By LU Wenqi
EV makers, seeking profitability wherever they can, are moving in on the insurance game.
Most recently, Nio renamed Huiding Insurance, a brokerage firm acquired in December, as Nio Insurance. In May, the China Banking and Insurance Regulatory Commission (CBIRC) approved BYD's acquisition of E'An Insurance, leading to its rebranding as Shenzhen BYD Insurance.
EV insurance market will be worth 200 billion yuan by 2035 and obtaining licenses through acquisitions is only the first step into the market. Running an insurance business is not always a smooth ride.
Insurance companies have reported substantial increases in EV premiums. According to their half-year reports, PICC saw a 54.7% increase, CPIC experienced a 65.1% surge, and ZhongAn Insurance recorded an extraordinary 228.7% rise. One out of every four new vehicles is now an electric one.
The growth, however, has not translated into profits.
While EV owners complain about premiums, insurers disclose their losses. EVs appear to have a higher likelihood of being involved in accidents, with a risk probability of 30 percent, in contrast to gas-powered vehicles which have a 19 percent risk probability. Moreover, they cost a lot more when they do. The average payout of each EV accident amounts to 7,200 yuan, which is 600 yuan more than for conventional cars.
When these figures are taken together, there is a clear problem that cannot be addressed simply by manipulating premiums and payouts.
EV manufacturers believe they can do better. WANG Chuanfu, founder and CEO of BYD, has spoken of strengths in user base, marketing and technology. It seems that most EV makers foresee an insurance sector of unprecedented cost-effectiveness, efficiency, and "scientifically grounded" claims processing.
Many car makers already view insurance as a route to more post-purchase profits. Nio, for example, has an enthusiastic customer base that consistently lauds its innovative customer service. Venturing into the insurance sector gives it more maneuverability in its services and a chance to excel in the aftermarket.
