The global transition from internal combustion engine (ICE) vehicles to electric vehicles (EVs) is accelerating, driven by environmental concerns, technological innovation, and supportive government policies.
As this transition reaches African markets, Kelvin Musa Keya, business development and bancassurance officer at Meticulous General Insurance Tanzania weighs in on how EVs are reshaping the insurance landscape in Africa by introducing new risk dynamics and the need for insurers to adapt to specialized underwriting expertise.
Insurers must be prepared to adapt swiftly and strategically as the global transition from internal combustion engine (ICE) vehicles to electric vehicles (EVs) accelerates, driven by environmental concerns, technological innovation, and supportive government policies.
Electric vehicles are reshaping the insurance landscape in Africa by introducing new risk dynamics, higher repair costs, advanced technologies, and the need for specialized underwriting expertise.
EVs are automobiles powered wholly or partially by electric energy stored in rechargeable batteries rather than ICEs. They include battery-electric vehicles (BEVs), plug-in hybrid electric vehicles (PHEVs), and extended range electric vehicles (EREVs). The global EV market is rapidly expanding, with emerging markets in Africa beginning to contribute to adoption.
However, Africa’s EV market is growing but remains small by global comparison. Ethiopia is the standout, with 100,000 EVs, driven by a 2024 ban on internal combustion engine imports. Other leaders include Ghana (17,000 EVs), South Africa (6,000 EVs), and Kenya (3,753 EVs). Tanzania, with about 5,000 EVs, primarily focuses on two and three wheelers. Meanwhile, Benin has surpassed 3,000 electric motorcycles, supported by investments in charging infrastructure from startups like Spiro. Despite the progress, EVs still make up less than 1% of total car sales, compared to over 20% globally.
Impact on underwriting
While much of the discussion focuses on sustainability and mobility, the rise of EVs is also reshaping the insurance industry. From underwriting and pricing to claims management and risk assessment, EVs introduce new risk dynamics that insurers must understand and adapt to in order to remain competitive and relevant.
Traditional motor insurance pricing models are largely built around factors such as engine size, vehicle age, repair costs, and historical claims data. EVs challenge these models. Repair costs for EVs are often higher than for conventional vehicles due to specialized parts, limited availability of trained technicians, and high battery replacement costs. Even minor accidents can result in significant claims if the battery system is affected. As a result, insurers may initially charge higher premiums for EVs to reflect increased claim severity.
At the same time, EV owners often exhibit different risk characteristics. They tend to drive fewer kilometers, adopt safer driving habits, and belong to higher-income segments. Over time, as claims data become more robust, insurers may refine pricing to reflect lower accident frequency, potentially leading to more competitive premiums.
Changing risk profiles of vehicles
Electric vehicles differ fundamentally from ICE vehicles in terms of construction, operation, and risk exposure. EVs rely on high voltage battery systems, advanced software, and complex electronics. These components alter the nature of insured risks.
On the positive side, EVs generally have fewer moving mechanical parts, which reduces the likelihood of certain types of mechanical failure. However, EVs also introduce new risks. Battery systems are expensive and vulnerable to damage, particularly in collisions or flooding. Battery fires, although statistically rare, can be severe and costly to manage. These are new emerging risks associated with electric vehicles
Lithium-ion traction batteries in EVs remain one of the most significant insurance exposures due to their thermal instability, degradation over time, and sensitivity to impact or manufacturing defects. Data from the International Council on Clean Transportation (ICTT) and a number of government authorities support this, indicating that EVs pose no higher fire risk, The problem is that when EVs do burn, the consequences can be severe. Fires involving charging infrastructure can cause severe damage.
High repair severity risk
EVs typically incur higher average repair costs, driven by expensive battery packs, advanced electronics, and limited diagnostic data that forces total loss decisions even for moderately damaged units. The complexity and cost of replacing or repairing a damaged high-voltage battery significantly increase claim severity.
The EV repair ecosystem remains immature in many markets, producing shortages of technicians, diagnostic tools, and parts. This creates longer claim settlement cycles, potential quality issues and uncertainty in repairability. For insurers, it increases both operational risk and exposure to secondary damages when vehicles are improperly repaired.
Charging infrastructure and power supply risk
EV charging infrastructure introduces a new category of risk beyond the vehicle itself. These include fires originating at charging stations, equipment malfunction, defective installation, cyber vulnerabilities in connected charging networks, and grid impacts. Additionally, inconsistent or under-tested installations can lead to property damage, interruption and liability exposure. Strained electrical grids can further increase fire or electrical risk at charging points.
In addition, flooding and water ingress events present unique concerns for EVs due to the vulnerability of high-voltage electrical systems and battery packs. While direct electrocution risk to rescue crews is generally low, water penetration can compromise electrical modules and battery safety systems, potentially leading to shorts, corrosion, functional failures, and post-submersion fire risk.
Underwriting considerations for insurers
Data collected in 2024 showed that EVs can cost approximately 20% more to repair than traditional petrol-powered vehicles. These costs stem from limited parts’ availability and the need for specialized knowledge and tools.
A shortage of certified technicians will be a barrier to servicing the growing EV vehicle in Africa. EVs generally cost more to repair than ICE vehicles due to specialized parts and the need for highly skilled EV-trained technicians. Battery replacement is one of the most expensive repairs
The lithium-ion battery is the heart of an EV and it is the most expensive component, often accounting for 30-50% of the vehicle’s total value. Even minor impacts near the battery pack can lead to an insurer writing the car off. This is because assessing internal battery damage is difficult and risky.
A seemingly superficial knock could compromise battery cells, creating a fire risk. While EV fires are statistically rare, fire risk and thermal runaway are specific hazards that need to be modelled in underwriting.
Sum insured
The cost of replacing the battery is typically around 40%-50% of the total cost of the vehicle. So, you should keep this in mind while deciding the limit of liability for coverage. You should take the maximum possible sum insured for the battery as inflation would drive up its costs significantly higher in the future.
If you live in a flood prone area, then you should definitely go for a higher sum insured for the battery. Since the chances of water ingression into your battery is quite high in flood prone areas, the premium rates for such areas will also be significantly more. But you should buy an adequate battery cover in such cases even if the premium costs are higher.
Claims management
Claims handling is one of the areas most affected by the growth of EVs. Assessing damage to high-voltage systems requires specialized knowledge and equipment. Insurers must invest in training claims adjusters and partnering with certified EV repair workshops.
Battery assessment is particularly critical. Insurers must determine whether a battery can be safely repaired, partially replaced, or must be fully replaced with each option carrying significantly different cost implications.
In some cases, the cost of battery replacement alone may exceed the vehicle’s market value, increasing the likelihood of total loss claims. Additionally, salvage and recovery processes are more complex for EVs due to safety concerns related to battery storage and disposal. This increases operational costs and affects claims’ turnaround time.
Conclusion
Across Africa, governments are actively revising development and transport policies to accommodate emerging innovations, particularly electric mobility.
In East Africa, these policy shifts are already evident, Uganda reversed its zero-rated import duty on electric vehicles in mid-2024 and now applies a 25% duty, significantly increasing EV acquisition costs. Kenya has retained VAT exemptions on electric motorcycles, buses, bicycles, and solar batteries under the Finance Act 2025 and Rwanda has gone further by exempting EVs from import duties while announcing a ban on internal combustion engine vehicles. These divergent, yet progressive policy approaches, signal a clear regional transition toward sustainable mobility.
In this context, insurers must be prepared to adapt swiftly and strategically. Electric vehicles are reshaping the insurance landscape in Africa by introducing new risk dynamics, higher repair costs, advanced technologies, and the need for specialized underwriting expertise.
Although EV penetration remains relatively modest compared to developed markets, the rapid pace of adoption in select African countries necessitates immediate action from insurers. Re-evaluating underwriting frameworks, investing in technical capacity, leveraging data analytics, and developing EV-specific insurance products will be critical.
Insurers that proactively understand and integrate EV-related risks into their underwriting and pricing models will not only mitigate emerging exposures but also secure a sustainable competitive advantage.
More importantly, such readiness aligns the insurance sector with broader environmental, economic, and policy-driven sustainability objectives that are shaping the future of mobility across Africa.
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