Government Support and Corporate Solutions to Address New Energy Vehicle Insurance Challenges
The government has finally taken action to tackle the issues of high insurance premiums and difficult coverage for new energy vehicles. Recently, many new energy vehicle owners have joyfully shared on social media that they have noticed a decrease in their insurance premiums during the renewal process this year.
On January 25, the head of the National Financial Regulatory Administration, Li Yunze, announced the launch of the “Easy Car Insurance” platform, aimed at addressing the challenges faced by new energy vehicle owners. This platform endeavors to ensure that all willing customers can obtain insurance coverage, eliminating the risk of insurance companies denying coverage.
The “Easy Car Insurance” platform offers an online portal for purchasing insurance specifically for new energy vehicles, preventing insurance companies from refusing to provide coverage. Individual clients can self-insure through WeChat or Alipay, while corporate clients can register their insurance needs online, after which they will receive offline underwriting services from insurance companies.
Developed by the Shanghai Insurance Exchange, the platform serves as a convenient online insurance window for new energy vehicles, particularly those with high liability risks. Initially, ten major insurance companies joined the platform, and after a month, an additional twenty-two insurance companies were onboarded. According to data from the China Insurance Industry Association, by February 25, the platform had accumulated 185,000 registered users. The first ten insurance companies have underwritten 114,000 new energy vehicles through the platform, providing a total insurance coverage of 94.49 billion yuan, with a single-day peak of over 10,000 policies.
The Benefits of “Easy Car Insurance” for Vehicle Owners
Fang Jie, a car owner from Hefei, shared his experience as a beneficiary of the “Easy Car Insurance” platform. In 2022, influenced by friends, he purchased a Xpeng P7 as his first car, with a price tag close to 300,000 yuan and an initial insurance premium of 6,500 yuan. However, he soon realized that securing insurance for his vehicle would be a struggle. In his first year as a new driver, he was involved in two accidents, leading to a staggering increase in his second-year insurance quotes, ranging from 12,000 to 13,000 yuan, with some companies quoting over 15,000 yuan.
After comparing rates, he chose to renew with his original insurer, albeit at nearly 10,000 yuan. The high premiums for new energy vehicles came as a surprise to him, as he expected such costs only for vehicles priced over 500,000 yuan. After two more accidents in his second year, his quotes skyrocketed again to 18,000-19,000 yuan, pushing him to renew with his original insurer yet again, this time with a 3,000 yuan increase from the previous year.
Despite driving cautiously in his third year, he was shocked to find it difficult to obtain quotes during the renewal period, which was a stark contrast to previous years when multiple insurers would reach out to him. This year, however, the only contact he received was from his previous insurer’s agent, who warned him of potential difficulties in obtaining coverage if he did not renew soon. Unfortunately, as the renewal deadline approached, he found himself without any quotes due to his accident history, despite having no incidents in the past year.
Eventually, a representative from his previous insurance company suggested he visit a physical branch to explore options. Upon arriving, he learned that only 15 appointments were available each day. While waiting, he discovered details about the “Easy Car Insurance” platform and, after inputting his information, received a quote of just over 8,000 yuan. When it was his turn at the branch, the staff quoted him 16,000 yuan, prompting him to cancel the in-person transaction and successfully complete his renewal online through the platform, saving him half the cost.
Addressing the Underlying Issues of High Premiums and Complex Insurance Processes
For a long time, high premiums and complicated insurance processes have posed significant hurdles to the growth of new energy vehicles. The elevated costs have left many consumers hesitant when considering a purchase. Compared to traditional gasoline vehicles, new energy vehicles often have higher component costs and maintenance requirements, along with expensive battery replacements, which make insurers cautious in determining premiums. It is no surprise that some consumers feel that the savings from using new energy vehicles are simply offset by their insurance costs.
Moreover, the cumbersome insurance application process has cast a pall over the promotion of new energy vehicles. Due to the rapid technological advancements and niche markets for some electric models, insurers often struggle to keep their vehicle databases updated, leading to mismatched information and requiring customers to invest significant time coordinating with insurance companies and regulatory bodies. Additionally, the insurance terms for new energy vehicles can be ambiguous, leading to disputes between owners and insurers regarding claims related to unique risks such as battery fires or electronic system failures.
So, how does the “Easy Car Insurance” platform achieve its goal of ensuring that all willing customers can obtain coverage? Li Xin, an insurance business manager from a major automotive dealership, explained that most insurance operations utilize an agency model, which incurs agent commissions. By joining the “Easy Car Insurance” platform, insurance companies essentially adopt a direct sales model, reducing the comprehensive cost rate by approximately 10%. However, he noted that this reduction is still insufficient to cover the high underwriting costs associated with new energy vehicles.
Currently, the comprehensive cost rate for new energy vehicles can reach as high as 130% to 150%, deterring many insurers from taking on this “hot potato.” The platform’s ability to ensure coverage hinges not only on the desire for profitability but also on the social responsibility that insurance companies bear.
Potential for Profitability in New Energy Vehicle Insurance in the Coming Years
In fact, due to the continuous rise in premiums over the past few years, Fang Jie has faced criticism from his family regarding his choice of a new energy vehicle. However, the “Easy Car Insurance” platform has restored his confidence in purchasing such vehicles. He noted that the recent substantial trade-in subsidies in Hefei have encouraged him to consider upgrading to a new car, and he recently placed an order for a new vehicle.
Li Xin believes that the “Easy Car Insurance” platform plays a crucial role in addressing consumer pain points within the insurance industry, facilitating the establishment of a shared risk mechanism among insurers for high-liability new energy vehicle coverage. This collaborative approach helps to distribute risk across multiple insurers rather than placing it solely on one company, thereby enhancing the overall capacity of the insurance industry to cover new energy vehicle insurance.
However, it is worth noting that users have still reported challenges in obtaining insurance through the platform, and its effectiveness in resolving the issues of high costs and difficulties remains to be seen. Liao Jiangguang, vice chairman and president of the Beijing Insurance Service Center, acknowledged the significance of the “Easy Car Insurance” platform but also pointed out that it cannot fully resolve the high claims rate associated with new energy vehicles. The increasing number of new energy vehicle users, including many first-time buyers and individuals unfamiliar with automotive technology, alongside rapid technological advancements, contributes to a higher accident rate.
Moreover, new energy vehicles are highly integrated, often featuring around 35 sensors, which result in repair costs that can be twice as high as those for gasoline vehicles, leading to elevated claims rates. However, from a long-term perspective, as new energy vehicles become more widely adopted and repair costs gradually decrease, it is anticipated that insurance companies will better understand the risk characteristics associated with these vehicles within three to five years. This improved understanding will enhance their capacity to manage risks, potentially leading to profitability in the majority of new energy vehicle insurance business. At that point, insurance companies may actively compete for customers rather than waiting for clients to seek them out, rendering the “Easy Car Insurance” platform less crucial for most private vehicle owners.
