Tesla Semi completes test: How will electric trucks impact insurance?

Tesla first announced the fully-electric Semi back in 2017, promising ‘The Future of Trucking’. It was supposed to be in production in 2019, but the program suffered repeated delays, including pandemic-driven supply chain issues.

On the Tesla website, details of the Semi are sparse. Apparently, the truck can accelerate from 0-100km/h in 25 seconds, fully loaded, and maintain highway-level speeds even up steep grades. It can also travel up to 800km on a single charge (allegedly proven in the successful test run), using less than 1.25kWh per kilometre of energy consumption.

Tesla team just completed a 500 mile drive with a Tesla Semi weighing in at 81,000 lbs!

— Elon Musk (@elonmusk) November 27, 2022

According to the Tesla website, the Semi truck also comes with “active safety features that pair with advanced motor and brake controls to deliver traction and stability in all conditions”.

The future of trucking

Pushing the noise and speculation around this Tesla product release aside, I’m excited about the “Future of Trucking” promise sold with the Semi because – as any commercial transportation insurer or broker will know – the industry is in desperate need of change.

The commercial transportation sector has long been on a bumpy road. In the years leading up to the COVID-19 pandemic, the industry was plagued with challenges around distracted driving, a general increase in auto claim costs due to new technology, and a rise in catastrophic liability claims driven by social inflation and nuclear jury verdicts (particularly in the United States, but the trends are true in other major trucking economies).

Today, the industry can add a few more challenges to the list, such as inflation and soaring gas prices, the ever-growing driver shortage, and supply chain delays, which are adding pressure to delivery schedules, and increasing the cost and time it takes to complete truck repairs.

Facing such challenges, commercial transportation insurance loss ratios have deteriorated, and as a result, most insurers have raised rates for both primary and excess/umbrella coverage, while also limiting capacity and applying strict risk selection and underwriting criteria … so, you can add insurance woes on top of that list above.

Is Tesla’s Semi the answer to all of those industry problems? Maybe not, but electric trucking, in general, could mitigate some of the core challenges … but not without introducing some new exposures.

Advanced in-cab safety technology – the likes of which Tesla claims to have included in the Semi – could help to reduce collisions, potentially even those tied to distracted driving or driver fatigue, which should (in theory) reduce auto insurance claims costs and eventually premiums.

For years, transportation insurers have tried to accentuate the importance of technologies like dash-cams and telematics to promote safer driving, but it has been a struggle getting truckers to engage. If these tools are already built into trucks, there should be an automatic positive feedback loop.

Having electric trucks with the ability to maintain highway-level speeds, even up steep grades, should also help to reduce crash frequency, as trucks would be able to share the road better with other vehicles.

But while frequency might go down, it remains to be seen what will happen to crash severity, especially if these electric trucks are far more expensive to purchase and repair. ENGS Commercial Finance Co. reported that the cost of buying an all-electric semi-truck is between 10% and 80% more than a comparable diesel truck, before rebates. This could result in higher loss severity in the event of an accident.

Energy challenges

Innovation always comes with its challenges. I personally think electric cars and trucks are amazing, and they’re an important step in the global race to net-zero carbon emissions – although they’re too expensive (at present) for the average consumer.

But nothing is ever 100% awesome. A Bloomberg article earlier this month, entitled ‘Electric Truck Stops Will Need as Much Power as a Small Town,’ cited a new study of highway charging requirements conducted by National Grid Plc. Researchers found that by 2030, electrifying a typical highway gas station will require as much power as a professional sports stadium—and that’s mostly just for electric cars. The projected power needs for a big truck stop are expected to equal that of a small town by 2035.

That’s a very dramatic increase in demand for power, which utility providers may struggle to match. The success and efficiency of electric transportation is heavily dependent upon energy infrastructure and the capacity of electrical grids. Some places, such as California – a very pro-electric vehicle state – are already struggling.

Californian officials have warned that extreme heat and other climate change impacts will threaten the reliability of the state’s electrical grid over the next five years, potentially causing electricity blackouts due to power supply shortages. Well, what happens when an electric truck carrying essential goods can’t reach its destination in time because it is unable to recharge?

In some countries, like the US, Canada, and Australia, the distances that truckers travel are immense. The infrastructure required to maintain electric fleets across areas of such enormous scale is not there yet – and based on the roll-out of electric vehicles for personal use – it will take some time for the necessary developments to take place.

I consider the Tesla Semi release as an exciting development in the trucking industry. It’s certainly positive for commercial transportation insurers and brokers, but, like all innovation, the rise of electric trucking will inevitably come with new exposures and insurance challenges.

Will electric trucks have a positive impact on the commercial transportation insurance market? Share your thoughts in the comments below.