Best’s Special Report: China’s New Energy Vehicle Growth Transforms the Country’s Motor Insurance Market

As China continues to lead the way globally in producing and selling new energy vehicles (NEV), the trend has spurred a sixfold increase in related insurance premiums for this segment in just the past five years alone, according to a new AM Best report.

NEV premiums now represent 11.5% of China’s total motor insurance business, momentum that AM Best expects to continue as a key element of future market growth. However, the higher claims frequency and repair costs associated with NEVs are posing a challenge for small and medium-sized insurers when it comes to profitability.

According to the report, China is poised to further strengthen its lead in this segment, underpinned by supportive governmental policies, increased consumer demand for sustainable transportation and technology advancements.

“As the NEV insurance business grows, traditional large insurance companies are taking advantage of their scale to expand market share,” said Aaron Li, associate financial analyst, AM Best.

China’s motor insurance market is dominated by three major insurers that together account for about 70% of the market premiums: the People’s Insurance Company of China; China Pacific Property Insurance Co., Ltd.; and Ping An Insurance (Group) Company of China, Ltd. The Big Three posted favourable underwriting profits after the comprehensive motor insurance reforms in 2020, including an aggregate combined ratio on the motor line that is lower than the market average over the past seven years. During that same timeframe, the rest of the market has collectively failed to break even, according to the report. As for NEV insurance, the combined ratio is generally higher compared to traditional motor insurance, which caused more pressure for small and medium-sized insurers to manage profitability.

While the traditional large-size players maintain competitive leverage by taking advantage of their scale, automobile manufacturers are actively entering the insurance landscape via acquiring domestic insurance brokers and setting up insurance companies. This may lead to potential change in the competitive landscape and closer cooperation between the insurers and manufacturers.

To access the full copy of this market segment report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=350228 .

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

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