China’s car market is now generally recognized to be the largest one in the world, and the adoption of electrification is happening at a rapid pace. However, Chinese consumers are now dealing with an unexpected side effect of the push towards “new energy” vehicles: significantly increased insurance premiums.
CNBC reports that insurance premiums for new energy cars (which includes EVs and hybrids) are, on average, 20 percent higher than they would be for traditionally fueled vehicles. According to Wenwen Chen, Director at S & P Global Ratings, who is in charge of the firm’s research for China Insurance, companies have found that the loss ratio is significantly higher for new energy vehicles than for internal combustion vehicles. This is one of many factors that go into determining insurance pricing, and Chen states that it may be higher due to new energy vehicles using parts that are not yet mass-produced and therefore are costlier.
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Another possible reason she mentioned is the higher potential for costly incidents. Data from the Chinese Ministry of Energy Management’s Fire and Rescue Department shows that in the first quarter of this year, 640 new energy vehicle fires have been reported, 32 percent greater than over the same period in 2021. That number is also far higher than the total increase in fires for transportation vehicles overall, which was 8.8 percent. The ministry has further stated that the risk of fires is greater for NEVs than for traditional vehicles.
The increase in incidents comes on the heels of massive growth in the new energy vehicle segment. The segment accounted for 3.26 million sales from January to August this year, more than double the totals for the same period in 2021 and accounted for approximately 25 percent of the total passenger car sales in the country. The growth potential of this segment has manufacturers scrambling to introduce new products, with even non-automotive companies like Huawei entering the fray. The development of new EVs is considered to be simpler than other types of vehicles, encouraging the entry of more players to the segment. However, there is as yet no specific data on whether all this leads to an increase in accident risk.
