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<\/p>\nPremiums for policies covering new energy vehicles in China have soared to $13.8 billion\u2014a six-fold jump from the level recorded five years earlier, AM Best said in a special report.<\/p>\n
According to the report, \u201cChina\u2019s New Energy Vehicle Boom Transforms Motor Insurance Market<\/a>,\u201d China leads the way globally in producing and selling new energy vehicles, NEVs, which in turn has stimulated demand for insurance coverage. (Editor\u2019s Note: According to Wikipedia, in China, the term new energy vehicle<\/a> is used for vehicles fully or predominantly powered by electric energy.)<\/p>\n The report describes how China\u2019s push to NEVs has further separated the auto insurance market there, with three major insurers that dominate the market\u2014 the People\u2019s Insurance Co. of China (PICC); China Pacific Property Insurance Co. Ltd.; and Ping An Insurance (Group) Co. of China Ltd. \u2014 increasing market share over recent years, while struggling smaller and mid-sized players have scaled down or exited.<\/p>\n Meanwhile, NEV auto makers are actively entering the insurance space, mainly by acquiring domestic insurance brokers, with one setting up an insurance company. \u201cThis may lead to potential change in the competitive landscape and closer cooperation between the insurers and manufacturers,\u201d AM Best said in statement about the report.<\/p>\n Related articles<\/strong>: Going, Going, Gone: \u2018Disruption\u2019 to Shrink Traditional Premiums for Auto<\/a>; Personal Auto Insurance Could Be Obsolete in 20 Years: Morningstar<\/a>; Bumps Ahead as Disruption Drives Changes in Auto Insurance<\/a><\/p>\n The report states that the actions of smaller insurers to cut back or leave the market followed the implementation of comprehensive motor insurance reforms in 2020 and subsequent underwriting losses. A chart in the report displays underwriting gains for the Big Three for each year from 2017 through 2023 juxtaposed with \u201crest of market\u201d underwriting losses for the same years.<\/p>\n The \u201crest of the market collectively failed to break even in each of the last seven years,\u201d the report says.<\/p>\n AM Best references anecdotal reports from insurers who believe that loss ratios for insured NEVs run 10-20 points higher than standard motor insurance. It\u2019s not just higher repair costs that drive the results, the report suggests, offering these two additional factors as possible causes of higher loss and combined ratios for NEVs:<\/p>\n Again referencing reports from insurers, the AM Best publication notes that reports of accident claims for NEVs may be double that of internal combustion engine vehicles.<\/p>\n The report provides further insights on market growth and the need for catastrophe management of NEV risks not currently captured by vendor cat models\u2014specifically, the vulnerability of NEV lithium-ion batteries to damage from flooding.<\/p>\n According to AM Best, China is already the world\u2019s largest automobile market, and it may \u201cfurther strengthen its lead through government subsidies that advance the NEV market, supportive governmental policies, increased consumer demand for sustainable transportation, and technological advancements.\u201d<\/p>\n In the United States, the fate of government subsidies for EV remain a question as President Trump\u2019s previously stated intentions to curtail government tax credits and other federal support for EVs come up against the wishes of Tesla founder Elon Musk, who will co-lead the Trump administration\u2019s newly created Department of Government Efficiency.<\/p>\n Related article<\/strong>: Mixed Bag: What Trump 2.0 Tariffs, DOGE Activities Mean For Insurers<\/a><\/p>\n Drawing a comparison between China and other developed countries, the AM Best report notes that overall underwriting risk for motor portfolios in China tends to be lower because of much lower limits in third-party liability coverage, the civil law environment, and minimal legal representation.<\/p>\n The report also comments on the potential relative strength of auto makers vs. traditional auto insurers. The AM Best report authors suggest a path forward for auto makers that can design NEV-specific insurance products, offering them through their insurance partners via the automaker-owned intermediaries and gaining knowledge of insurance operations in the process. \u201cFor NEV manufacturers, the industry know-how and insights drawn from their proprietary data on vehicle characteristics and driver behaviors can provide a competitive advantage over traditional insurers,\u201d the report concludes.<\/p>\n In a report published in April last year (\u201cNavigating unknowns: Auto insurance questions in a new mobility era\u201d)<\/a>, consultants from McKinsey & Co. offered similar predictions for the U.S. auto insurance market.<\/p>\n \u201cOEMs might emerge as formidable competitors for insurers,\u201d with data playing a central role in risk selection, claims management and distribution. Insurers \u201cmay need to consider the implications of OEMs potentially treating vehicle data as a competitive asset, affecting data sharing and utilization\u2014and opening up new opportunities for collaboration with traditional insurers,\u201d the McKinsey report said in a section titled, \u201cAre OEMs set to disrupt insurer incumbents?\u201d (Related article: Going, Going, Gone: \u2018Disruption\u2019 to Shrink Traditional Premiums for Auto<\/a>)<\/p>\n This article first was published<\/a> in Insurance Journal\u2019s sister publication, Carrier Management<\/a>.<\/strong><\/p>\n Topics<\/span> AM Best<\/a> China<\/a> <\/p>\n<\/p><\/div>\n Was this article valuable?<\/p>\n<\/p><\/div>\n\n
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