Caixin Weekly | The Challenge of Pricing Insurance for New Energy Vehicles (AI Translation)

财新周刊｜新能源车险定价难题

[para. 1][para. 2][para. 3] New energy vehicle (NEV) insurance has faced challenges with high costs for car owners and losses for insurers. However, since BYD, a NEV giant, entered the property insurance market in 2023 and rebranded Yi An Property Insurance as BYD Property Insurance, the insurance market dynamics have shifted. BYD's insurance offers have been notably cheaper, as evidenced by a BYD car owner from Anhui who saved over 1,000 yuan compared to offers from People's Insurance and Ping An. Once BYD officially launched its insurance in select regions in the summer of 2024, the auto insurance premium collected by the company reached 555 million yuan by September, indicating rapid growth. BYD utilizes comprehensive data control to achieve precise automotive insurance pricing, thus challenging smaller insurers.

[para. 4][para. 5] The entry of new energy vehicles caused complications despite reforms in car insurance in 2019 that were meant to reduce costs and improve coverage. Persistent issues led to regulators proposing a shared risk mechanism for high-risk cars. Moreover, a lack of foundational data after data provider Beili Xinyuan ceased services posed a problem as insurers struggled to set appropriate premiums. Senior actuaries warn that a unified pricing for all car types poses unfair conditions for traditional household cars when mixed with ride-hailing vehicles.

[para. 6][para. 7][para. 8] Industry experts advocate for breaking down information monopolies to provide relevant data to insurers. Zhang Lei, a CEO from Cheche Technology, argues that proper data access could help reduce rates and fraud. According to him, BYD leverages precise data to potentially lower the combined ratio quickly, although this is contingent on being able to access vast amounts of driving data. Other companies like Xiaomi are also entering the auto insurance market, posing potential shifts in data and power dynamics.

[para. 9][para. 10][para. 11] While many BYD car owners report savings on premiums, BYD's insurance isn't necessarily cheaper than industry leaders like PICC Property and Casualty. For example, BYD's average insurance in the third quarter of 2024 was higher than industry averages for NEVs. Traditional insurance companies face challenges in the NEV sector, limited by less data access compared to automaker-backed firms like BYD.

[para. 12][para. 13][para. 14] The core difficulty lies in evaluating NEV risk due to limited data access. Many NEVs are used as ride-hailing services without being properly categorized as commercial vehicles, leading to increased premiums and pricing discrepancies. Discussions around regulatory frameworks and pricing notifications continue as traditional insurers work to delineate between commercial and private vehicle risks.

[para. 15][para. 16][para. 17] Insurers rely on traditional factors such as No-Claims Discount to set prices, but the lack of driving data limits accurate risk assessment. The previous reliance on figures from Beili Xinyuan demonstrates the urgent need for data transparency and sharing. Regulators are working alongside agencies to further improve data access and encourage innovation in NEV insurance products, potentially including digital models and ride-sharing specifications.

[para. 18][para. 19][para. 20] Challenges in distinguishing between ride-hailing and household vehicles lead to calls for regulatory change to appropriately categorize and price these diverse NEVs. Proposals include innovative insurance products tailored for ride-hailing services. Additionally, future steps might involve regulations mandating more detailed classification and metrics to allow for more precise insurance offerings, suggesting a path toward nonlinear, dynamic coverage models for part-time commercial operations like ride-hailing.