BYD Property & Casualty Insurance Turns Losses into Profits; Can Xiaomi Auto Insurance Follow Suit?

As AI · How Car Companies with Backgrounds in Insurance Use Data Advantages to Reduce Costs?

As more car companies with insurance backgrounds enter the market, the new energy vehicle insurance market is heating up. Recently, China’s 91st property insurance institution—Faba Tianxing Insurance—piloted online in Beijing. Since it sells through Xiaomi’s official car ordering channels, industry insiders call it “Xiaomi Official Car Insurance.”

It is reported that Faba Tianxing Insurance obtained its insurance license at the end of 2025. The rapid launch of Xiaomi auto insurance makes one think of BYD’s auto insurance, which turned profitable in 2025. BYD Finance Insurance was officially approved to operate in November 2023, and in just over a year, it achieved profitability, undoubtedly stirring waves in the new energy vehicle insurance market.

Strategies for Locking in Renewal Customers

Recently, a car owner posted a screenshot comparing insurance quotes for the same Xiaomi car from different insurance providers. The screenshot shows Faba Tianxing Insurance quoting 4,794.65 yuan, cheaper than PICC’s 6,688.56 yuan by 1,893.91 yuan, a reduction of 28.3%. Compared to the lowest quote from Pacific Insurance, it is also 229.43 yuan cheaper. “Xiaomi Official Car Insurance” not only offers lower prices but also provides more service items.

Tianyancha information shows that Faba Tianxing Insurance was established on December 16, 2025, with a registered capital of 1 billion yuan. Its three shareholders are: 49% held by the French Paris Insurance Group, 33% by Xiaomi’s Sichuan Yinmi Technology, and 18% by Volkswagen Financial Services Overseas. Sichuan Yinmi Technology is wholly owned by Beijing Xiaomi Electronic Software Technology Co., Ltd. Xiaomi founder Lei Jun personally holds 90% of Xiaomi-related companies’ shares, indirectly controlling part of this insurance company’s equity. According to its official website, Faba Tianxing Insurance will fully enter China’s property insurance market, leveraging its global resources, technological innovation, and industry synergy to provide more inclusive and efficient insurance products and solutions, creating core value for customers.

On January 22 this year, Faba Tianxing Insurance announced its opening, emphasizing focus on the promising and closely related electric vehicle insurance sector, deepening exclusive car insurance products around the EV ecosystem, continuously optimizing claims processes, and genuinely improving service experiences for EV owners, while further enriching its business matrix and strengthening its differentiated advantages.

A reporter contacted Faba Tianxing Insurance and learned that currently, only renewal customers can purchase the newly launched insurance; new car buyers can only choose other insurers. Some analysts believe that locking initial customers among renewal groups is because the company adopts a UBI (Usage-Based Insurance) pricing model, which requires complete driving, usage, and claim data from the previous year to determine premiums.

Zhu Yunyao, deputy chief engineer at the Policy Research and Consulting Center of China Automotive Engineering Research Institute Co., Ltd., told reporters that UBI insurance prices premiums based on driving behavior and vehicle usage intensity. Currently, new energy vehicles can provide sufficient data to characterize driver behavior, such as rapid acceleration and deceleration, frequent lane changes, and usage frequency, which can support UBI pricing models. Using UBI insurance can indeed lower premiums for good drivers with low vehicle usage, but for drivers with poor habits or high usage, the quotes will correspondingly increase.

“Allowing only renewal customers to buy is because insurers need to reference the driver’s usage data from the previous year,” said Yang Ting, associate professor at the School of Economics and Management, Northern Industrial University. “UBI models rely heavily on historical driving data. When insuring new customers for the first time, insurers lack enough data to assess risk. If new customers are allowed in, the advantages of UBI pricing cannot be fully realized. Therefore, limiting to renewal customers is essentially risk screening based on last year’s data, using the customer’s historical information as a credit source—a cautious risk mitigation strategy.”

An unnamed researcher in the insurance field at the Chinese Academy of Social Sciences said that due to the rapid proliferation of new energy vehicles, unknown risks are numerous, so insurers tend to be conservative in pricing. This explains why brands with higher claims history and ride-hailing services have faced rejection or high premiums. Xiaomi’s car insurance, using a UBI pricing model, shows significant price differences for the same model among different owners. UBI pricing is more precise, matching real risk levels, and the larger the difference, the more fair it is for drivers. “The widening gap isn’t unfair; it’s actually fairer for drivers. Through differentiated pricing, it can also optimize driving behavior, reduce risk, and improve market efficiency,” he said.

Obviously, a single case cannot determine whether Faba Tianxing’s insurance prices are generally lower than those of other insurers. So, the reporter contacted Faba Tianxing Insurance, and they stated that their business is just starting, and they currently lack enough data to provide.

Dual Growth in Revenue and Profit Is Attractive

BYD Finance Insurance, a benchmark for Faba Tianxing, has achieved astonishing speed in profitability. 2025 was its first full operating year, with insurance business income reaching 2.87 billion yuan, doubling from 2024, and turning profitable with a net profit of nearly 94 million yuan for the year.

Notably, all policies signed by BYD Finance Insurance are sold through direct channels. Public information shows that in 2025, about 2.84B yuan of direct channel premiums were signed, accounting for 97.89% of total premiums, with almost zero commission and brokerage expenses. Additionally, BYD’s vehicle sales reached 4.6 million units in 2025, which likely contributed to the premium scale increase.

In terms of profitability, BYD Finance Insurance shows a “quarterly fluctuation, annual improvement” trend. Although the net profit in Q4 2025 was a loss of 11.4732 million yuan, the total net profit for the year reached 93.62M yuan, turning around from a loss of 169M yuan in 2024.

The improvement in profitability may be related to its reduced comprehensive cost ratio. In 2025, BYD Finance Insurance’s cumulative comprehensive cost ratio dropped to 102.49%, significantly lower than the high of 308.81% in 2024. Its combined loss ratio fell from 233.92% to 97.28%, and its comprehensive expense ratio improved from 74.88% to 5.21%, beginning to be well below industry average.

Regarding solvency, BYD Finance Insurance’s latest solvency adequacy ratio remains above regulatory safety thresholds but has declined quarter-over-quarter. Data shows that at the end of Q4 2025, its core solvency adequacy ratio and comprehensive solvency adequacy ratio were 589.86% and 589.95%, respectively, down 66.56 and 66.59 percentage points from the previous quarter. The company explained that the decline was mainly due to a rise in the rolling six-month comprehensive cost ratio, which increased the minimum capital requirement by 32M yuan (a 10.29% increase), and changes in the proportion of equity assets, which increased market risk minimum capital by 50M yuan (a 13.97% increase).

The average premium per vehicle for BYD Finance Insurance in 2025 was 4,054.53 yuan, down more than 400 yuan from about 4,500 yuan in 2024.

However, from operational indicators, BYD Finance Insurance’s comprehensive cost ratio in 2025 was about 102.49%, significantly lower than 308.81% in 2024 but still above 100%. This indicates that its underwriting business is still in loss, with profits mainly coming from investment income.

BYD Chairman Wang Chuanfu once pointed out at last year’s shareholder meeting that the current new energy vehicle insurance industry is basically loss-making, mainly due to disjointed vehicle design and after-sales service. For example, if a power battery in an electric vehicle is damaged, the entire battery pack must be replaced, not repaired by parts.

Some industry insiders believe that car companies, with their better understanding of EV technology, risks, and performance, can better customize insurance products and control costs. The aforementioned insurance researcher said that the biggest advantage of car companies designing their own insurance products is access to vast data on vehicle operation, driving behavior, parts pricing, and repairs. However, their limited road risk data, the need to refine pricing models, and the gradual development of offline claims channels restrict rapid expansion of their insurance businesses.

Traditionally, the first contact point for new car customers was at 4S shops, but now car companies reach customers directly through their own channels or apps, offering insurance and renewal services. Therefore, car companies can leverage their channel advantages to sell their insurance products, reduce channel costs, and even promote new car sales through insurance discounts.

Some also argue that car companies lack experience in big data actuarial science and risk control, and need to invest heavily in building offline claims networks, making short-term profitability difficult through car insurance alone.

Yang Ting believes that if insurers cannot profit from underwriting and rely on investment income, the overall profitability will face more uncertainty. First, whether the parent company can provide stable cash support; second, whether capital markets can offer steady returns. Using investment to support core operations can be a short-term balancing strategy, but long-term competitiveness depends on profitable underwriting. Otherwise, fluctuations in investment returns will directly impact insurance solvency.

Behind the Year-over-Year Drop in Average Premiums

For a long time, new energy vehicles have been criticized for high premiums but unprofitable underwriting, with many owners joking that “the money saved on fuel is all spent on insurance.” Recently, 58 insurers disclosed their Q4 2025 average premiums, among which 31 saw a decrease compared to 2024, accounting for 53.44%. This indicates that over half of insurers experienced a decline in average premiums. Analysts believe that recent reductions are due to more scientific pricing, refined process control, and reduced service costs.

However, from interviews, consumers seem less aware of premium reductions and more sensitive to increases. One owner of a pure electric MPV told the reporter that their premium was 5,600 yuan when the car was first registered in 2024, but increased to 8,600 yuan in 2025 renewal, a 3,000 yuan jump. An insurance staff member said it was because repair costs for that model are high, so premiums were raised.

Mr. Li, a gasoline car owner, complained that his premium hadn’t increased for years, but this year it rose by over 1,000 yuan. The insurer explained that because the company suffered huge losses insuring new energy vehicles last year, it raised premiums for gasoline car owners the following year. This logic is hard to accept. Gasoline car owners have already paid full purchase taxes and road maintenance fees, enjoy fewer scrappage subsidies, and are restricted in some areas. Should they be “cut again” at renewal?

The significant difference between disclosed average premiums and owners’ actual experiences suggests that last year’s price wars, declining new car prices, and increased sales of low- and mid-range models contributed to the decline in average premiums.

According to China Association of Automobile Manufacturers, in 2025, new energy vehicle sales in the 100k–200k yuan price range reached 100k units, the largest share; sales of 80k–100k yuan models grew 78.4%, the fastest growth. In the gasoline market, the most popular segment was 100k–150k yuan. Data also shows that in 2025, models over 250k yuan accounted for 16.7% of sales, down 4.9 percentage points year-over-year. Sales of models below 100k yuan increased by 4.4 percentage points.

Additionally, owners choosing fewer coverage items and selecting lower compensation amounts at purchase also lower average premiums. Ms. Xi said she usually drives less and has good driving habits, so she removed some coverage and lowered some deductibles during renewal to save costs, which resulted in a lower premium than last year.

Yang Ting pointed out that the decline in average premiums results from both supply-side efficiency improvements and demand-side structural changes. On the supply side, more precise pricing and lower operating costs enable insurers to offer discounts to low-risk customers. On the demand side, first, lower new car prices and increased sales of affordable models reduce the value of insured objects; second, consumers are more rational, actively reducing unnecessary coverage or increasing deductibles, balancing risk retention and premium expenditure.

Zhu Yunyao also added that factors like longer vehicle usage years (depreciation), improved traffic safety management (e.g., reduced drunk driving leading to fewer accidents), and the application of assisted driving (potentially higher safety levels than humans) may all lead to lower average premiums.

From the perspective of ongoing insurance reform, price optimization remains a constant goal. The entry of more “big players,” especially car company-backed property insurers, will inject vitality into the new energy insurance market.

He pointed out that premiums are the largest cost component in daily EV use, increasingly attracting consumer attention. Car companies entering the EV insurance field will push the industry toward more innovative offerings. As vehicle usage data becomes more comprehensive and rich, the traditional “one-size-fits-all” insurance model will become less suitable for the emerging industry ecosystem.

However, the same insurance researcher also noted that with this year’s reduction of EV purchase tax to half, product restructuring, and the gradual end of price wars, there is potential for new car premiums to rise in 2026.

A Personal View

The Pricing Coefficient for New Energy Vehicle Insurance Should Be “Equalized” as Soon as Possible

Recently, the autonomous pricing coefficient range for new energy vehicle insurance was adjusted again, expanding from [0.6-1.4] to [0.55-1.45], the second expansion since last year. The previous adjustment was in September 2025, from [0.65-1.35] to [0.6-1.4].

In January 2025, the China Banking and Insurance Regulatory Commission, Ministry of Industry and Information Technology, Ministry of Transport, and Ministry of Commerce issued the “Guiding Opinions on Deepening Reform, Strengthening Supervision, and Promoting High-Quality Development of New Energy Vehicle Insurance” (hereafter “Guiding Opinions”). It mentioned that the autonomous pricing coefficient range for EV commercial insurance should be prudently optimized. Properly expanding the range can effectively leverage market mechanisms, better match prices with risks, and improve the scientificity of pricing by market entities. Clearly, the adjustment of the autonomous pricing coefficient range again reflects the implementation of the “Guiding Opinions.”

The author understands that the autonomous pricing coefficient for EV commercial insurance differs from that of fuel vehicles mainly due to risk characteristics, insufficient data accumulation, and different stages of pricing mechanism development. Therefore, policymakers are adopting a “step-by-step, rapid expansion” approach to gradually widen the EV pricing range, avoiding market volatility and giving insurers time to improve data and models.

There are reports that in the second half of this year, the autonomous pricing coefficient for EV insurance will be further adjusted to [0.5-1.5], fully aligning with fuel vehicles. The core risk of insurance lies in claims. Although several insurers have announced phased profitability, high claims ratios remain an issue, with all exceeding 100%. However, indiscriminately raising premiums to cover claims costs is unfair, and penalizing fuel vehicle owners in the process is even more unreasonable.

Recently, some fuel vehicle owners reported that they had not had an accident in a year, but their premiums increased the next year. Insurers explained that because the company suffered losses insuring EVs last year, it had to raise overall premiums. This logic is unconvincing. Fuel vehicle owners have already paid full purchase taxes and road fees, enjoy fewer scrappage subsidies, and face restrictions in some areas. Should they be “cut again” at renewal?

The phased adjustment of the pricing coefficient range for EV insurance is a comprehensive consideration by relevant government departments to balance market stability, data accumulation, policy goals, and fair pricing. But insurers’ insistence on a “reward the good, punish the bad” pricing logic is unacceptable. The author hopes that after the adjustment, insurers will stop relying on “lazy governance” of good drivers to fill gaps, and instead use more market-oriented and precise methods to turn losses into profits.

After expanding the premium fluctuation space, insurers should leverage recent vehicle and owner data, maximize the use of the range, more accurately match risk and premium, and improve underwriting efficiency—allowing low-risk, high-quality drivers to enjoy lower premiums, and high-risk drivers to bear higher costs, thus optimizing overall profitability.

For consumers, the continuous expansion of the autonomous pricing range for EV insurance will better match premiums with risk levels. Premium fluctuations will more effectively encourage drivers to develop good habits, truly reduce risk, and create positive incentives for drivers and the industry as a whole.

Text: Chen Meng Editing: Jiao Yue Layout: Liu Xiaoye

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