We provide gap insurance for electric vehicles - and they’re becoming increasingly common on our books. Whilst they’re mainly just like other vehicles there is one interesting quirk when it comes to gap insurance.
At the moment electric vehicle batteries are a significant portion of the cost of electric vehicles - maybe as much as half of the value. Because the technology is new, car manufacturers have made a habit of leasing the batteries rather than selling them outright. This brings the purchase price down and also is an effort to persuade people that the manufacturer is standing behind the technology and guaranteeing that they’ll swap them if they degrade significantly over the course of the lease.
However, on a car with a leased battery the gap insurance covers the car - but not the battery. With some of the Renault range the cost of the car is virtually 50% battery - so in effect the gap insurance is only on the half owned outright.
Even with Finance Gap policies, we are insuring the finance agreement on the vehicle itself and not a supplementary agreement (i.e. the battery lease). So we would ask customers to check the detail of any battery lease they take out.
Out of curiosity, we tried asking the manufacturer and cannot get to the bottom of what happens with the battery lease in the event of loss. Do they have a value? What is the settlement? We genuinely despite asking, have no idea at all. However, we do know that we can provide gap cover for value of the car itself - and any other outstanding finance obligations.
However, in the long term we suspect that this will not be an issue and that battery leasing will phase out as people become used to the battery life cycles. Early EV batteries are proving much more resilient than expected, to the extent that cars are threatening to rust to death before the batteries stop charging enough to make the kind of journeys they were bought for.
We’re watching with interest - and so far haven’t had to process a claim on an electric vehicle.
By Beate Kubitz at 10 May 2019, 00:00 AM