Underwriting losses of 5.6 billion yuan! How can new energy vehicle insurance overcome the "growth pains?

Source: International Finance News (Guoji Jinrong Bao)

On March 31, the Society of Actuaries and China’s Banking and Insurance Information Disclosure (China Yin Bao Xin) released information that in 2025, China’s insurance industry underwrote 43.58 million new-energy vehicles, generating premium income of RMB 190 billion; the industry incurred an underwriting loss of RMB 5.6 billion, narrowing the loss by RMB 0.1 billion year over year.

Data show that although the underwriting scale of new-energy auto insurance has continued to expand and the loss trend has been somewhat alleviated, the industry as a whole still has not been able to achieve underwriting profitability.

Industry insiders believe that only by building standards and integrating an ecosystem through industrial collaboration can new-energy auto insurance be pushed out of the dilemma of “policyholders complain it’s too expensive, while insurers complain they’re losing money.” Specifically, regulatory authorities should take the lead in establishing an industry data-sharing platform and a vehicle risk tiering system; insurance companies should innovate products such as “vehicle-and-electricity separation,” and strengthen technology-driven loss reduction services; automakers should optimize vehicle safety and the economic efficiency of repairs, and open up for data collaboration.

Narrowing the loss by RMB 0.1 billion

In recent years, China’s new-energy vehicle market has shown strong growth momentum.

According to data disclosed by the China Association of Automobile Manufacturers, in 2025, the production and sales of new-energy vehicles completed 16.63M and 16.49 million units, respectively, up 29% and 28.2% year over year; sales of new-energy vehicle models reached 47.9% of total new car sales, up 7 percentage points from the same period last year.

This has also directly driven rapid growth in the premium scale of new-energy auto insurance. According to data provided by the Society of Actuaries and China Yin Bao Xin, in 2025, China’s insurance industry underwrote 43.58 million new-energy vehicles (including 41.81 million passenger vehicles and 1.77 million freight trucks), up by 12.48 million vehicles year over year, with a year-over-year growth rate of 40.1%; premium income was RMB 190 billion, providing risk protection with an amount of RMB 159 trillion.

However, the trend of continuous losses in new-energy auto insurance still persists. In 2025, the industry underwrote losses of RMB 5.6 billion, narrowing the loss by RMB 0.1 billion year over year; the combined ratio fell by 1.3 percentage points year over year.

There were 143 high-claim vehicle models with a loss ratio exceeding 100% (not yet considering the daily operating and management expense costs of property-casualty insurers); this is up 6 from the previous year, including 106 passenger-vehicle models and 37 freight-truck models.

Regarding the specific circumstances of these high-claim vehicle models, the Society of Actuaries and China Yin Bao Xin stated that they will, through appropriate means, feed information back to relevant vehicle manufacturers, encouraging them to improve the design of vehicle safety and repair economic efficiency, and work together to reduce the vehicle’s total cost of ownership over its entire lifecycle.

“Overall, new-energy auto insurance faces three major challenges,” said Zhang Daoming, interim head of PICC Property and Casualty. First, the claim frequency for new-energy vehicles is high, significantly higher than that of gasoline/diesel vehicles; second, there are insufficient socialized vehicle repair channels, so vehicle repair costs are relatively higher; third, the share of personal-injury cases and the compensation standards both show an upward trend, and average claim payments per case are rising. All of these lead to claim-payment pressure for new-energy auto insurance staying at a high level.

However, positive signals have also emerged in the industry’s development. Zhang Daoming analyzed that first, due to multiple factors including a higher share of older cars, improvements in driving behavior habits, and advances in driver-assistance technologies, the claim frequency for new-energy vehicles is showing a downward trend.

Second, for freight trucks equipped with Automatic Emergency Braking (AEB), the data show that the claims risk is 7% lower than that of trucks not equipped with AEB, mainly reflected in lower average claim payments. According to national standards, starting from July 1, 2026, newly registered heavy-duty commercial trucks will be required to be equipped with AEB; starting from January 1, 2028, newly registered light trucks will be required to be equipped with AEB. This will be an important positive factor for improving claims risk for new-energy trucks.

Finally, a domestic risk-tiering system for new-energy vehicle models is being prepared. Once the tiering system is introduced, it will inevitably push automakers to pay more attention to and continuously improve both vehicle safety and repair economic efficiency, thereby ultimately reducing vehicle repair costs and benefiting consumers of new-energy vehicles broadly.

“Overall, in 2026, the combined ratio for new-energy auto insurance will further improve, and the level of profitability will further increase,” Zhang Daoming said.

Leading insurers turn profitable first

Against the backdrop that the industry as a whole has not yet been profitable, leading insurers have actively leveraged advantages in data, pricing, channels, costs, and other areas to build leading positions in the field of new-energy auto insurance, gradually achieving underwriting profitability.

According to the latest disclosed annual reports, in 2025, Taikang Property & Casualty’s original insurance premium income from new-energy auto insurance reached RMB 1.59M, accounting for 22.6% of auto insurance premium. Chen Hui, General Manager of Taikang Property & Casualty, stated that through dedicated operations tied to automaker brands, technology-enabled claims loss reduction, and further strengthening of the service system, the business costs of new-energy auto insurance have improved significantly. “At present, the home-use passenger-vehicle new-energy business has entered a stable profitable range.”

As a typical representative of automaker cross-industry entry into insurance sales, BYD Insurance also fought a “comeback battle.” The solvency report shows that in 2025, the company achieved insurance business revenue of RMB 25.02B, doubling year over year; net profit was RMB 2.87B, a significant turnaround from RMB -169 million in 2024.

Looking further at performance indicators, in 2025, BYD Insurance’s cumulative combined ratio was 102.49%, down sharply from the extreme 308.81% level in 2024; the expense ratio optimized from 74.88% to 5.21%, effectively diluting fixed costs through scale effects; the loss/claims ratio decreased from 233.92% to 97.28%, with ongoing strengthening of controllability of claims costs.

Wu Xiaowei, Global Partner at McKinsey and Head of Insurance Consulting Business for Greater China, analyzed that this is the result of the combined effect of technological progress, data accumulation, and regulatory guidance.

First, technological progress in new-energy vehicles follows two core paths: “preventing accidents from happening” and “mitigating the consequences of accidents/lowering repair costs.” This has significantly improved vehicle safety, which in turn drives down accident occurrence rates and average claim payments, ultimately optimizing claims costs for new-energy auto insurance.

Second, data application in the new-energy auto insurance industry focuses on scenario-based risk analysis. Its core is using data to accurately identify the vehicle’s true usage characteristics, and conducting dynamic quantitative assessments across three risk dimensions: “vehicle,” “driver/people,” and “behavior,” thereby driving optimization of risk management and insurance pricing models.

Third, to promote healthy, high-quality development of the new-energy auto insurance industry, in January 2025, the “Guiding Opinions on Deepening Reform, Strengthening Regulation, and Promoting High-Quality Development of New-Energy Vehicle Auto Insurance” was released. The goal is to, through reforms and regulation, improve a risk-based, market-oriented rate formation mechanism, fully play the role of new-energy auto insurance in loss compensation, risk reduction, and risk management, reduce the frequency of accidents and the extent of losses, and provide solid support for effectively controlling and lowering the overall claims level.

More efforts from multiple angles to seek a breakthrough

Looking ahead, to fundamentally reshape the new-energy auto insurance ecosystem and push the industry toward a new win-win situation for both owners and insurers, the new-energy auto insurance industry is continuously deepening reforms, using diverse measures to break through development bottlenecks.

In terms of pricing mechanisms, the self-determined pricing coefficient range for new-energy auto insurance has been expanded from the original [0.6—1.4] to [0.55—1.45], which is the second expansion of this coefficient range since September 2025. Next, the range for the self-determined pricing coefficient for new-energy auto insurance is expected to be further expanded and aligned with gasoline/diesel vehicles.

Chen Haiye, a senior analyst at Huachuang Securities, pointed out that from a theoretical perspective, high claims should force pricing to move upward—that is, to ensure risks are fully priced. But for a long time, due to constraints on the self-determined pricing coefficient range, new-energy vehicles—especially some high-risk models—have clearly been underpriced. “This time, regulators have opened 0.05 of pricing space both upwards and downwards, which may help improve the degree of pricing adequacy and partially relieve insurers’ operating pressure in new-energy auto insurance.”

Meanwhile, the industry is accelerating its exploration of insurance under the “vehicle-and-electricity separation” model. So-called “vehicle-and-electricity separation” means separating the ownership and right to use the vehicle and the battery for new-energy vehicles. Consumers can manage and maintain the battery through battery leasing, battery swapping services, and other methods by professional institutions, while only retaining ownership of the vehicle body and enjoying the right to use the battery.

In January 2025, four departments including the National Financial Regulatory Administration jointly issued the “Guiding Opinions on Deepening Reform, Strengthening Regulation, and Promoting High-Quality Development of New-Energy Vehicle Auto Insurance,” which proposed researching and exploring automobile commercial insurance products under the “vehicle-and-electricity separation” model, to provide science-based and reasonable insurance protection for relevant new-energy vehicles.

Local authorities are also actively following up. In February 2026, four departments including the Shenzhen Municipal Local Financial Regulatory Administration jointly issued the “Action Plan (2026—2028) for Insurance Industry Support of Technological Innovation and Industrial Development,” proposing to explore automobile commercial insurance products under the “vehicle-and-electricity separation” model in specific scenario areas such as urban transportation.

With policy guidance and insurers stepping up, Chongqing Qiantou Logistics recently adopted the “vehicle-and-electricity separation” model auto insurance to complete the replacement of the first batch of 10 new-energy trucks. Compared with traditional procurement methods, the initial investment cost was reduced by 30%—50%, and insurance premiums were also lowered by about 30%.

It is worth mentioning that with the continuous evolution of new-energy vehicle technology, new-energy auto insurance has also welcomed new market variables. On March 29, the Beijing Municipal Financial Regulatory Administration announced at the 2026 Zhongguancun Forum annual conference “Major Achievements Special Press Conference” that it would take the lead in launching the development and application of commercial insurance for intelligent connected new-energy vehicles, marking a key step in the insurance industry’s important exploration to serve new quality productive forces and support the intelligent connected vehicle industry.

According to the introduction, the new products basically follow the existing commercial new-energy auto insurance framework. Following the principle of “overall stability with partial optimization,” they mainly provide risk protection for specific intelligent driving scenarios and losses of both software and hardware that consumers and auto companies care about, and can be uniformly adapted for intelligent connected new-energy vehicles across all L2 to L4 levels.

“New-energy auto insurance has reached a turning point in the market. This is a strategic opportunity to reshape the auto insurance landscape,” said Wu Xiaowei. Insurers need to start from multiple dimensions including strategic planning, business model innovation, technology application, and risk management, and build a transformation path across the full chain. Only by deeply integrating the insurance industry’s professional accumulation and the technology insights of the new-energy vehicle industry, and forging the two domains’ practices and advantages into a blade for a breakthrough, can insurers cut through in the fiercely competitive market, help auto insurance businesses sail forward through the wave of new-energy technology development, open up a second growth curve, and jointly drive the industry toward a new journey of high-quality development.

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