China’s premiums grow sixfold amidst new energy vehicle adoption

But higher claims frequency and repairs challenge profit for some insurers.

China continues to dominate the global market for new energy vehicles (NEVs), with related insurance premiums increasing sixfold over the past five years, according to a report by AM Best. 

NEV premiums now account for 11.5% of China’s total motor insurance business, and AM Best expects this trend to remain a key driver of market growth.

The expansion of NEV insurance is supported by government policies, growing consumer demand for sustainable transportation, and advancements in technology. 

However, the higher claims frequency and repair costs for NEVs are challenging profitability for small and medium-sized insurers. 

In contrast, large insurers are leveraging their scale to expand market share, maintaining a competitive advantage in the growing segment.

China's motor insurance market is dominated by three major players: People’s Insurance Company of China, China Pacific Property Insurance Co., Ltd., and Ping An Insurance (Group) Company of China, Ltd. All three hold about 70% of market premiums. 

Following comprehensive motor insurance reforms in 2020, these insurers have posted favourable underwriting profits, with a combined ratio on motor lines consistently below the market average over the past seven years. 

Smaller insurers, however, have struggled to achieve profitability, particularly in NEV insurance, where combined ratios are generally higher than those for traditional motor insurance.

Automobile manufacturers are increasingly entering the insurance space by acquiring domestic insurance brokers and establishing their own insurance companies. 

AM Best sees this development as altering the competitive landscape and boosting collaboration.