It’s hard to earn hundreds of billions in premiums; how can new energy vehicle insurance overcome "growing pains"?

Regarded as a "blue ocean" in property insurance, the new energy vehicle insurance business has yet to shake off its "growing pains."

The China Actuarial Society disclosed that in 2024, the premium income from new energy vehicle insurance in China will reach 140.9 billion yuan, covering 31.05 million new energy vehicles;

Additionally, data from industry exchanges indicate that in that year, the premium and settled claims for new energy commercial vehicle insurance increased by 52.93% and 63.47%, respectively, surpassing the overall growth rate of vehicle insurance (including commercial insurance and compulsory insurance) by 48 and 54 percentage points.

The sustained growth in demand has created a vast potential market, but under the constraints of maintenance costs and driving habits, traditional insurance companies are struggling to share this "new cake."

From the perspectives of profit margins and service levels, the overall underwriting of new energy vehicle insurance in the insurance industry is still in a state of loss; vehicle owners have long complained on various complaint platforms about soaring premiums, delayed claims, and the refusal to insure certain models.

In this awkward situation, the latest "Guiding Opinions on Deepening Reform, Strengthening Supervision, and Promoting High-Quality Development of New Energy Vehicle Insurance" (hereinafter referred to as the "Guiding Opinions") released by the Financial Regulatory Bureau and other departments has proposed to reasonably reduce maintenance costs and optimize the scope of autonomous pricing.

In the long term, reducing maintenance costs still requires the joint efforts of automakers and upstream and downstream suppliers in the industry chain;

Moreover, the failure of traditional fuel vehicle actuarial models and the constraints faced by insurance companies in maintenance also mean that automakers, who have been envious of the vehicle insurance market for years, finally have the qualifications to compete with insurance companies.

Difficult to Profit

The Passenger Car Association disclosed that in 2024, domestic retail sales of new energy vehicles will reach 10.899 million units, with a year-on-year growth rate of 40.7%, which is 5 percentage points higher than the same period last year;

According to its estimates, in 2025, with the "old-for-new" policy maintaining the same subsidy level as in 2024, domestic vehicle retail sales are expected to exceed 23.4 million units, and the penetration rate of new energy passenger vehicles is expected to rise to 57%.

Under the growth expectations, insurance companies, automakers, upstream and downstream suppliers, and insurtech companies are all actively laying out related markets, viewing new energy vehicle insurance as a "must-fight territory."

However, under the backdrop of high maintenance costs and significant differences in driving habits, the premiums for new energy vehicle insurance remain high.

On one hand, the high degree of intelligence and integration of new energy vehicles, along with the fact that most new energy vehicle manufacturers and power battery companies adopt a maintenance authorization model with low socialization, collectively raise maintenance costs;

On the other hand, factors such as faster acceleration and lower noise lead to an accident rate that is more than 10 percentage points higher than that of fuel vehicles, putting pressure on insurance payouts.

The inability to reduce costs has also led both traditional insurance companies and new entrants to struggle to escape complaints from vehicle owners.

"I spent all the money saved on fuel for insurance," said a Nio owner. "I had no accidents or violations all year, with a total mileage of 11,000, yet my premium increased by 1,200 yuan."

Some new energy vehicle owners have even complained on social media about insurance companies refusing to insure them, stating, "With a total mileage of 33,000, no accidents, and one minor violation, I have already been classified as a high-risk customer."

In the face of widespread complaints about high costs, a large number of "motor vehicle safety mutual companies" not protected by the Insurance Law have emerged, misleading vehicle owners into purchasing "insurance-like" services with low fees and deceptively named entities such as "Taibao Automobile Service Company" and "PICC Automobile Service Hebei Co., Ltd." In just 2024, there have already been over a hundred cases of "car insurance coordination misguidance" reported on the judicial documents website.

This reflects the helplessness of new energy vehicle owners regarding high premiums.

On the flip side, insurance companies, which seem to never lose money, are also in an awkward position in the new energy vehicle insurance business, facing the dilemma of "losing money but not gaining any publicity."

According to data from the Financial Regulatory Bureau in 2023, the comprehensive cost ratio of the entire industry for new energy vehicle insurance reached 109%, with a payout ratio of 84%, which is 10 percentage points higher than that of fuel vehicles;

In the first half of 2024, "the number one in property insurance," PICC Group disclosed that the comprehensive cost ratio for new energy household vehicle insurance dropped to below 100% in the second half of 2023 to the first half of 2024, but the comprehensive cost ratio is still higher than that of fuel vehicles;

Zhang Lei, chairman of CheChe Technology, predicts that the new energy vehicle insurance industry will enter a profitable era overall, but it will still take about three years.

"If insurance companies are not making money, marketers are earning even less." A business marketer from an insurance agency revealed, "The profit margin for new energy vehicle insurance is very low now, it's difficult to insure, and the products are not good; we find it hard to buy them ourselves."

In response to the current predicament, the "Guiding Opinions" have proposed 21 measures, including unifying the repair and compensation standards for new energy vehicles, exploring the establishment of a risk grading system for insurance models, and steadily optimizing the floating range of self-pricing coefficients.

Previously, the "Car Insurance Easy to Insure" platform established by the Shanghai Insurance Exchange went live on January 25, with the first batch of 10 large and medium-sized property insurance companies already connected.

It is reported that this platform provides an online convenient insurance window for high payout risk new energy vehicles, allowing new energy vehicle owners to link to insurance companies for insurance, and insurance companies cannot refuse coverage.

"Promised Land"

Despite the current difficulties, major insurance companies still view the new energy vehicle insurance business as the "promised land" of the future.

Especially with XPeng, Li Auto, Nio, and BYD successively entering the car insurance market, the "big three" in property insurance (PICC Property and Casualty, Ping An Property and Casualty, CPIC Property and Casualty) are also frequently making moves, cooperating with upstream and downstream players in the new energy vehicle sector through various forms such as equity participation.

Among them, PICC has signed a strategic cooperation framework agreement with CATL;

CPIC has established a development center for new energy vehicle insurance and has invested in IM Motors in 2024;

Ping An, through its subsidiary Autohome, provides traditional services including media and leads to new energy vehicle manufacturers, and its energy space station has laid out in 20 cities nationwide.

Due to the structural differences between new energy vehicles and fuel vehicles, most data from traditional car insurance business becomes ineffective in the new energy vehicle insurance field, making it impossible to talk about the long-accumulated "first-mover advantage."

Yu Ze, president of PICC Property and Casualty, pointed out that the biggest difference between new energy vehicles and fuel vehicles lies in the significant risk differences between different models, and as time goes on, these differences may become even larger.

"There are many new energy vehicle brands, and they are still in a period of rapid development." Yu Ze stated, "Judgments on model risk trends still require a long accumulation of time."

The continuous influx of outsiders adds a touch of tension between car manufacturers and insurance companies that are "stepping into the same river."

The solvency report disclosed that BYD Property and Casualty, which just received approval for its car insurance business in May 2024, has already achieved an insurance business income of 546 million yuan in the first three quarters; In the third quarter, the premium of 478 million yuan has surpassed the annual performance of many small property insurance companies.

In October of the same year, Beijing FaFa Tianxing Property Insurance was approved for establishment, and Xiaomi thus obtained its second property insurance license after BYD, becoming a new "catfish" in the industry.

Although leading insurance companies like PICC have publicly welcomed car manufacturers to enter the market, claiming that they still possess a competitive advantage; many industry insiders have pointed out that the disruption of traditional sales and claims models by new energy vehicles may impact traditional insurance companies.

For example, in the future, 4S shops and repair factories may become the mainstream for claims, and car manufacturers may integrate sales, maintenance, and replacement, forming close ties with car owners;

Based on the real-time driving behavior data accumulated by intelligent driving systems, it can directly influence auto insurance actuarial calculations, potentially achieving more competitive products or pricing compared to traditional car manufacturers.

However, in this competition between "new and old forces," traditional insurance companies have long lost their retreat.

For leading insurance companies with significant market share, the new energy vehicle insurance market is not just about incremental growth, but also about existing stock.

As the number of fuel vehicles declines, traditional auto insurance business will continue to shrink; the potential benefits that new entrants can leverage in the future are enormous, and insurance companies find themselves in a situation where they must row against the current—if they do not advance, they will retreat.

This also explains why, despite the overall losses in new energy vehicle insurance, major insurance companies continue to increase their investments.

"Catfish" is not easy either

The car manufacturers that have entered the market to "stir things up" are not having an easy time.

On one hand, companies like XPeng and Nio, which have only obtained brokerage licenses, do not have insurance pricing authority, which significantly diminishes the effectiveness compared to having a true property insurance license;

On the other hand, BYD and Xiaomi, which have obtained insurance licenses, also face the technical challenges of fully establishing an insurance company.

For example, Tesla, which entered the insurance field ahead of others in the global market, is facing criticism for high cost burdens and inefficient services.

In the first three quarters of 2023, Tesla's insurance subsidiary, Tesla Property & Casualty, had a comprehensive cost ratio as high as 146% in Texas, where it first launched its business;

According to data cited by Reuters, in early 2022, Tesla Insurance insured over 50,000 vehicles in California but only had a little over a dozen claims adjusters, and may lack experience in handling personal injury cases, making it prone to complaints.

Warren Buffett once stated, "I have no doubt about the value of data, but the success rate of car companies entering the insurance industry may be as high as that of insurance companies entering the automotive industry."

The difficulties faced by these car manufacturers after entering auto insurance have already appeared in BYD.

On the Black Cat Complaint platform, multiple BYD car owners have reported issues such as being unable to place orders with BYD Property Insurance, service delays, and untimely customer service feedback.

"I purchased BYD insurance through official channels, met all conditions but was unable to successfully place an order," one car owner stated. "Customer service repeatedly responded with 'feedback in process' and 'will reply later,' and my vehicle has entered an 'uninsured' status due to not being able to purchase insurance on time, which not only violates traffic regulations but also makes me extremely anxious about daily driving safety."

Several other car owners also indicated that after inquiring about prices from BYD Property Insurance, the customer service response time exceeded 30 days In addition to the inquiry process, there have also been delays in the claims process.

"A collision with BYD, and the car has been repaired for over a week, but because BYD's insurance hasn't paid out, I can't drive the car away," said one car owner. "I'm in a hurry to drive, so I can only pay a deposit to the 4S shop myself."

Various signs indicate that quickly building a service network and claims team in a short period remains a challenge for BYD, which is new to the auto insurance market;

However, for the insurance industry, which directly interacts with customers, the claims experience is precisely one of the most important competitive advantages.

Therefore, whether the "catfish" can stand out in the new energy market in the future may still depend on their ability to address service shortcomings