Recently, with the soaring insurance premiums for electric vehicles on the mainland, many car owners have had to sell their electric cars and switch to gasoline cars.
According to Tencent’s original in-depth column “High Beam,” Li Deng (pseudonym) spent over 200,000 yuan to purchase a Tesla Model 3 in 2021, but the resale value in the second-hand market is now around 120,000 yuan, a discount of over 50%.
The main reason for the painful decision to sell the car at a discount is that the insurance premium for the car was just over 7,000 yuan three years ago, but this year Ping An Insurance issued a price as high as 22,800 yuan, about 20% of its current second-hand market price. Other insurance companies have simply refused to insure it.
Li Deng said, “With a car worth around 110,000 yuan and insurance costing over 20,000 yuan, plus charging fees and parking fees, I would be spending around 40,000 to 50,000 yuan a year. The costs are simply staggering. I’d rather sell the car and take taxis, than to spend over 20,000 yuan on insurance.”
It’s not just Tesla, insurance premiums for other brands of electric vehicles have also significantly increased, and the phenomenon of being refused insurance coverage by insurance companies is not uncommon. Xiaopeng Motors’ electric vehicles have also become subject to refusals. Posts on social media platforms discussing the large increase in electric vehicle insurance premiums or refusals are widespread. Many car owners told Tencent’s “High Beam” that insurance prices have risen to an unacceptable level, feeling like they are being “nickel-and-dimed.”
As electric vehicles sell well in mainland China, their insurance costs are also rising. Data from the National Monitoring and Management Platform for New Energy Vehicles shows that in 2023, the average commercial insurance premium for electric vehicles reached 4,003 yuan, about 1.8 times that of traditional gasoline vehicles. Dongwu Securities predicts that in 2024, the average premium for new energy vehicles will reach 5,001 yuan.
Despite the increase in insurance premiums, it has not brought increased profits to insurance companies. According to Ping An Property Insurance’s annual report, in 2023, the number of insured new energy vehicles and the average premium increased in the car insurance market, but underwriting profits narrowed. One of the reasons for the overall higher comprehensive cost rate in the industry is the high claims ratio for new energy vehicles.
During the 2023 performance announcement, Yu Ze, Vice President of China Insurance Group and President of PICC Property Insurance, revealed that the comprehensive cost rate for commercial insurance for electric vehicles at PICC Property Insurance is about 7 percentage points higher than the overall vehicle insurance rate; at the industry level, the cost rate for electric vehicle insurance is expected to be around 10 percentage points higher. Electric vehicle insurance is still a continuous loss-making business for insurance companies.
A high claims rate is one of the reasons for the high insurance premiums for electric vehicles.
Taiping Property Insurance Chairman Gu Yue previously stated at an annual briefing that the claims rate for electric vehicles at Taiping Property Insurance is twice as high as that for gasoline vehicles.
In addition, the high technology content of electric vehicles leads to higher costs for replacing parts after accidents.
Xu Yuchen, a founding member of the China Actuarial Association, gave an example, saying that when encountering a claim, repairing a gasoline car costs about 500 yuan at most, maybe up to 1,000 to 2,000 yuan; but many electric vehicles have electronic components related to autonomous driving on the claims list, which can cost several thousand or even tens of thousands of yuan.
Car owners complain about high costs, insurers about losses, leaving electric vehicle insurance in a dilemma of being “unfavorable” at both ends.
Issues with electric vehicle insurance have recently become a focus of concern for car owners. On Tencent’s website, more than 2,700 netizens participated in discussions on the news.
Netizens have expressed that the maintenance costs for electric vehicles are indeed higher than gasoline vehicles.
“Xiaoqi” said, “The maintenance costs for electric cars are much higher than gasoline cars! Not to mention battery issues, even minor scratches or accidents can easily damage the cameras or radars around the electric car, not to mention if the battery case is deformed or damaged, it can cost tens of thousands!”
Some netizens also feel that insurance companies denying coverage is not appropriate. “Jinge Tiema” said, “No claim, no sale of insurance; sell insurance, no claim. Good business model.” “Fengyu Ren’ai” was more direct, stating, “Do not know how to do business if losing money.”