As the annual reports for 2024 from various listed insurance companies are released, the development of new energy vehicle insurance (NEV insurance) is becoming clearer. According to the disclosed data, the insurance scale for NEV insurance continues to rise in 2024, yet the comprehensive cost ratio remains high, placing significant pressure on insurance companies due to elevated accident rates.
NEV insurance is currently the fastest-growing area in property and casualty insurance. Executives, including Chen Hui, General Manager of China Pacific Insurance, Yu Ze, Vice President of China People’s Insurance Group, and Zhu Jie, Vice General Manager of China Taiping, addressed issues surrounding NEV insurance at recent performance briefings. Despite the market currently operating at thin profit margins, insurance companies maintain a positive outlook on the NEV insurance sector. Zhu Jie stated, “We believe NEV insurance will be a major source of growth for the vehicle insurance market in the future, maintaining rapid growth. We tentatively estimate that by 2025, the premium scale for NEV insurance will reach approximately 190 billion RMB, with a growth rate exceeding 30%, thereby increasing its share of total vehicle insurance premiums to around 20%.”
However, the reality is that many companies find themselves in a challenging position, often experiencing a situation where “for every vehicle insured, another incurs a loss.” According to the data, China Pacific’s NEV insurance premiums reached 18.317 billion RMB, representing a growth of 48.55%. The comprehensive cost ratio dropped by 4 percentage points year-on-year, with the premium accounting for 17.03%, covering 4.6 million vehicle owners. On the other hand, China People’s Insurance reported NEV insurance premiums of 50.87 billion RMB in 2024, up 8.7% year-on-year, with a premium share of 17.2% and coverage of 11.5905 million NEVs, marking a 57.3% increase.
It is noteworthy that China People’s Insurance has set a goal for its comprehensive cost ratio for NEV insurance to remain below 100% by 2025, while China Taiping reported a compound annual growth rate of 61% in NEV insurance customers from 2021 to 2024. This rapid growth in premiums is attributed to the swift development of the NEV market in China. The China Association of Automobile Manufacturers indicates that in 2024, the production and sales of new energy vehicles reached 12.888 million and 12.866 million, respectively, marking year-on-year increases of 34.4% and 35.5%. The total number of NEVs in use across the country has now reached 31.4 million, which accounts for 8.9% of the total number of vehicles.
However, an examination of the comprehensive cost ratios reveals that the underwriting profits for NEV insurance are under pressure. The comprehensive cost ratio is a critical metric used by insurance companies to assess operational costs, encompassing all expenses from operations to claims. A comprehensive cost ratio of 100% indicates a break-even point, with no underwriting profit or loss. Conversely, a ratio exceeding 100% indicates a challenging situation for the business, where each insured vehicle results in losses. Industry data shows that in 2024, the insurance sector covered 31.05 million NEVs, generating 140.9 billion RMB in premium income, but also facing 5.7 billion RMB in underwriting losses, marking a continued trend of losses.
According to analyses from the China Actuarial Society and the China Banking and Insurance Information Technology Management Co., Ltd., the high degree of intelligence and integration in NEVs leads to elevated repair costs. Damages to intelligent devices and components often require complete replacements, and many NEV manufacturers and battery companies operate under a repair authorization model, resulting in relatively closed service systems and high prices for parts and labor. Additionally, the accident rates for NEVs are higher than those for traditional vehicles, further inflating insurance costs. Last year, China Pacific indicated that the accident rate for NEVs was double that of gasoline vehicles. NEVs, favored for their low operational energy costs, have a higher proportion of operational vehicles compared to traditional vehicles, with operating vehicles representing a 10 percentage point advantage. Furthermore, NEV owners tend to be younger, with those under 35 years old comprising a 14 percentage point higher share than their gasoline counterparts, resulting in less driving experience. The quick acceleration and low noise levels of NEVs make accidents less detectable, increasing the likelihood of claims. These factors have contributed to a market where “insurance companies are losing money, while vehicle owners are feeling the pinch.”
Despite these challenges, insurance companies remain optimistic about the NEV insurance market, striving to reduce claims costs and improve pricing accuracy through various operational management strategies and data connectivity with manufacturers. In light of the overall slowdown in property and casualty business growth, the fast-growing NEV insurance sector is viewed as a crucial battleground.
In January of this year, the National Financial Regulatory Administration, along with the Ministry of Industry and Information Technology, the Ministry of Transport, and the Ministry of Commerce, jointly issued guidelines aimed at deepening reforms and strengthening regulation to promote high-quality development in NEV insurance. These initiatives are intended to continuously optimize the market environment. Yu Ze from China People’s Insurance stated, “Our company holds a significant market share in NEVs, with strong channel control and pricing capabilities. We have established deep collaborations with repair and battery manufacturers, and if policy adjustments can further expand the range of coefficients, the profitability of our NEV operations will significantly improve. We look forward to enhanced policy implementations and productive interactions with industry associations on aspects such as risk mitigation, safe driving, and repair costs.”
Looking towards 2025, Yu Ze indicated that under normal disaster levels and without major policy changes, the company’s goal is to match market growth rates in vehicle insurance, with a comprehensive cost ratio lower than that of the previous year, ideally achieving below 96%, while aiming for a comprehensive cost ratio of 100% or less for NEV insurance. Chen Hui from China Pacific Insurance noted during the 2024 performance briefing that the operational model for NEVs is still relatively new, and various insurance providers are actively exploring this emerging field. He shared two key strategies: first, establishing a vertical management model, and second, employing a centralized claims process. This approach will involve real-time data sharing with manufacturers regarding claims standards, parts pricing, and accident statistics to effectively reduce claims costs and enhance repair economics.
Furthermore, Zhu Jie emphasized the importance of strengthening differentiated pricing capabilities, controlling operational costs, and deepening collaborations with manufacturers in the underwriting of NEVs. The company has seen steady improvements in its NEV insurance operations, with the claims rate declining year-on-year. In 2024, the claims rate fell by 8.2%, and for January and February 2025, it dropped by 15.1%.
Another interesting development is the rapid advancement of autonomous driving technology, propelled by innovations in artificial intelligence, the Internet of Things, and 5G. According to the SAE’s classification, autonomous vehicles are categorized from L0 to L5, based on the level of human intervention required. Full automation is achieved at L5, where no human intervention is needed in any scenario. Furthermore, L4 allows for automated driving within specified conditions, making it somewhat similar to L5 in limited contexts. The NEV sector is witnessing rapid growth in autonomous driving capabilities, with major manufacturers planning to introduce L3 and higher levels of automation by around 2025.
With the reduction of human factors in driving scenarios, the industry anticipates that autonomous driving technology could lead to unprecedented changes in the insurance landscape. Yu Ze noted, “The risks associated with autonomous driving mainly relate to design and liability, and in the future, automobile liability insurance may replace traditional vehicle insurance.” Some collaborations between People’s Insurance and domestic brands have shown a slight decrease in accident rates with the use of intelligent driving. However, the primary concern lies not in individual risks, but in collective risks arising from OTA upgrades or system failures. Autonomous driving remains a potential growth market for vehicle insurance.
People’s Insurance is currently developing dedicated insurance products for L3 and above intelligent connected vehicles, proactively preparing for the new insurance risks and demands arising from advancements in driving technology. In collaboration with the China Insurance Industry Association, they are establishing technical standards for determining liability in traffic accidents involving intelligent connected vehicles. Similarly, China Pacific has stated its commitment to preparing for advances in intelligent driving, with ongoing research into market demands for NEV insurance products and protections. They have established relevant application laboratories with multiple vehicle manufacturers to bolster their contributions to the development of NEVs.
Additionally, the NEV insurance market has seen traditional insurance companies facing competition from vehicle manufacturers venturing into the insurance sector. Notable examples include Xpeng, which established a financing company in 2021; Li Auto, which acquired an insurance brokerage in June 2022; and NIO, which acquired an insurance brokerage in March 2023. In May 2023, BYD gained full ownership of an insurance company and obtained the necessary licenses to operate across several regions. By the fourth quarter of 2024, BYD’s insurance business income reached 1.351 billion RMB, with the majority generated in the third quarter.
In summary, the NEV insurance market in 2025 presents both opportunities and challenges. The industry faces competition from new entrants and innovations driven by technology. Observing how this billion-yuan market evolves will require ongoing attention.
