GTHT has released a research report indicating that China's new energy vehicle insurance premium scale is in a rapid growth phase. Although the overall industry faces losses, the combined ratio has shown continuous improvement. The report forecasts ample room for premium scale expansion over the next few years, with further potential for enhanced profitability. As a leading Chinese insurer, PICC Property and Casualty has accumulated deep advantages in auto insurance resources, channels, and technology. In 2025, PICC P&C held over 30% of the new energy vehicle insurance market share and is expected to achieve stable profitability first. GTHT maintains an 'Overweight' rating on the industry and recommends PICC P&C (02328) as a stock pick.

Growth in Premium Scale Amid Persistent Losses

The rising number of new energy vehicles in China is driving rapid expansion of the insurance market. In 2025, the industry's premium scale reached 190 billion yuan, a year-on-year increase of 34.8%. New energy vehicle insurance now relies on specific clauses that add coverage for the three-electric system and charging scenarios, forming a risk protection system distinct from traditional fuel vehicle insurance. However, challenges such as high claim frequency and costly repairs for the three-electric system, combined with insurance companies' premium pricing that fails to fully cover risk costs, have led to sustained industry losses.

Limited Pricing Adjustments and High Claim Costs

Under regulatory guidance, China's new energy vehicle insurance has relatively limited room for price adjustments. Pre-sale terms and pricing follow unified industry standards, restricting insurers' ability to independently adjust rates. This makes it difficult to improve rate adequacy by simply reducing coverage or increasing premiums. During the sales process, distribution channels are shifting toward online internet platforms and automaker dealerships, weakening the influence of traditional offline agents. Sales expenses for new energy vehicle insurance are generally lower than for traditional auto insurance. In the after-sales phase, due to technical and qualification barriers as well as component costs, assessing losses and repairing new energy vehicles is complex and expensive, driving up claim costs.

Comparison with the US Market

In the United States, insurance companies benefit from a more market-driven environment, with greater flexibility in clause design and pricing. This allows them to adjust rates to match risk costs more effectively, offering stronger profitability adjustment capabilities. The sales channels and after-sales claim service processes for new energy vehicle insurance in China and the US are broadly similar. Both countries face operational pressures from complex vehicle damage assessments and high repair costs.

Future Growth and Profitability Improvement

The report forecasts that China's new energy vehicle insurance premium compound annual growth rate from 2026 to 2030 could reach 14.1%, providing substantial market expansion. Additionally, as smart driving technology becomes more widespread, the repair market becomes more standardized, and insurers' pricing mechanisms continue to improve, the industry's claim frequency and compensation pressure are expected to gradually ease. This should further enhance profitability.

Risk Warnings

Risks include the potential for slower-than-expected improvement in repair costs for new energy vehicles, as well as uncertainties in the external policy environment.