How are new energy vehicle sales shaping China's insurance market? 

NEV sales saw a 33.3% increase in Q1 2024.

The Chinese motor insurance market is projected to grow at a compound annual growth rate (CAGR) of 5.4% from $127.4b in 2024 to $158.9b by 2028, according to GlobalData. 

The growth is driven by increasing vehicle sales and the rising popularity of new energy vehicles (NEVs). 

In 2024, the market is expected to grow by 5.2%, bolstered by a 10.2% increase in automobile sales during the first four months of the year, as reported by the China Association of Automobile Manufacturers (CAAM).

A key contributor to this growth is the surge in NEV sales, which made up 30.4% of total vehicles sold in 2023 and saw a 33.3% increase in the first quarter (Q1 2024), Swarup Kumar Sahoo, Senior Insurance Analyst at GlobalData, said.

NEV insurance premiums are significantly higher than those for internal combustion engine (ICE) vehicles. In 2023, NEV premiums averaged CNY4,003, compared to CNY2,209 for traditional motor insurance.

However, limited claims data for NEVs presents challenges for insurers in accurately assessing risks and setting premiums. NEVs have higher accident rates due to the use of new technologies without extensive testing, prompting a 20% rise in premiums in 2023.

To address these challenges, insurers are investing in technologies like big data, artificial intelligence (AI), the Internet of Things (IoT), and machine learning to improve risk assessment and underwriting. 

These technologies also help in detecting fraudulent claims and streamlining the claims process.

Despite regulatory limits on premium increases, larger insurers, such as People’s Insurance Company of China (PICC), are dominating the NEV insurance market, with PICC issuing 2.82 million NEV policies in 2023. 

Additionally, NEV manufacturers like BYD and BMW have entered the insurance space, with several holding licenses to operate in China's insurance market.

In the short to medium term, the lack of claims data will continue to impact profitability for motor insurers in China. However, strategic investments in technology and early entry into the NEV insurance market are expected to support long-term growth in the industry.