto loan providers will adjust operations in line with the changing environment, said Mr Tirachart.
A car buyer normally has the option to specify the drivers when purchasing insurance. Under the new criteria, EV drivers must be named.
For the battery claim criteria, if an accident damages the battery and the entire battery needs to be replaced, the battery coverage reduction will be applied, with a depreciation rate of 10% per year, up to a maximum reduction of 50%. If an accident damages the battery and it can be repaired, the insurance company will cover 100% of the repair costs.
According to the Bank of Thailand, auto loan approvals dropped 3% year-on-year in the first three months of 2024, compared with a 0.4% decline the previous quarter. Auto loan rejections increased based on borrowers’ weaker debt repayment abilities.
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