New Energy Vehicle Insurance in China: Policy and Market Overview

I. Policy Background and Recent Developments

1. Policy Evolution
   • On December 14, 2021, the China Insurance Association released the Trial Clauses for Commercial Insurance of New Energy Vehicles, which first included the “three-electric system” (battery, motor, and electronic control system) within the coverage scope.
   • On January 24, 2025, the Financial Regulatory Administration and three other departments jointly issued the Guiding Opinions on Deepening Reform, Strengthening Supervision, and Promoting High-Quality Development of New Energy Vehicle Insurance, marking China’s first dedicated policy framework for new energy vehicle insurance, aimed at resolving issues of “difficulty in purchasing insurance and high premiums.”
   • On January 25, 2025, the “Good Insurance Purchase for Vehicles” platform was officially launched, with 10 property insurance companies joining initially to ensure high-risk vehicles could also be insured smoothly.
2. Industry Status
   • In 2025, the insurance industry covered 43.58 million new energy vehicles, with premium income reaching 190 billion yuan, a year-on-year increase of 34.8%, providing risk coverage of 159 trillion yuan.
   • The industry incurred an underwriting loss of 5.6 billion yuan, a reduction of 100 million yuan compared to the previous year, with the comprehensive cost ratio decreasing by 1.3 percentage points.
   • There were 143 vehicle series with payout rates exceeding 100%, six more than the previous year, including 106 passenger vehicles and 37 trucks.

II. Core Components of New Energy Vehicle Insurance

1. Definition of New Energy Vehicles
   • Vehicles that operate within the People’s Republic of China (excluding Hong Kong, Macau, and Taiwan) and are driven primarily or entirely by new energy sources, including plug-in hybrid (including range-extended), pure electric, and fuel cell vehicles.
   • Excludes motorcycles, tractors, and special-purpose vehicles.
2. Main Insurance Coverage
   • New Energy Vehicle Loss Insurance: Covers direct damage to the vehicle body, battery and energy storage system, motor and drive system, other control systems, and all original equipment caused by natural disasters or accidents (including fire).
   • Third-Party Liability Insurance: Covers third-party personal injury or property damage resulting from accidents.
   • Occupant Liability Insurance: Covers personal injury to occupants caused by accidents.
3. Special Additional Insurance Options
   • External Grid Fault Loss Insurance: Covers vehicle damage due to external grid faults during charging, such as voltage fluctuations and current anomalies.
   • Private Charging Pile Loss Insurance: Covers damage to privately owned charging piles that meet national standards caused by natural disasters, accidents, theft, or vandalism.
   • Private Charging Pile Liability Insurance: Covers third-party personal injury or property damage caused by private charging piles.
   • Other additional options: Wheel Separate Loss Insurance, Body Scratch Loss Insurance, Additional Equipment Loss Insurance, and Repair Period Expense Compensation Insurance.

III. Unique Characteristics and Challenges of New Energy Vehicle Insurance

1. Differences from Traditional Fuel Vehicle Insurance
   • Core Components: The core of new energy vehicles is the “three-electric system,” accounting for 40%-60% of the total vehicle cost, while traditional vehicles focus on the engine and transmission.
   • New Risk Scenarios: Risks such as charging fires, grid faults, and charging pile damage are unique to new energy vehicles and not covered by traditional insurance.
   • Broader Coverage: New energy vehicle insurance covers driving, parking, charging, and operational states, providing 24/7 risk protection.
2. Industry Challenges
   • High Repair Costs: Limited repair channels, high costs of parts and labor, and integrated manufacturing techniques increase repair difficulty.
   • Higher Accident Rates: New energy vehicles are often driven by younger drivers and used for commercial purposes, with adaptive periods required for smart driving features, leading to higher accident rates.
   • Insufficient Data Accumulation: Short history of accident data for new energy vehicles hampers risk identification and actuarial pricing.

IV. Insurance Purchase Strategies and Practical Recommendations

1. Essential Insurance Combinations
   • Basic Plan: Compulsory Traffic Accident Liability Insurance + Vehicle Loss Insurance + Third-Party Liability Insurance (coverage of at least 1 million yuan).
   • Family Vehicle Plan: Basic plan + Occupant Liability Insurance.
   • High-Coverage Plan: Basic plan + External Grid Fault Loss Insurance + Private Charging Pile Loss Insurance/Liability Insurance.
2. Scenario-Based Additional Insurance Selection
   • Frequent Long-Distance/Use of Public Charging Stations: Prioritize External Grid Fault Loss Insurance to protect against voltage fluctuations at charging stations.
   • Private Charging Pile Owners: Essential to include Private Charging Pile Loss and Liability Insurance to safeguard both the pile and third parties.
   • New Drivers: Consider adding Body Scratch Loss and Wheel Separate Loss Insurance to cover frequent minor damages.
3. Insurance Purchase Considerations
   • Confirm “Three-Electric System” Coverage: Ensure the policy explicitly includes protection for the battery, motor, and electronic control system.
   • Understand Exclusions: Natural battery degradation, unauthorized modifications, and damage from non-compliant operation are typically not covered.
   • Verify Charging Pile Standards: Private charging piles must meet national installation standards; accidents from unauthorized wiring are not covered.
   • Compare Insurance Providers: Prioritize large insurers with strong partnerships with automakers and extensive repair networks, such as PICC and Ping An.

V. Future Development Trends

1. “Vehicle-Battery Separation” Model
   • For battery-swap vehicles, research is underway to develop insurance products where vehicle owners only insure the vehicle body, while battery operators cover the battery.
   • Pilot programs are active in cities like Chongqing and Shenzhen, with broader implementation expected.
2. Risk Grading System
   • Low-speed collision tests at 15 km/h will assess vehicle damage and repair costs to categorize risk levels, linking insurance rates to these levels.
   • This aims to incentivize automakers to reduce collision damage and repair costs from the design stage.
3. Data Sharing Mechanism
   • A collaborative mechanism established by the Financial Regulatory Administration and other departments will promote data sharing among relevant entities to enhance risk assessment and pricing accuracy.

The new energy vehicle insurance market in China is transitioning from “broad pricing” to “risk-oriented” pricing, enabling more precise risk management and sustainable growth.