## Why China's Booming EV Market is Costing Insurers Billions in Losses

China's electric vehicle insurance sector has become a profitability nightmare. In 2024 alone, insurers hemorrhaged 5.7 billion yuan ($802 million) underwriting EV policies, despite collecting nearly 141 billion yuan in premiums. The gap reveals a fundamental problem: the market is growing far faster than insurers' ability to manage risk.

### The Perfect Storm: Why EV Claims Are Exploding

The numbers tell a stark story. EV owners file claims at roughly double the rate of traditional car owners—a gap that's destroying underwriting margins. With over 20 million new energy vehicles already on Chinese roads and sales continuing to surge past gasoline vehicles in multiple cities, the pressure is only intensifying.

The root cause? EV repair economics are fundamentally different. Batteries represent approximately one-third of a vehicle's total value, and damage is commonplace. Mounted beneath the chassis, they're vulnerable to speed bumps and road debris. Replacing a battery often costs more than fixing the rest of the car entirely. Add in scarce specialized components, chips that are difficult to source, and the reality that most repairs require authorized service centers—often at premium Tesla-certified or OEM shops—and repair bills skyrocket beyond what traditional insurers budgeted for.

Qin Lu, CEO of Greater China at Aon Plc, highlighted the core challenge: insurers struggle to differentiate between vehicle brands, models, and actual loss patterns. Without this granularity, pricing becomes guesswork. By his assessment, the sector may need three more years before reaching profitability.

### Regulators Step In: New Rules Reshape the Game

Recognizing the crisis, Chinese regulators launched their first-ever EV and plug-in hybrid insurance guidelines in January 2025. The strategy addresses three fronts: standardizing coverage, reducing repair costs, and forcing automakers to collaborate with insurers.

The most pivotal change involves data access. Automakers collect extensive information on battery health, driving behavior, and vehicle usage patterns—data that insurers have historically been locked out of. New regulations mandate cross-industry data sharing to help insurers build more accurate risk models and price policies fairly.

A government platform called "Easy to Insure" has already matched over 500,000 EV owners with policies worth nearly 495 billion yuan combined. While it won't guarantee the lowest premiums, it ensures no one is denied basic coverage.

Simultaneously, law enforcement is pressuring automakers and suppliers to cut replacement part prices. Greater transparency in repair chains and supply logistics should eventually reduce costs, though progress remains gradual.

### The Prize: A Market Worth Betting On

Despite current losses, the EV insurance opportunity is too massive to ignore. Industry analysts project premiums will reach 500 billion yuan by 2030—representing over one-third of China's entire auto insurance market. The sector's three heavyweights—Ping An, PICC, and China Pacific Insurance—control more than 65% of the market, while smaller players struggle to compete without sufficient data or operational scale.

The tide is turning. Ping An reported its EV business turned profitable in 2024, thanks to new analytical tools that identify ride-hailing drivers and model repair economics. Competitors are experimenting with usage-based pricing models that leverage real-time driving data to adjust premiums dynamically.

Car manufacturers themselves are making bold moves. BYD, Tesla, and emerging players like Xiaomi are launching dedicated insurance arms, betting that vertical integration could provide a competitive advantage in an increasingly complex market. These moves signal confidence that whoever masters EV insurance will shape the industry's future.

The loss-making present may be the price of admission to a far more lucrative tomorrow.