In 2025, the operating loss of compulsory auto insurance reached 23 billion yuan. This is the figure from the 2025 annual compulsory auto insurance business announcement recently released by the National Financial Regulatory Administration. A review by Yicai found that since the comprehensive auto insurance reform in 2020, the operating losses of compulsory auto insurance have expanded for three consecutive years. The role of compulsory auto insurance in protecting people's livelihoods is beyond doubt. However, the continuously rising scale of losses has led some policyholders to worry about whether their compulsory auto insurance premiums will increase. Yicai interviewed multiple insurance company executives and industry experts on this matter, and their answers were largely consistent: raising the base rate for compulsory auto insurance is no easy task鈥攊ts rate adjustment must follow strict legal procedures, the probability of a nationwide uniform adjustment of the base rate in the short term is extremely low, and short-term losses will not be passed on to consumers.
Underwriting Losses Grew 5.7-Fold in Nearly Five Years
Compulsory auto insurance, officially known as "motor vehicle traffic accident liability compulsory insurance," is a mandatory liability insurance under which insurance companies compensate victims (excluding persons in the insured vehicle and the insured) for personal injury, death, and property damage caused by traffic accidents involving the insured motor vehicle, within the liability limit. It is also China's first compulsory insurance system established by national law, and since its launch in July 2006, it has become one of the insurance businesses with the broadest coverage and the highest level of public attention.
Data from the National Financial Regulatory Administration shows that in 2025, the coverage and protection level of compulsory auto insurance continued to rise: insured motor vehicles reached 386 million, including 347 million automobiles, up 3.8% and 3.9% year-on-year respectively; the guaranteed amount for the year was 76.8 trillion yuan, up 3.4% year-on-year. At the same time, the average premium per vehicle was 762.1 yuan, down slightly by 0.1% year-on-year, keeping the burden on car owners stable.
However, a prominent phenomenon is that the growth rate on the claims side is significantly faster than on the premium side. Data shows that in 2025, compulsory auto insurance premium income was 285.2 billion yuan, up 5.2% year-on-year, while claims payments were 252.4 billion yuan, up 11.6% year-on-year, 6.4 percentage points higher than the premium income growth rate. This resulted in an underwriting loss of 29.6 billion yuan for compulsory auto insurance in 2025. After allocating 6.6 billion yuan in investment returns, the final operating loss was 23 billion yuan.
In September 2020, as part of the comprehensive auto insurance reform, the liability limit for compulsory auto insurance was raised from 122,000 yuan to 200,000 yuan, the upper limit of the rate floating coefficient remained unchanged at 30%, and the lower limit was expanded from -30% to -50%, increasing the rate discount for consumers with no claims. A review by Yicai found that if the time span is extended to the five years after the reform, compulsory auto insurance underwriting losses have generally shown an expanding trend, growing from a loss of 4.4 billion yuan in 2021 to 29.6 billion yuan in 2025, a 5.7-fold increase over five years. After allocating investment returns, pre-tax operating profits of 4.2 billion yuan and 3.1 billion yuan were achieved in 2021 and 2022 respectively; but from 2023 onward, it turned to an operating loss of 6.41 billion yuan, and has continued to expand since then.
The financial reports of leading companies better illustrate the problem. A review of the 2025 compulsory auto insurance financial reports of the "big three" property insurance companies found that all of them were in an operating loss position for their compulsory auto insurance business in 2025: PICC P&C's year-end cumulative operating profit turned from 8.1 billion yuan in 2024 to a loss of 2.314 billion yuan in 2025; Ping An P&C's operating loss expanded from 1.65 billion yuan in 2024 to 3.404 billion yuan in 2025; and CPIC P&C turned from an operating profit of 236 million yuan in 2024 to a loss of 1.379 billion yuan in 2025.
However, viewed by vehicle type, the bulk of the losses does not come from family cars. In 2025, both CPIC P&C and Ping An P&C achieved operating profits in their compulsory auto insurance business for family cars.
"Claims costs directly affect the operating results of compulsory auto insurance," said Yu Fei, assistant president of China Life P&C, at a related press conference, explaining that the continued rise in compulsory auto insurance claims costs in 2025 was the result of multiple objective factors stacking up. Specifically, the intensity of motor vehicle use continued to increase, with the number of compulsory auto insurance claims rising 7.3% year-on-year, constituting the fundamental factor behind rising claims costs; personal injury protection levels also improved, with death and disability compensation uniformly calculated based on per capita disposable income of urban residents, and rising income levels pushing up compensation standards; medical expenses rose structurally, with advances in medical technology and increased costs of consumables and examinations directly transmitted to claims costs; the proportion of new energy vehicles rose rapidly, with the industry underwriting 43.58 million such vehicles in 2025, up from 8.9% the previous year to 12.1%, and new energy vehicles have higher claim frequencies and higher repair costs, with overall operations in a loss range; and claims services continued to improve, with the expansion of advance payment and police-insurance coordinated rapid claims processing making claims data more complete and expenditures more adequate.
"From the perspective of the rate floating mechanism, car owners who drive safely and have no at-fault accidents for many years enjoy premium discounts, while the premium surcharge for vehicles with claims is limited (the compulsory auto insurance floating range itself is relatively narrow). Combined with background factors such as annual increases in personal injury compensation standards and the expanding base of claim cases brought by continuous growth in motor vehicle ownership, the fact that claims are growing faster than premiums is actually structural and trend-based. This precisely shows that compulsory auto insurance has paid out what should be paid and provided the protection it should provide, with money spent where it matters most," Long Ge, deputy director of the Innovation and Risk Management Research Center at the University of International Business and Economics and co-founder and general manager of Zhongtuobang, told reporters.
Claims Pressure in 2026 Will Not Ease
Judging from the assessments in the actuarial reports on compulsory auto insurance from leading companies, claims pressure in 2026 will still not be light.
PICC P&C expects that the claims ratio on compulsory auto insurance policies will continue to rise in 2026, with pressure mainly coming from two sources: first, the proportion of new energy vehicles will continue to increase. In 2025, China's new energy vehicle production and sales exceeded 16 million units, with new energy vehicle sales accounting for 47.9% of total new car sales; the China Association of Automobile Manufacturers expects new energy vehicle sales to reach 19 million units in 2026. Since new energy vehicles have a significantly higher claim frequency than traditional fuel vehicles, an increased proportion will directly push up claims costs. Second, compensation standards will continue to rise with income and price levels, putting upward pressure on the average claim amount per policy in the future.
Ping An P&C's assessment is also that compulsory auto insurance claims costs in 2026 will "rise slightly" compared with 2025, with the final result depending on the combined impact of both positive and negative factors. Unfavorable factors include higher personal injury compensation standards, rising labor and parts costs, rising medical expenses, and growth in non-motor vehicle ownership; favorable factors include improved road environments and the application and popularization of advanced driver assistance technology鈥攖he penetration rate of L2-level assisted driving in new cars exceeded 45% in 2025 and is expected to exceed 50% in 2026, which in the long run is expected to reduce overall road risk.
In addition, the rapid iteration of new energy vehicle manufacturing technology, rapidly changing repair costs, and possible new rules on personal injury disability assessment bring great uncertainty to the average claim amount per policy; fuel price fluctuations and changes in the new-to-old vehicle mix brought by an overall decline in new car sales in 2026 are also reshaping the distribution of risk.
"Driven by rigid factors such as higher personal injury compensation standards and a rising proportion of new energy vehicles, underwriting losses may persist, but the level of protection will steadily improve," Long Ge said.
However, an auto insurance executive at another insurance company said that compulsory auto insurance losses are unlikely to expand rapidly in a short period, mainly because after the slowdown in new car sales, which carry relatively higher claims this year, their proportion will also decline relatively, but compulsory auto insurance is still far from turning a profit.
Will Premiums Rise?
For consumers, the most practical question brought by years of compulsory auto insurance losses is: will premiums rise?
Multiple interviewed insurance company executives and industry experts believe that the probability of an upward adjustment of the base rate for compulsory auto insurance in the short term is very small.
Long Ge explained that compulsory auto insurance operates under a government-approved "no profit, no loss" pricing mechanism, using a nationally unified base rate and terms. The actual premium is determined by multiplying the benchmark price by a floating coefficient linked to claim records, and safe driving can enjoy downward floating discounts. Adjustments to the base rate of compulsory auto insurance require regulatory approval, and insurance companies have no authority to raise prices on their own; such adjustments must follow strict legal procedures.
"Changing compulsory auto insurance rates is not that easy," said another chief actuary at a large property insurance company. The Regulations on Compulsory Motor Vehicle Traffic Accident Liability Insurance stipulate that the State Council's insurance regulatory authority may, based on the overall profitability or loss situation of insurance companies' compulsory motor vehicle traffic accident liability insurance business, require or permit insurance companies to adjust premium rates accordingly. If the rate adjustment range is relatively large, the State Council's insurance regulatory authority should hold a hearing. In 2007, the former China Insurance Regulatory Commission held a corresponding hearing on compulsory auto insurance rate adjustments.
"The probability of a nationwide uniform adjustment of the base rate in the short term is extremely low," Long Ge said. In terms of average premium per vehicle, due to the rate floating method, increased emphasis on safe driving, and the introduction of new traffic regulations, the average compulsory auto insurance premium per vehicle has shown a downward trend in recent years, with the average premium per vehicle at 762.1 yuan in 2025, down 0.1% year-on-year. "Short-term losses are borne by the industry and will not be passed on to consumers. Regulators prioritize guiding the industry to resolve losses through cost reduction and efficiency improvement," Long Ge said.
PICC P&C stated in its compulsory auto insurance report that the company will further strengthen refined management of auto insurance, increase efforts to reduce costs and improve efficiency, and strive to reduce the impact of external factors on rising claims costs.
Long Ge believes that from the perspective of insurers, in response to years of operating losses in compulsory auto insurance, they mainly reduce costs and improve efficiency by regulating competition, cutting expenses (such as "integration of reporting and execution"), and improving claims efficiency (such as AI damage assessment and police-insurance coordination). For new energy vehicle insurance, claims costs can be reduced by coordinating with automakers to optimize repair costs, while investment returns can be used to partially offset losses.
On the other hand, industry insiders analyze that consumers generally purchase compulsory auto insurance and commercial auto insurance from the same insurance company. When commercial auto insurance is included, the auto insurance business as a whole remains profitable, and regulators do not have a strong incentive to push for rate adjustments.
"Actually (compulsory auto insurance losses) do not have a big impact, and after combining with commercial insurance, auto insurance as a whole is quite profitable," said the chief actuary mentioned above.
Data from the National Financial Regulatory Administration shows that from January to August 2026, the industry's comprehensive cost ratio for auto insurance fell to 95.8%, with operations and management continuing to improve.
As for an individual's compulsory auto insurance rate, on top of the base rate, premiums may rise due to at-fault traffic accidents or serious violations such as drunk driving. Under the current compulsory auto insurance floating coefficient scheme, vehicles with no at-fault traffic accidents for three consecutive years or more can enjoy a premium discount of at least 30% to 50%; conversely, premiums for vehicles with frequent claims will gradually rise, with a maximum surcharge of 30%.
However, the auto insurance executive mentioned above said that the long-term trend of compulsory auto insurance rates is still difficult to judge鈥攃ompulsory auto insurance premiums have not been adjusted for many years, while personal injury compensation standards and parts prices have continued to rise, and it remains to be seen to what extent future improvements in intelligent technology and road safety environments can offset these effects. He also suggested that for new energy vehicles with higher claims, compulsory auto insurance rates could implement differentiated pricing by energy type.