The Rise of AI in Chinese Insurance: A New Era for EV Policies
The insurance sector in China is witnessing a significant transformation, particularly in the realm of electric vehicle (EV) policies. With the increasing adoption of artificial intelligence (AI), insurers are finding innovative ways to reduce costs and improve pricing accuracy. This shift is not only helping insurance companies turn a profit but also benefiting EV owners through more competitive premiums.
A Profitable Turnaround for EV Insurance
Despite the broader automotive sector facing a bearish outlook, the EV insurance market in mainland China is showing signs of recovery. Industry officials and analysts suggest that this turnaround could accelerate the pace of electrification on the country’s roads. “Heavy losses in the insurance business used to be a big hurdle for the EV industry’s fast-track growth,” said Wang Feng, chairman of Shanghai-based financial services group Ye Lang Capital. “As the major insurance players make profits from underwriting policies, EV owners will also benefit from lower premiums.”
According to the latest available data from the China Association of Actuaries (CAA), mainland insurers posted a combined loss of 5.7 billion yuan (US$825 million) from underwriting EV policies in 2024. However, this figure is expected to change as the industry adapts to new technologies and strategies.
Insurance firms generated more than 200 billion yuan in premiums from EV policies last year, an increase of 30 per cent from 2024, according to state news agency Xinhua. Early last year, Ping An Insurance (Group) and China Pacific Insurance Group, two of the mainland’s top insurers, announced they would report a profit from underwriting EV policies for 2025.
The Role of AI in Enhancing Efficiency
Zhang Lei, founder and CEO of Cheche Group, an insurtech company with clients including the mainland’s largest carmakers such as FAW and GAC, highlighted the importance of AI-powered tools in improving performance. “Intelligent pricing and intelligent claim processing are the two crucial areas we use our AI tools and technologies to serve our clients since they represent the two most important scenarios in the insurance business,” he said. “By utilising AI tools, risks in premium pricing and claims are reduced.”
In China, car insurers’ policy prices are based on the guidance set by the National Financial Regulatory Administration (NFRA). The regulator maps out the pricing mechanism in accordance with factors such as vehicle type and usage. Insurance companies can raise or lower the premiums they charge individual drivers based on their risk profiles, but within a specific range.
Challenges and Opportunities in EV Insurance
The average EV insurance premium in China was 4,487 yuan a year, according to data compiled by insurance broker Aon. However, Chinese EV owners, most of whom are young motorists, were 2.2 times more likely than users of petroleum-powered cars to file claims, according to Zhang Xiaolei, executive vice-president of CAA. The repair costs for battery-powered vehicles are also higher than petrol cars. Most ride-hailing services on the mainland are also operated by EV owners, whose vehicles carry higher accident risks.
Insurance company officials said they were trying to work out different pricing systems to cover risks arising from ride-hailing services. EV users normally pay an insurance premium at least 20 per cent higher than those who drive petrol-powered cars.
Cheche’s Zhang noted that the increasing use of technology had largely reduced insurers’ labour costs and enhanced pricing accuracy. “AI tools are efficient in damage assessment to minimise insurers’ losses,” he said. “The increasing use of AI is creating new value for the insurance industry.”
The Broader Impact on the EV Sector
New EV sales in China accounted for about 70 per cent of the global total last year, according to data from the China Passenger Car Association (CPCA). However, despite this growth, the broader automotive sector is facing challenges. Deutsche Bank predicted that China’s car sales – both EVs and petrol cars – would fall 5 per cent this year, while UBS forecast a 2 per cent decline, citing overcapacity and narrowing government support.
Paul Gong, head of China automotive research at UBS, said in January that EV deliveries would buck the trend, with sales expected to rise 8 per cent year on year.
Insurance is not the only industry related to the EV sector that is struggling to generate profit. Chinese car dealers are also being hit by a fierce price war and a growing preference among manufacturers and shoppers for e-commerce sales. Fourteen major industry players reported a 10 per cent decline in sales in the first half of 2025, following an 18 per cent decline a year earlier, according to the CPCA.
