More Data Give BYD Unit Edge in Auto Insurance

BYD Co. Ltd.’s recent entry into the car insurance market, particularly for new-energy vehicles (NEVs), is causing significant disruption within the industry.[para. 1] By leveraging its position as a leading Chinese automaker, BYD's insurance arm is able to offer premiums that are almost 50% lower than those offered by established insurers. For instance, some BYD NEV owners have secured insurance policies for as low as 2,600 yuan ($356) annually, in sharp contrast to rates ranging from 3,300 to 5,000 yuan provided by major insurers like PICC Property and Casualty Co. Ltd and Ping An Property and Casualty Insurance Co. of China Ltd.[para. 2][para. 3]

The major edge that BYD has in this competitive landscape is access to vast amounts of driving data from its vehicles. This data includes information about driver behavior, the frequency of crashes, and the current condition of the vehicles. Utilizing this information, BYD can create accurately priced insurance policies for low-risk customers, which allows it to offer affordable premiums.[para. 4] While BYD's third-quarter average annual premium per vehicle is around 4,700 yuan, its ability to implement customized pricing strategies gives it a significant advantage over traditional insurers who lack access to such granular data.[para. 5]

Typically, traditional insurers apply generalized pricing strategies because they do not possess the detailed data that companies like BYD can access. This results in higher premiums for NEVs as traditional insurers factor in the likelihood of claims related to expensive NEV components like batteries, plus the potential for higher usage in ride-hailing services — both of which contribute to increased risk profiles.[para. 5][para. 7] In general, NEV insurance costs significantly more, with national averages in 2023 reflecting nearly double the premiums for NEVs compared to conventional vehicles.[para. 5][para. 8]

BYD's venture into insurance was initiated through the acquisition of an insolvent online insurance unit from Tomorrow Holding Co. Ltd in 2023.[para. 10] This allowed BYD to roll out its operations in May and rapidly accumulate 555 million yuan in contracted premiums by the end of September, with 485 million yuan collected in the third quarter alone.[para. 11] The shift in data access rights has amplified challenges for conventional insurers who previously relied on NEV data from firms like Beijing Bitnei Corp. Ltd. The government’s recent decision to suspend Bitnei's data service has further disadvantaged these traditional insurers, leaving them unable to adequately assess NEV health or pricing premiums accurately.[para. 12][para. 14]

Industry sources indicate that efforts are underway by the MIIT and the National Financial Regulatory Administration to establish NEV insurance data-sharing norms, although no concrete resolution has been reached yet.[para. 15] However, hurdles remain in cross-industry data sharing, according to Dai Haiyan from LexisNexis Risk Solutions, despite some insurers' attempts at collaboration for enhanced services using vehicle data.[para. 17]

In conclusion, BYD’s foray into the insurance sector exemplifies the transformative potential of utilizing proprietary data. This move has positioned BYD advantageously against traditional players in the NEV insurance market facing barriers related to data access and accurate risk assessment.[para. 4][para. 10][para. 12]