Behind China’s Sky-High Prices for EV Insurance (AI Translation)

【周刊提前读】新能源车保费为何贵？ 背后原因让保险公司亦无奈

BYD's entry into the property insurance market has influenced the new energy vehicle insurance sector, despite high initial costs complained by car owners and losses lamented by insurers. The company began participating in the troubled insurer Yi'an Property Insurance in 2023, acquiring sole control and subsequently renaming it to BYD Property Insurance [para. 1][para. 3]. BYD's entrance to the insurance market with competitive pricing has attracted attention. A BYD owner in Anhui reported substantial savings on insurance premiums with BYD compared to big players like PICC and Ping An. As of September 2024, BYD's auto insurance premium revenue reached 555 million yuan, with 485 million generated in the third quarter alone [para. 1][para. 3].

BYD's ability to offer lower quotes has unsettled the existing insurance landscape. Supported by extensive data from its parent company, BYD Insurance can perform precise pricing, posing a potential threat to small and medium-sized insurers [para. 5][para. 9]. However, BYD faces limitations, operating in only seven provinces and exclusively insuring BYD vehicles [para. 10][para. 11]. While its premiums appear low, the company posted an average premium of 4,700 yuan per vehicle in the third quarter of 2024, above the industry average of 4,003 yuan for new energy vehicles as reported by CIB, disproving the perception that its premiums are consistently low [para. 10][para. 12].

BYD's advantage lies in its data utilization from its car manufacturing arm, enabling more accurate insurance pricing. This privilege allows differentiation between high- and low-risk clients better than traditional insurance firms [para. 16]. Moreover, the absence of data from Xin Yuan Information Technology limits conventional insurers’ pricing capability, reinforcing BYD's strategic advantage [para. 11][para. 16]. Zhang Lei from Cheche Technology commented on the potential of leveraging data, like driving habits and behaviors, for efficient insurance pricing [para. 17].

Additionally, industry-wide challenges persist. The difficulty in insuring high-risk, new energy vehicles, particularly ride-hailing cars, is evident. These issues stem from obfuscated distinctions between commercial and private use and a lack of robust data infrastructure for accurate risk assessment [para. 38][para. 40]. As per the National Financial Regulatory Administration, plans are in action to establish a guarantee mechanism for high-risk vehicles through platforms like the Shanghai Insurance Exchange [para. 27][para. 37]. However, solutions are complicated by inadequate regulatory frameworks and insurance data dynamics [para. 41][para. 48].

The persistent challenge for insurers is to balance between accessing comprehensive data for proper underwriting and navigating the regulatory and infrastructural limitations present in China. Future strategies might involve integrating data-sharing mechanisms across sectors to bridge existing "data islands" and facilitate more refined insurance products. For instance, considering separate insurance categories for ride-hailing vehicles or adopting dynamic insurance products could offer viable pathways [para. 29][para. 52].

In conclusion, BYD's strategic insurance venture, leveraging its automotive data prowess, highlights the emerging disruptions in new energy vehicle insurance. The firm capitalizes on its ability to provide precision pricing amidst regulatory and infrastructural challenges in the Chinese market. However, substantial improvements in data access and regulatory frameworks are needed to address long-standing issues like high premiums and insurance accessibility for high-risk vehicles, hinting at potential collaborations and innovations in the industry [para. 16][para. 54].