As the annual reports for 2024 from various listed insurance companies are revealed, the state of the new energy vehicle (NEV) insurance market is becoming clearer. The data indicates a continued rise in the scale of NEV insurance premiums for 2024, yet the comprehensive cost ratio remains high, driven by elevated claims rates that are creating significant pressure on insurers.
NEV insurance is currently the fastest-growing segment in the non-life insurance market. Recent commentary from executives including Chen Hui, General Manager of China Pacific Insurance, Yu Ze, Vice President of China United Property Insurance, and Zhu Jie, Deputy General Manager of China Taiping, during the 2024 annual performance briefings highlights the ongoing developments in this sector. Although the NEV insurance market is still operating at a marginal profit, insurers maintain a positive outlook. Zhu Jie stated, “We believe that NEV insurance will continue to be a major source of growth in the auto insurance market, with rapid growth expected to persist. We estimate that by 2025, the premium scale for NEV insurance will reach around 190 billion yuan, with an annual growth rate of over 30%, accounting for approximately 20% of the auto insurance premium scale.”
Despite the rapid growth, the industry faces challenges characterized by the phrase “insuring one vehicle results in a loss on another.” According to disclosed data, China Pacific’s NEV insurance premiums reached 18.317 billion yuan, reflecting a growth of 48.55%, with a comprehensive cost ratio decreasing by 4 percentage points year-on-year. This segment covers 4.6 million vehicle owners, accounting for 17.03% of their business. China United Property Insurance reported a NEV insurance premium of 50.87 billion yuan for 2024, which is an 8.7% increase year-on-year, representing 17.2% of their business, while underwriting 11.5905 million NEVs, a year-on-year increase of 57.3%. Notably, China United has set a target for the comprehensive cost ratio of NEV insurance to remain below 100% by 2025. From 2021 to 2024, China Taiping reported a compound annual growth rate of 61% in NEV insurance customers.
This surge in premium scale is attributed to the rapid development of the NEV market in China. According to the China Association of Automobile Manufacturers, in 2024, the production and sales of NEVs reached 12.888 million and 12.866 million units, respectively, marking a year-on-year growth of 34.4% and 35.5%. The total number of NEVs in operation across the nation has now reached 31.4 million, accounting for 8.9% of the total number of vehicles.
However, the high comprehensive cost ratio reveals the pressure on underwriting profits within the NEV insurance sector. The comprehensive cost ratio is a key metric for insurance companies to assess their operational costs, including expenses related to company operations and claims. A ratio of 100% indicates a break-even point, while a ratio higher than 100% signifies an operational loss. In 2024, the insurance sector in China covered 31.05 million NEVs, generating premium income of 140.9 billion yuan and providing risk coverage of 106 trillion yuan, while incurring losses of 5.7 billion yuan—a trend of continuous losses.
Analysis from the China Actuarial Society and the China Banking and Insurance Information Technology Management Co. indicates that the high degree of intelligence and integration in NEVs leads to elevated repair costs. Localized damage to smart devices and components often necessitates complete replacements, and many NEV manufacturers operate under a repair authorization model, which results in relatively closed repair systems with high costs for parts and labor. Furthermore, the higher claims rate for NEVs compared to traditional vehicles exacerbates costs. China Pacific revealed that the claims rate for NEVs is double that of fuel vehicles. NEVs are increasingly preferred for operational use due to their lower energy costs, and in 2024, the proportion of operational vehicles among NEVs was 10 percentage points higher than that of fuel vehicles, leading to greater usage intensity. Additionally, NEV owners tend to be younger, with 14 percentage points more drivers under the age of 35 compared to fuel vehicle owners, contributing to shorter driving experience and higher accident rates due to the rapid acceleration and quiet operation of NEVs.
The combined impact of these factors has created a situation where insurers report losses while vehicle owners feel premiums are high. Despite these challenges, insurance companies remain optimistic about the NEV insurance market and are striving to reduce claims costs and achieve precise pricing through operational model management and data connectivity with vehicle manufacturers. In an environment where overall growth in non-life insurance is slowing, the rapidly growing NEV insurance market represents a critical battleground.
On January 1, 2024, the National Financial Regulatory Administration, Ministry of Industry and Information Technology, Ministry of Transport, and Ministry of Commerce jointly released guidelines aimed at deepening reforms, strengthening regulation, and promoting high-quality development in NEV insurance, launching a series of measures to optimize the market environment. Yu Ze of China United emphasized, “Our company has a high market share in NEV insurance, strong control over channels, and pricing ability. We have developed deep collaborations with battery manufacturers for repairs. If policies allow for greater flexibility in coefficient adjustments, our profitability in the NEV sector will significantly improve. We look forward to further policy implementation and positive interaction with industry associations to conduct in-depth research on risk reduction management, safe driving, and repair costs.”
Regarding 2025, Yu noted that under normal disaster levels and without major policy changes, the company’s target is to align growth with market rates and achieve a comprehensive cost ratio better than the previous year’s, striving for below 96%, with the NEV insurance comprehensive cost ratio also aimed to be below 100%.
Chen Hui of China Pacific stated during the 2024 annual performance briefing that the business model for NEVs is still in its infancy, with insurance companies continuously exploring this emerging field. He highlighted two key strategies: first, implementing a vertical management model, and second, establishing a centralized claims model. In this process, real-time communication and integration of claims standards, parts pricing, and accident data with vehicle manufacturers using technological methods will help continuously lower claims costs and enhance repair economic efficiency. Chen noted that NEVs are a crucial strategic development direction for the country, and the operational status of NEV manufacturers has significantly improved compared to previous years, as evidenced by a 4 percentage point year-on-year decrease in comprehensive costs for China Pacific.
Zhu Jie emphasized that in underwriting NEVs, China Taiping is focusing on enhancing differentiated pricing capabilities, controlling operational costs, and deepening collaborations with vehicle manufacturers. In recent years, the company’s operational capabilities and profitability in NEV insurance have steadily improved, with the claims rate for insured vehicles decreasing annually—by 8.2% in 2024 and by 15.1% in January and February of 2025 compared to the same period last year.
As automation technology accelerates, significant changes may be on the horizon for the insurance industry. With advancements in artificial intelligence, the Internet of Things, and 5G technology, autonomous driving is entering a stage of deep development. According to the Society of Automotive Engineers (SAE), autonomous driving is classified into six levels from L0 to L5, with L5 representing full automation requiring no human intervention. Level 4 automation can also operate without human control under specified conditions, akin to L5 in limited scenarios. With supportive policies and industry developments, the autonomous vehicle sector in China is rapidly advancing, with major automakers beginning to equip L3 or higher-level autonomous driving features, and some leading companies planning to launch L4 products around 2025.
As human factors diminish in driving scenarios, industry experts suggest that autonomous driving technology could lead to unprecedented transformation in the insurance market. Yu Ze mentioned that the primary risks associated with autonomous driving lie in design and liability, suggesting that automotive liability insurance may eventually replace traditional motor vehicle insurance. Preliminary tests conducted by China United and several domestic brands indicate a slight decrease in claims rates with the use of intelligent driving. However, the main concern lies not with individual risks but with collective risks arising from over-the-air (OTA) updates or system failures. Intelligent driving remains a potential growth area for auto insurance.
China United is actively developing specialized auto insurance products for L3 and higher intelligent connected vehicles to address the new insurance risks and demands arising from future intelligent driving technology upgrades. They are also collaborating with the China Insurance Industry Association and other institutions to establish industry standards for determining liability in accidents involving intelligent connected vehicles. Similarly, China Pacific is proactively preparing for developments in intelligent driving within the NEV insurance market, establishing application laboratories with various automakers to enhance their contributions to the sector.
In addition to traditional insurance companies, recent years have seen automakers entering the insurance market, with significant players emerging. In 2021, Xiaopeng established Tianjin Xiaopeng Commercial Factoring Company; in June 2022, Li Auto acquired Yinjiang Insurance Brokerage to gain an insurance brokerage license; in March 2023, NIO acquired Huiding Insurance Brokerage; and in May 2023, BYD fully owned Yi’an Property Insurance, obtaining an insurance license and operating under a unified compulsory insurance policy nationwide, entering multiple regional markets. BYD’s property insurance division reported 1.351 billion yuan in insurance revenue for the fourth quarter of 2024, primarily generated in the third quarter.
Overall, the NEV insurance market in 2025 presents both opportunities and risks. The competitive landscape features disruptions from new entrants and product innovations driven by new technologies. The evolution of this billion yuan market will require ongoing observation.
