Why New Energy Vehicle Insurance Is Seen as Expensive by Owners, But Unprofitable by Insurers? (AI Translation)
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文｜财新周刊 吴雨俭
By Caixin Weekly's Wu Yujian
2024年3月28日，小米首款汽车SU7正式上市发售，并在新能源车市场中引发一轮高潮，但其保费价格也受到广泛关注。
On March 28, 2024, Xiaomi's first car, the SU7, officially went on sale, sparking a surge in the new energy vehicle market. However, its insurance premium prices also attracted widespread attention.
有网友指出，小米SU7的保险费用和价格50多万元燃油车的保险费用接近。目前，共有人保财险、平安产险、太保产险、阳光财险四大财险公司为小米车主提供保险和理赔服务。有自媒体统计的保费数据显示，个人购买定价为21.59万元的SU7首年保费在7000—7400元，而定价在29.99万元的SU7 Max首年保费最高可达到9900多元。
Some netizens have pointed out that the insurance costs for the Xiaomi SU7 are close to those of a fuel vehicle priced over 500,000 yuan. Currently, four major property insurance companies—PICC Property and Casualty, Ping An Property Insurance, CPIC Property Insurance, and Sunshine Property Insurance—are providing insurance and claims services to Xiaomi car owners. According to data compiled by social media on insurance premiums, the first-year premium for the SU7, priced at 215,900 yuan, ranges from 7,000 to 7,400 yuan. Meanwhile, the first-year premium for the SU7 Max, priced at 299,900 yuan, can reach up to over 9,900 yuan.
小米汽车对此回应，新能源车和燃油车商业险条款不同，新能源车商业险专属条款既为“三电”系统提供保障，又全面涵盖行驶、停放、充电及作业场景，还根据新车/旧车、品牌、车型、上户类型、险种、保额等因素综合计算，保费价格不尽相同，不能简单通过车价进行比较。不同的车辆售价及不同的城市地区，新车保险价格均有不同。
Xiaomi Auto responded that the commercial insurance terms for new energy vehicles differ from those for fuel vehicles. The exclusive clauses for new energy vehicle insurance not only provide protection for the "three-electric" system—which includes the battery, motor, and electronic control—but also comprehensively cover scenarios involving driving, parking, charging, and operations. Additionally, insurance premiums are calculated based on a combination of factors including whether the car is new or used, brand, model, registration type, type of insurance, and coverage amount. Therefore, premiums cannot be simply compared based on the price of the vehicle alone. Insurance costs vary depending on the vehicle's sale price and different urban areas.
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- Xiaomi launched its first car, the SU7, on March 28, 2024, sparking interest in the new energy vehicle market. The insurance costs for the SU7 are comparable to those of a fuel vehicle priced over 500,000 yuan, with premiums ranging from 7,000 to 9,900 yuan depending on the model.
- New energy vehicles (NEVs) face higher insurance rates and claim frequencies compared to traditional fuel vehicles. Insurance companies often operate at a loss in this segment due to high risk and payout rates associated with NEVs. Regulatory adjustments aim to address these issues by optimizing insurance mechanisms for NEVs.
- A draft notice from China's financial regulatory authority proposes expanding the pricing autonomy for NEV insurance by adjusting the autonomous pricing coefficient range from 0.65-1.35 to 0.5-1.5, allowing insurers more flexibility in setting premiums based on risk levels and potentially reducing instances of coverage denial.
On March 28, 2024, Xiaomi launched its first car, the SU7, marking a significant entry into the new energy vehicle market. The insurance premiums for this model have drawn attention due to their high costs, comparable to those of traditional fuel vehicles over 500,000 yuan. Major insurers like PICC Property and Casualty and Ping An Property Insurance are offering coverage that includes specific clauses for new energy vehicles such as protection for the battery, motor, and electronic control systems [para. 1].
The insurance industry has faced challenges with new energy vehicles before. High repair costs led some insurers to refuse coverage for brands like Tesla in early 2021. Despite the introduction of exclusive new energy vehicle insurance later that year, issues persisted. New energy vehicles tend to have higher accident rates and claim frequencies compared to traditional cars, often resulting in losses for insurers as they struggle with pricing accurately due to insufficient data on these vehicles [para. 2][para. 3].
In response to these ongoing challenges, the National Financial Regulatory Administration issued a draft notice aiming to improve the quality of new energy vehicle insurance by expanding pricing autonomy among other measures. This proposal suggests increasing the autonomous pricing coefficient range from 0.65-1.35 to 0.5-1.5, allowing insurers more flexibility in setting premiums based on risk assessment [para. 4].
The sales of new energy vehicles have surged dramatically in China, reaching a market share of over 31% in 2023 with sales nearing 9.495 million units. This rapid growth has also seen a corresponding rise in insurance premiums for these vehicles which now represent a significant portion of total auto insurance revenue despite making up a smaller percentage of total vehicle numbers [para. 5].
Insurance costs for new energy vehicles are notably higher than those for traditional fuel-powered cars due to factors like higher risks associated with battery packs and power systems which are costly parts of these vehicles. The industry's combined cost ratio remains above 100%, indicating consistent operational losses within this sector [para. 6].
The draft from NFRA not only aims at adjusting premium rates but also proposes enhancing product offerings and establishing safety nets specifically tailored for high-risk operational vehicles like ride-sharing services or commercial use trucks which face even greater challenges obtaining coverage [para. 7].
Overall, while there is an expectation that average premiums might slightly increase after implementing these changes, it could lead to more balanced pricing reflecting actual risks better and potentially easing issues related to obtaining insurance coverage for high-risk models [para. 8].
- Xiaomi
小米 - On March 28, 2024, Xiaomi launched its first car model, the SU7, which sparked significant interest in the new energy vehicle market. However, the insurance costs for the SU7 have also drawn attention due to their similarity to those of fuel vehicles priced over 500,000 yuan. Xiaomi responded by highlighting differences in insurance terms between electric and fuel vehicles and noted that premiums vary based on several factors including vehicle type and insurance coverage specifics.
- PICC Property and Casualty
人保财险 - PICC Property and Casualty, also known as China People's Insurance Company of China (PICC P&C), is experiencing a higher comprehensive cost rate for new energy vehicle insurance compared to traditional fuel vehicles. The company's senior vice president revealed that the comprehensive cost rate for new energy vehicles is approximately 7 percentage points higher than that of fuel vehicles, indicating an overall industry level about 10 percentage points higher.
- Ping An Property Insurance
平安产险 - Ping An Property Insurance is one of the four major insurance companies providing insurance and claims services to Xiaomi car owners. The company, along with others like PICC, CPIC, and Sunshine Insurance, faces challenges in pricing new energy vehicle (NEV) insurance due to higher accident and claim rates compared to traditional fuel vehicles. This has led to a situation where NEV insurance is often more expensive than that for conventional cars.
- CPIC Property Insurance
太保产险 - CPIC Property Insurance, also known as China Pacific Insurance (Group) Co., Ltd., is one of the major insurance companies in China providing insurance and claims services for Xiaomi car owners. It has been mentioned that CPIC, along with other insurers, faces challenges with high claim rates and costs associated with new energy vehicles, leading to generally higher premiums compared to traditional fuel vehicles.
- Sunshine Property Insurance
阳光财险 - Sunshine Property Insurance is one of the four major insurance companies providing insurance and claims services to Xiaomi car owners. The company, along with PICC Property and Casualty, Ping An Property Insurance, and CPIC Property Insurance, offers coverage for Xiaomi's new energy vehicles like the SU7, addressing the unique risks associated with electric vehicles.
- Tesla
特斯拉 - In April 2021, Tesla faced insurance issues due to high vehicle repair costs, leading some regions to refuse coverage. This sparked industry and public scrutiny over new energy vehicle insurance pricing. Despite the introduction of specialized insurance for new energy vehicles in December 2021, cases of refusal continued to surface, highlighting ongoing challenges with insurance pricing for such vehicles.
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