New energy vehicle insurance: "Car owners complain that it's expensive, while insurance companies complain that they're losing money" Can BYD and Tesla's entry into the market reshape the new ecosystem?
2024-08-16
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Many owners of new energy vehicles are facing problems such as high premiums, difficulty in renewing insurance, and rejection of insurance.
Recently, many Nezha Auto owners reported on social media that their insurance premiums had increased significantly, and some were even denied insurance. In response, Nezha Auto's legal department issued a statement on its official Weibo account, saying: "According to data from the relevant databases consulted by Nezha Auto, the overall renewal rate of vehicles sold has dropped by more than 8%, which is lower than the industry average. After further verification by all parties, there is no case of insurance companies refusing to insure Nezha Auto brand models."
Image source: Sina Weibo (@Nezha Automobile Legal Department)
For a long time, new energy vehicle insurance has had the industry pain point of "car owners complaining about the high cost and insurance companies complaining about losses". All parties in the market have high hopes that the new forces in auto insurance - insurance companies controlled by new energy vehicle companies - will reduce auto insurance premium costs and reshape the auto insurance business model.
Regarding the car companies that have already entered the market, some relevant people said in an interview that BYD Insurance has only been operating new energy vehicle insurance for a short time, and the extent to which it can reduce the cost of auto insurance remains to be seen. In the long run, insurance institutions under many car companies such as BYD and Tesla have many advantages in entering the new energy vehicle insurance market. Their active layout in the auto insurance market is expected to further reduce the price of auto insurance. At the same time, in the future, to resolve the pain points of new energy vehicle insurance operations, relevant parties still need to work together and continue to explore.
Car owners complain about high prices, while insurance companies complain about losses
"The first year's premium was 4,600 yuan, and the second year's premium was almost 6,000 yuan. My car has not been in any insurance this year, but the premium is getting higher and higher." Mr. Huang, a new energy vehicle owner, found that the price of auto insurance was rising when he renewed his insurance. Mr. Huang said that he originally bought a new energy vehicle to save fuel, but he didn't expect the insurance price to make him very embarrassed.
During the interview, the reporter learned that there are quite a few new energy vehicle owners who have encountered this problem. Some owners also chose other insurance companies because their vehicles encountered collisions and accidents in the first year, and the insurance company directly refused to insure them in the second year. However, the insurance premiums only increased and did not decrease.
Data from the National Monitoring and Management Platform for New Energy Vehicles show that the total premium scale of new energy vehicles in 2022 will be approximately 65 billion yuan, and the average premium per new energy vehicle insurance policy will be 4,139 yuan, 81% higher than the average premium per fuel vehicle.
As for why the insurance premiums for new energy vehicles are generally more expensive than those for fuel vehicles, Yang Weibin, an expert on new energy vehicles and power batteries, analyzed that there are two main reasons: First, in the past few years, new energy vehicles of the same size were much more expensive than fuel vehicles, and the inertia of high basic prices and expensive premiums has continued to this day; on the other hand, although the fire rates of new energy vehicles and fuel vehicles are similar, the public still subjectively believes that electric vehicles are less safe, so the premiums are relatively higher.
A senior person engaged in auto insurance sales told reporters that when insurance companies evaluate premiums, they do not base their decisions on the cost of repairs after an accident, but rather on the number of vehicle accidents, which is directly linked to the accident rate.
However, an insurance company staff member who wishes to remain anonymous disagrees with the claim of "rejection of insurance". "No insurance company can reject compulsory traffic insurance, but commercial insurance is a two-way choice, which cannot be called 'rejection of insurance'." The staff member explained that, for example, the insurance premiums for online ride-hailing vehicles with many accidents will be very high, and if the car owner agrees with the calculated cost results, he can continue to purchase insurance.
Image source: Visual China
It is worth noting that while car owners are complaining about the high cost, insurance companies are also complaining about the "injustice". Gu Yue, chairman of Tai Ping Property & Casualty Insurance, said at the company's 2023 performance conference that the accident rate of new energy vehicles is twice as high as that of fuel vehicles. Yu Ze, president of PICC Property & Casualty Insurance, also said at this year's performance conference that the claim rate of new energy vehicle insurance in the entire industry is about 10 percentage points higher than that of fuel vehicles.
According to Li Wenzhong, deputy director of the Insurance Department of Capital University of Economics and Business, there are two main reasons why insurance companies complain of "losses": first, the regulatory authorities require that the comprehensive expense rate of new energy vehicle insurance be controlled within 15%, which has brought great operating pressure to insurance companies; second, insurance companies deliberately lower the prices of new energy vehicle insurance products in order to seize the first opportunity in the new energy vehicle insurance market. "The first point cannot be changed by insurance companies in the short term. The second point is that the marketing channel advantages and technical advantages of new energy vehicle companies will play a role, reducing the competitive pressure they face in operating new energy vehicle insurance." Li Wenzhong said.
BYD Chairman Wang Chuanfu said at the BYD shareholders' meeting that there are many reasons why new energy vehicle insurance is still losing money, some of which are due to the disconnection between after-sales and service. However, if the vehicle design allows for disassembly and repair, the insurance compensation cost can be greatly reduced, and insurance and design can be integrated.
New energy vehicle companies are competing to develop insurance business
Faced with the dilemma of new energy vehicle insurance where "car owners complain about high prices and insurance companies complain about losses", new energy vehicle companies including BYD, Weili, Tesla and others have entered the new energy vehicle insurance market by establishing or acquiring insurance intermediary licenses. For example, BYD obtained the "birth permit" for auto insurance by acquiring 100% of the shares of Yi'an Property Insurance (i.e. Yi'an Property Insurance Co., Ltd.) and issued its first insurance policy in May this year. In March 2023, after the acquisition of Huiding Insurance Brokerage was completed, Weilai cancelled the Weilai Insurance Brokerage established in January 2022 and renamed Huiding Insurance Brokerage to Weilai Insurance Brokerage. In June 2022, Ideal Auto obtained an insurance brokerage license by acquiring Yinjian Insurance Brokerage Company, and can directly carry out vehicle insurance-related business. Tesla Insurance Brokerage Co., Ltd., established by Tesla in August 2020, was cancelled on April 16, 2024, but in less than 4 months, it established another insurance brokerage company in China called "Tesla Insurance Brokerage (China) Co., Ltd."
In an interview with reporters, Li Bin, chairman of NIO, admitted that the reason why NIO was involved in auto insurance was because the current new energy vehicle insurance costs were high and users complained that it was too expensive. "NIO is a user-oriented company, and the involvement in auto insurance business is to give NIO users a better experience." Li Bin said.
Yang Weibin said that traditional insurance has many intermediary agents. After car companies enter (insurance), they can save a lot of intermediate links, save costs, and bring down the price of new energy vehicles.
"BYD's entry into auto insurance is a good thing for the industry. It will improve efficiency, reduce costs, and enable the green development of new energy vehicle insurance," said Wang Chuanfu.
Dongwu Securities said in its research report that at present, insurance companies lack talents in new energy vehicle damage assessment and are unable to conduct on-site damage assessment after an accident. New energy vehicle companies can simplify the claims process for new energy vehicles. At the same time, car companies can design innovative auto insurance products that better match vehicle risks and claims.
Image source: Visual China
The industry is optimistic about the development prospects of new forces in auto insurance
The huge premium price difference makes the industry full of expectations for the development prospects of new forces in auto insurance.
Zhang Lei, CEO of CheChe Technology, an insurance service provider for new energy vehicle companies, said that new energy vehicle companies have three major advantages in entering the insurance industry: First, the channel advantage. Vehicle companies have their own sales channels and traffic advantages. Consumers' trust in vehicle brands can be transferred to their insurance products, which can improve sales conversion rates; second, the closed-loop service ecosystem. Vehicle companies can provide users with one-stop services from car purchase to insurance and maintenance, thereby enhancing user stickiness; third, vehicle companies have a large amount of vehicle and driving data, which can more accurately assess risks and set prices.
Shi Hui, founder of Yanshu New School, also said that the biggest difference between new energy vehicle insurance and traditional vehicle insurance lies in vehicle damage insurance, and the difference in vehicle damage insurance mainly comes from differences in vehicle structure, which leads to different risk points, maintenance costs and vehicle insurance pricing. From this perspective, traditional insurance companies need a period of data accumulation and exploration to formulate appropriate prices, while insurance companies under new energy vehicle companies have natural advantages.
"Since it is more convenient to collect data, insurance companies under new energy vehicle companies may have a more timely and in-depth understanding of the probability of accidents and losses of their own brand cars. Therefore, they have certain advantages in operating pricing. In addition, large new energy vehicle companies have built repair service networks based on their own outlets, and they also have advantages in the timeliness and standardization of services and the comprehensiveness of the network. Therefore, after a period of exploration, insurance companies under new energy vehicle companies are expected to create insurance products and service systems that are very suitable for new energy vehicles." Shi Hui said.
However, there is only one insurance company wholly owned by a new energy vehicle company that directly operates auto insurance business. Although its advantages in auto insurance business are prominent, it also has some shortcomings. At the same time, for many traditional insurance companies, how to find a suitable way to achieve sustainable development of their own auto insurance business while supporting the development of new energy vehicles is a very important issue.
Zhang Lei believes that both new forces in auto insurance and traditional insurance companies need to develop risk assessment models tailored to the characteristics of new energy vehicles and design insurance products that meet the needs of new energy vehicle users; auto companies need to gradually penetrate into multiple scenarios such as insurance, accidents, renewals, repairs, and claims, establish connections with users, and thus reshape the traditional cooperative relationship between auto companies and users; auto companies can also provide digital system services to new energy vehicle owners through insurance technology companies, forming a digital operation model for auto insurance.
"As the popularity of new energy vehicles increases, it is an inevitable trend that new energy vehicle insurance models will gradually replace traditional vehicle insurance, which is also in line with the national strategic development direction of green and low-carbon economy." Shi Hui said that in the long run, insurance companies and car companies need to cooperate with each other, constantly run in, and work together to create a business model that can not only provide consumers with solutions to difficulties, but also explore a business model that can make companies profitable and sustainable. At the same time, regulatory authorities can support the coordination of all parties related to new energy vehicles from the perspective of top-level design, create a good policy ecological environment, and jointly support the development of new energy vehicles and new energy vehicle insurance markets.
Source: Daily Economic News, Securities Daily, etc.
