With a big wave of electric vehicles starting to arrive in the U.S. market, companies that offer F&I products such as extended-service contracts are rolling out products marketed specifically for EVs.
“What made us pivot to EV standalone products are the impending changes we are seeing the industry take globally,” says Martin Jenns, senior vice president-global transformation at Assurant Global Automotive, a division of Assurant Inc.
“It made sense for us to re-examine what our consumer customers and dealer customers were looking for,” Jenns (pictured, below left) says in a phone interview. New York-based Assurant Inc. offers extended-service contracts and similar “protection” products across several categories of consumer products, not just autos but also appliances and mobile devices.
New Wave & Brand Appeal
According to LMC Automotive, by next year there will be 81 electric vehicle models available in the U.S. market, four times as many as in 2020. By 2025, LMC expects 131 EV models on the market, accounting for about 8.3% of the total light-vehicle market, up from about 1.6% share in 2020. That’s battery-powered EVs alone, not counting hybrids.
“With the amount of technology being installed on BEVs, certainly not limited to the powertrain itself, but changes with the human interface, advanced driver assistance systems and other technologies, extended-service contracts could certainly provide a level of comfort and security for longer-term ownership or in purchasing pre-owned models,” says Kevin Riddell, LMC Automotive senior manager.
“This could be especially helpful as some of the coming products will be built by start-up manufacturers with no established history of quality and durable products in the marketplace to rest on,” Riddell says in an email.
Under the brand Assurant EV One, Assurant Global Automotive is introducing to the U.S. market F&I products branded specifically for electrified vehicles, that is, EVs and gasoline-electric hybrids. Jenns says Assurant piloted the new EV and hybrid products first in the U.K.
In the U.S., Assurant already offers protection products for EVs and hybrids through its subsidiary, TWG Holdings, better known as The Warranty Group, which Assurant acquired in 2018 for $2.5 billion.
But Jenns says Assurant believes customers would find products more appealing if they were specifically tailored to, and branded for, EVs and hybrids, instead of the current setup, where buyers check off a box on a generic extended-service contract to indicate they’re purchasing an EV or hybrid.
Buyer Appetite & Risk Assessment
A couple of Assurant’s competitors agree. In separate interviews, they say they’re adding or refining F&I products designed and marketed specifically for electrified vehicles, too.
With the exception of the battery, coverage for an EV or a hybrid is pretty similar to coverage for a vehicle with only an internal-combustion engine, says Jason Garner, senior vice president-strategic product development for AUL Corp. of Napa, CA. “You can have the same exact coverage, but the EV driver likes to believe they are slightly different,” he says in a phone interview.
Elliot Schor, assistant vice president-sales operations for JM&A Group of Deerfield Beach, FL, agrees EV buyers would be more prone to buy service contracts. “The technology is still new,” he says. “The theory is, people are going to be more inclined to protect those vehicles.”
JM&A and AUL both already offer F&I products for hybrids and EVs.
Obviously, the battery is the biggest difference between an EV or hybrid and a gasoline-powered vehicle. It’s also a given that the battery represents a greater percentage of the vehicle’s entire value than an ICE engine-only.
Administrators designing extended-service contracts for hybrids, and especially for EVs, assume the frequency of battery failure is expected to be statistically low, but the loss severity if one does fail would be high, Schor says.
The industry has lots of data on hybrids to assess that risk, but much less data on EVs, he says. “We have early data, but it’s very statistically insignificant. We have tremendous experience with hybrids. There, we do have data that’s significant,” Schor says.
JM&A is part of JM Family Enterprises, which also owns Southeast Toyota Distributors, an independent distributor for five states (North Carolina, South Carolina, Georgia, Alabama, Florida). Southeast Toyota accounts for a substantial volume of Toyota hybrids, especially the Toyota Prius.
In Assurant’s case, Jenns says the company is gathering its own data on EV performance from a fleet of more than 4,000 vehicles being operated by the London Electric Vehicle Co., which makes a BEV version of the famous London taxi, and electric vans. Assurant in January announced a partnership with LEVC to provide warranty coverage.
JM&A’s Schor says his company has a partnership with Polestar, Volvo’s dedicated EV brand, which should produce more data on EVs. But he says until EVs become numerous enough to provide more, and more accessible, real-world data, administrators are taking a calculated risk on providing EV coverage.