Despite the surge in electric vehicle (EV) sales in China, the insurance market has remained in the red for years. Critics say that because loss ratios appropriate for the vehicles are not being managed properly, structural imbalances across the industry are deepening.
On the 21st (local time), Bloomberg reported that Chinese auto insurers are gradually increasing sales of related products on the back of soaring EV sales. According to the China Association of Actuaries, insurers collected 141 billion yuan (27.5838 trillion won) in EV premiums last year and are projected to reach 500 billion yuan by 2030. That would amount to more than one-third of the overall auto insurance market.
Still, despite the market's growth, the insurance industry has not escaped chronic losses. Last year alone, the industry logged losses of 5.7 billion yuan (about 1.1149 trillion won) just from underwriting EV insurance, marking at least the third straight year in the red. The association of actuaries said the industry is expected to post a loss again this year.
Some say EV characteristics have not been properly reflected in pricing. According to Bloomberg, EVs have a claim frequency more than twice that of internal combustion engine cars. In particular, because batteries are mounted under the vehicle, the likelihood of battery damage is higher when speed control fails. Battery structures are complex and the share of specialized parts is high, putting repair expense on the high side.
The industry charges EVs premiums 20% to 100% higher than for conventional cars, but that has not translated into profitability. Last year, the combined ratio for EV insurance in China was 107%, and a combined ratio above 100% means expenditure exceeds revenue.
In 2023, the EV insurance combined ratio was 109%, and smaller insurers in particular have struggled to generate revenue even from traditional internal combustion engine policies. According to global insurer Aon, there are more than 60 auto insurers in China, while the top three corporations hold a share of more than 65%.
Some insurers have begun to devise their own measures. For example, Ping An Property & Casualty, an affiliate of Ping An Group, China's largest insurer, developed technology to distinguish ride-hailing drivers, who carry passengers and generate revenue, from ordinary drivers and reflected that in pricing. By working with automakers to segment accident scenarios, it posted a profit from EV insurance last year and in the first half of this year.
The government is also lending support so EV sales do not falter. In January, Chinese authorities launched the Easy2Insure platform, which connects consumers and insurers so EV owners can directly compare a variety of insurance products. So far, the platform has facilitated as many as 500,000 EV insurance contracts, with total coverage reaching 494.8 billion yuan.
Qian Wenwen, an S&P researcher, said, "EV insurance is still in a trial-and-error phase," and noted, "It will likely take at least three years to secure profitability."