The automotive insurance sector, regarded as a cornerstone of the property and casualty (P&C) insurance industry, is currently experiencing significant transformationThe advent of new energy vehicles (NEVs) has accelerated changes in the structure, channels, and competitive landscape of the traditional car insurance marketAs we look towards 2024 and beyond, it is evident that the momentum of growth is not merely a reflection of consumer demand but a nuanced interplay of regulatory adaptation and market innovation.

For the year 2024, the expected premium income from the property insurance sector will total approximately 16.9 trillion Chinese Yuan, with car insurance expected to yield around 913.7 billion Yuan—comprising a substantial 54% of the total portfolioDespite a slight dip in growth—from an earlier 5.64% in 2023 to a forecasted 5.4% for 2024—the figures indicate a stable, if slightly diminishing, growth trajectory for this sector.

The growth of car insurance premiums is remarkable; it has surged from 551.6 billion Yuan in 2014 to approximately 913.7 billion Yuan in 2024, marking a staggering increase of 65.65% over the past decadeHowever, the industry is also grappling with slower growth in traditional insurance lines, leading to noticeable structural changes, particularly due to the rise of NEVs and the subsequent demand for specialized insurance products tailored to them.

On January 24, data released from the China Association of Actuaries and the China Banking Insurance Information Technology Management Co. revealed notable trends in NEV insuranceBy 2024, the Chinese insurance market has underwritten 31.05 million NEVs, bringing in a premium revenue of approximately 140.9 billion Yuan, thus providing coverage of around 106 trillion Yuan

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This marks a historical milestone: for the first time, the NEV insurance segment has surpassed the 100 billion Yuan mark, with a remarkable year-on-year growth rate of 52.93%, far exceeding the overall growth in traditional car insurance premiums.

Channel-wise, the online insurance sector is witnessing exponential growthAccording to Tencent's Weibao, the platform has experienced a 70% surge in car insurance premium transactions year-on-yearAdditionally, the number of users actively seeking quotes through the platform has increased by 50%. Reports forecast that the online insurance sector will continue to sustain a robust annual growth rate of 15% to 20% over the next five years.

As these changes unfold, the competitive landscape of the market is also evolvingRegulations are increasingly tightening the rules surrounding car insurance, reinforcing a blended reporting and operational approach while enhancing the control of costsThese moves wish to elevate the profitability of underwriting, while the overall policy reforms in this sector suggest a promising recovery of premium growth rates as pressures subsideNevertheless, with the surge of new players entering the NEV insurance market, the future dynamics remain friendly territory for innovations.

According to analysts from Guangda Securities, the broadening of pricing parameters for car insurance allows leading firms to leverage their big data capabilities to recapture market share, illustrating the burgeoning Matthew Effect where the rich get richerAs of the third quarter of 2024, the combined market share of the “big three” insurers—PICC Property and Casualty, Ping An Insurance, and China Life Property—has reached 69.1%, an increase of 1.6 percentage points since pre-reform 2020.

In a related update, data recently disclosed by publicly traded insurers revealed that the “big three” collectively recorded a premium income of approximately 1.063 trillion Yuan, marking a 5.4% year-on-year increase in 2024.

Several industry leaders project that an uptick in new car sales and an increase in the overall insurance premium growth are on the horizon

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High-performing insurers that dominate in low loss ratios, effectively control channel fees, and enjoy superior profitability over smaller competitors are set to benefit significantly from continued market premium growth, albeit while balancing profitability and premium levels carefully.

Among the hot topics propelling discussions in 2024 is undoubtedly NEV insurance, soon to become a focal point for the P&C market in 2025. The skyrocketing sales of NEVs are a driving force behind the burgeoning demand for insurance coverageThe Passenger Car Market Information Joint Conference indicates a production of approximately 12.185 million NEVs in 2024, reflecting a 36.4% annual growthAdditionally, it's anticipated that the country’s retail automobile market will see sales surpass 23.4 million units, with NEV penetration rates soaring to 57%.

Given such momentum, many industry experts predict that NEV insurance will continue its upward trajectory well into 2025. The “Ant Insurance” platform recently issued its 2024 Annual Insurance Service Trend Report, indicating rapid growth for NEV insurance, with coverage on their platform more than doubling in the past year.

From 2020 to 2024, NEV insurance has undergone transformative changes, transitioning from relying heavily on basic vehicle assessments to incorporating risk monitoring and differentiating vehicle usage types, reflecting the increasingly sophisticated underwriting needs as new models and technologies are developed.

However, amidst these advancements, NEV insurance faces its own set of challengesIndustry leaders express concern over the high claim rates and premiums currently associated with NEVs, which often exceed those of traditional fuel vehiclesIn 2024, claim payouts for NEV insurance reached 58.7 billion Yuan, a dramatic 63.47% increase over the previous year, surpassing the overall industry payout growth rates.

A report released by China Banking Insurance This data illustrates the unique characteristics associated with NEV insurance: higher average premiums and increased claim frequencies compared to conventional vehicles

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Notably, household NEVs exhibit an average premium that is 28% higher than traditional vehicles, coupled with a 5% increase in payout rates.

The analysis identifies four primary factors contributing to the current high payout rates in NEV insurance: elevated repair costs, frequent claims occurrence, mismatched pricing based on vehicle usage, and pricing discrepancies against associated risksThe relatively short history and rapid model iterations of NEVs have resulted in insufficient data accumulation, further complicating the establishment of appropriate baseline rates.

The National Insurance Corporation has also highlighted that NEV insurance pricing flexibility currently ranges from 0.65 to 1.35, allowing insurers only minimal adjustment capability compared to fossil-fuel vehiclesThis limitation restricts the industry’s capacity to accurately reflect genuine risk factors in pricing.

According to recent mid-year performance guidance from the People's Insurance Company of China, their NEV insurance branch insured 4.5 million NEVs in the first half of 2024, generating premium revenue of 19.66 billion YuanThe data indicates stronger growth indicators in terms of both the number of insured vehicles and premium rates, but highlights the distinct differences between NEVs and traditional fuel vehicles in terms of risk assessment, pricing, and claims management.

To overcome the multilayered challenges faced in NEV insurance, a series of strategic initiatives have been proposedThese include lowering maintenance and operational costs, encouraging responsible driving behaviors, enhancing data-sharing capabilities across industries, and streamlining the establishment of a risk classification system for vehicle insurance.

On January 25, 2025, China's Insurance Industry Association will unveil the "Good Insurance for Cars" platform, which aims to provide a user-friendly online portal for high-claim-risk NEVs, ensuring that vehicle owners can secure insurance without limitations.

The insurance marketplace has observed a gradual shift, where the traditional insurance giants have maintained significant market shares

Since 2019, the revenue share of the “big three” in car insurance has consistently hovered above 67%. Despite witnessing a slight decline from above 70% prior to 2018, car insurance remains pivotal for the growth trajectory of P&C insurance, impacting overall premium growth significantly.

As outlined by market experts, while larger firms have reported growth in profits, smaller firms are grappling with deepening losses stemming from pressures on both investment and underwriting fronts.

Post-reform insights from Ping An Securities indicate that industry-wide cost levels have become more homogenized; thus, the competitive edge now relies heavily on pricing power and quality of serviceThe scrutiny around pricing and service mechanisms signifies a concrete shift away from mere price competition, fostering an environment where data-driven pricing and enhanced customer service capabilities reign supreme.

As the market environment matures, the “big three” insurers reflect an enduring legacyTheir superior data history, precise pricing strategies, intricate claims management, and diversified service offerings continue to bolster their respective market share positions, with a current aggregate market share of 69.1% in the car insurance space.

Nevertheless, this seemingly tranquil market landscape is witnessing underlying turbulenceIn 2024, the rapid ascendancy of NEV insurance is inviting a new wave of entrants into the arenaSeveral experts predict that these fresh players will catalyze transformative changes across both the insurance marketplace and regulatory landscapes.

Exciting developments include the recent approval for vehicle insurance operations by numerous new entities, such as the “Aiyu” insurance company, and fresh initiatives from international financiers such as Prudential

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