Navigating Rising Insurance Costs for New Energy Vehicles: Expert Tips for Cost-Effective Coverage

As of the end of 2024, the number of electric vehicles (EVs) in China has reached 31.4 million. With EVs entering households as “energy-efficient and intelligent” options, the costs associated with insuring these vehicles have become a new focus for car owners. Insurance premiums for EVs priced around 200,000 yuan are now comparable to those for gasoline cars valued at 500,000 yuan. Some owners, despite not having filed any claims, are facing premium increases. Behind these phenomena is a comprehensive restructuring of the pricing logic for EV insurance.

On May 20, Yuan Lei, head of new energy vehicle insurance at Zhong An Insurance, joined the “520 Wealth Festival” hosted by the Daily Economic News to unravel the secrets of pricing from an industry perspective. He stated, “The core of EV insurance is not the vehicle price, but the dynamic balance of risk costs.”

During the conversation, Yuan Lei delved into key topics such as the pricing logic driven by the loss ratio and the intelligent upgrade of claims processes. He also provided practical solutions for common concerns among car owners, such as strategies for reporting minor scrapes and a guide for avoiding pitfalls in online insurance purchasing.

Why Are EV Insurance Premiums Increasing Despite Traditional Logic?

The recent market trend shows that the premiums for 200,000 yuan EVs are now at the same level as those for 500,000 yuan gasoline vehicles. What is the cause behind this phenomenon?

Yuan Lei explained that traditionally, the insurance premium is positively correlated with the vehicle purchase price. For instance, the annual premium for a 200,000 yuan gasoline car typically ranges from 3,000 to 5,000 yuan for coverage such as collision and third-party liability insurance, while the same coverage for a 500,000 yuan gasoline car can reach 6,000 to 7,000 yuan.

However, the current market presents a significant discrepancy: the annual premium for 200,000 yuan EVs is generally between 6,000 and 7,000 yuan, or even higher, leading to what is termed a “premium inversion.” This creates the perception among consumers that they save money on purchasing the car but spend more on insurance.

The root cause of this phenomenon lies in the fundamental differences in the pricing mechanisms of insurance companies. The core basis for insurance pricing is the loss ratio (the ratio of claims paid to premiums collected), which is directly related to claims frequency and average claims amounts. Data shows that both the claims frequency and average claims amounts for EVs are significantly higher than those for gasoline vehicles. This discrepancy can be attributed to three main factors:

• Technology Iteration Speed: The technology iteration cycle for EVs is only one year, compared to four to six years for gasoline vehicles. For example, millimeter-wave radar can be upgraded to laser radar within a year. This rapid iteration results in high maintenance costs for parts, directly increasing the loss ratio.
• Manufacturing Characteristics: To lower production costs, EVs often use integrated body designs. However, repairs after accidents may require replacing multiple related components, unlike gasoline vehicles, which typically only need a bumper replacement. This significantly raises repair costs and claim amounts.
• Driving Behavior: EVs excel in acceleration and have features like energy recovery and single-pedal driving, which alter driving habits. Additionally, the demographic of EV owners tends to be younger, leading to a higher frequency of claims compared to gasoline vehicles.

It is important to note that the industry generally anticipates that as EV technology matures, the pace of iteration slows, supply chains improve, and driving habits stabilize, the loss ratio for EVs will gradually decrease, helping to bring overall insurance premiums back into a reasonable range.

Premium Increases Despite No Claims: Understanding the Factors Behind This Trend

Many car owners report that even without any claims throughout the year, their premiums still increase the following year. This contradicts the traditional logic of “no claim, lower premium.” What are the underlying drivers of this pricing trend?

Yuan Lei elaborated that in traditional insurance practices, car owners believe that their premiums should decrease if they do not make any claims. However, there is a possibility of premiums increasing for EVs regardless of claims history. This phenomenon can be analyzed through the underlying logic of the insurance pricing mechanism.

The “no claim, enjoy a discount” rule in the car insurance industry is primarily implemented through the No Claim Discount (NCD) coefficient, which is uniformly set by the industry based on a vehicle’s historical claims record. Typically, if a vehicle did not have any claims in the previous year, the NCD coefficient should lower the premium for the following year. However, some EV owners still face premium increases due to two main reasons:

• Structural Adjustment of Overall Discount Coefficient: The insurance pricing system includes various factors such as the insurance company’s own coefficients, NCD coefficients, and traffic coefficients. In 2024, the entire EV insurance industry faced a loss of 5.7 billion yuan, prompting insurance companies to adjust their self-pricing coefficients. This coefficient is based on a multidimensional risk assessment model considering “people, vehicles, and the environment,” combined with historical claims data to generate differentiated pricing factors. Given that the overall loss ratio for EVs is significantly higher than that of gasoline vehicles, their risk ratings are generally higher, leading to increased coefficients and higher premiums.
• Upgrade in Coverage Needs: As standards for personal injury compensation increase annually, the traditional 1 million yuan third-party liability insurance is often insufficient to cover risks, leading most car owners to raise their coverage to between 2 million and 5 million yuan. Simultaneously, EV owners are becoming more risk-aware and opting for additional coverage such as charging accident insurance and extended warranties for the electric systems, directly resulting in increased premium expenditures.

It should be noted that under normal circumstances without any claims, EV premiums still follow the “no claim, enjoy a discount” principle and are likely to decrease.

Constructing an Optimal Insurance Strategy

Faced with the myriad of insurance options and coverage amounts, how should car owners construct a strategy that offers the best value for money? What configuration principles should be followed between fundamental protection and personalized needs?

Yuan Lei suggested that car owners can choose from different types of insurance coverage based on their specific usage scenarios and needs, which can typically be categorized into three types: basic protection, economic protection, and comprehensive protection:

• Basic Protection: Suitable for car owners with low driving frequency, fixed routes, and proficient driving skills. This plan centers on mandatory traffic insurance (a legally required insurance) combined with third-party liability insurance with coverage amounts between 500,000 and 1 million yuan. It is generally not recommended to purchase collision insurance, as vehicle losses can be quantified, while third-party liability risks (such as personal injury and property damage) can result in unpredictable compensation responsibilities that require priority coverage.
• Economic Protection: Targeted at car owners seeking value for money with a neutral risk preference. This plan builds on mandatory traffic insurance and adds collision insurance, along with third-party liability insurance with coverage between 1 million and 2 million yuan, while also including coverage for passengers or minor driver accident insurance with a limit of 10,000 yuan per seat. This combination covers major risk scenarios and, while the coverage amounts are somewhat conservative, meets daily driving needs while balancing risk and cost.
• Comprehensive Protection: Designed for new car owners, those with less mature driving skills, or risk-averse users, emphasizing extensive high-coverage for vehicles, third-party liability, and passenger coverage. This includes collision insurance (covering vehicle losses), third-party liability insurance with coverage between 2 million and 3 million yuan (to address high third-party compensation), and passenger liability insurance with limits of 20,000 to 30,000 yuan per seat, focusing on covering medical costs for injuries. Additionally, optional driver accident insurance with coverage of 100,000 to 200,000 yuan can be added. Moreover, EV owners can choose to purchase charging accident insurance based on the vehicle’s age; for vehicles over five years old that exceed the manufacturer’s warranty, it is advisable to buy extended warranty products for the electric systems to cover risks related to aging core components.

In summary, car owners should flexibly choose suitable insurance coverage based on their driving frequency, driving skills, risk tolerance, and vehicle characteristics (such as EV features and age) to achieve a dual goal of comprehensive risk coverage and cost optimization.

Online Insurance Channels: Price vs. Detail

Insurance quotes from online channels are often more attractive, but the details of coverage may vary. While pursuing price advantages, what key clauses should car owners focus on to avoid falling into the “low-price trap”?

Yuan Lei noted that insurance clauses are uniformly established across the country, meaning that whether purchasing through online or offline channels, the scope of coverage and claims standards remain consistent. Therefore, car owners can obtain the same coverage details through online channels as they would through offline methods. Online insurance channels typically enjoy a price advantage due to the elimination of intermediaries, but the purchasing process requires full self-service.

When choosing to purchase insurance online, car owners should focus on the following four aspects:

• Choose a Legitimate Insurance Platform: Prioritize purchasing through the official websites of insurance companies or authorized platforms, and avoid using unofficial channels to minimize the risk of insurance fraud.
• Confirm Coverage and Amount Configurations: Carefully verify the types of coverage purchased and their corresponding limits, ensuring the scope of protection meets personal needs.
• Review Policy Clause Details: Pay close attention to specific details in the policy regarding exclusions and the extent of coverage for additional insurance (such as the compensation standards for passenger accident insurance).
• Be Wary of Low-Price Traps: There are currently some informal organizations in the market attracting customers with low prices. Car owners need to enhance their risk awareness and must only choose formally approved insurance companies and legitimate purchasing channels to avoid losing their legal rights due to pursuing low prices.

In conclusion, while online purchases should focus on price advantages, it is crucial to strengthen the review of the purchasing platform’s credentials and policy details to ensure that the purchasing behavior is legal and compliant, and that coverage is sufficient.

The Smart Upgrade of Claims Processes

The decision of whether to file a claim for minor scrapes often causes hesitation among car owners. From both financial and protection perspectives, how can one define the threshold between “out-of-pocket repairs” and “insurance claims”?

In minor scrape incidents, the decision to opt for out-of-pocket repairs or to file an insurance claim should be based on the balance between the cost of a single repair and the increase in next year’s premium. The criteria for judgment are as follows:

• Single-Party Accident Scenario: If the repair costs are lower than the increase in next year’s premium due to reporting the claim, it is advisable to handle it out-of-pocket.
• Multi-Party Liability Accidents or High-Damage Scenarios: If the incident involves third-party liability requiring compensation or the repair costs exceed the premium increase amount, filing an insurance claim is more beneficial.

It is important to note that the number of claims not only affects next year’s premium but can also have a lingering impact on rates for the next three years, so car owners should carefully evaluate their reporting decisions. For example, in the case of a minor scrape, if it only involves a light scratch on the bumper or door, the repair cost typically ranges from 300 to 500 yuan, allowing for self-assessment on whether to report; however, if the damage involves replacing a door or bumper or damaged headlights, where repair costs are higher, it is advisable to file an insurance claim to protect legal rights.

Zhong An Insurance provides intelligent decision-making support for customers: its self-developed warning claims estimation system can automatically identify cases with minimal losses that could significantly impact next year’s premium after an incident occurs. Through real-time pop-ups or SMS notifications, customers are reminded to evaluate the economic feasibility of reporting, ensuring that customer interests are maximized.

In summary, the decision to report minor accidents should be based on an analysis of accident responsibility types, repair costs, and premium impacts. Low-damage cases can be prioritized for out-of-pocket handling to avoid rate fluctuations, while high-damage or liability accidents should promptly utilize insurance protection to achieve optimized risk costs through informed decision-making.

Leveraging Technology for Insurance Services

Technology is reshaping the landscape of insurance services. In the field of EV insurance, how is Zhong An Insurance utilizing AI technology to enhance the claims process?

Zhong An Insurance is driving the intelligent upgrade of the claims process in the EV insurance sector through innovative methods such as video claims and AI technology, creating a more efficient and transparent service experience for car owners. Its core innovations are reflected in three dimensions:

• Efficiency Revolution in Video Claims and AI Damage Assessment: By utilizing mini-programs, apps, or 5G calls, Zhong An has established a “one-click video reporting” channel, simultaneously developing an NFC touch-triggered reporting function to connect accident scenes with claims adjusters in real-time. Relying on its self-developed AI intelligent assessment tool, the system guides car owners through on-site assessments via voice and image interactions, eliminating the need to wait for an adjuster to arrive and completing the entire process from reporting to compensation payment within as little as 10 minutes. Additionally, AI image recognition technology analyzes vehicle damage photos, combining them with digital models of critical components such as batteries and circuits to accurately calculate repair costs, keeping human error within 5% and compressing average case processing times to within one business day.
• Intelligent Definition of Responsibility through Data Ecosystems: A cross-platform data collaboration mechanism allows for the quick extraction of EV onboard video data after obtaining electronic customer authorization, enabling rapid initial assessments of accident responsibility. For disputed liability cases, remote access to vehicle OBD (on-board diagnostics) data, combined with intelligent algorithms, allows for the automatic interpretation of critical parameters such as driving trajectories and braking frequencies, accurately determining the cause of faults and the proportion of responsibility, improving the processing efficiency of disputed cases by over 40%.
• Full-Process Digitization of Transparent Repair Factories: A closed-loop service system has been established encompassing “online reporting—intelligent dispatch—transparent repairs”: after reporting an incident, the system intelligently recommends certified repair shops based on geographical location and vehicle models, providing standardized labor and parts pricing schemes. Furthermore, blockchain technology is employed to record the repair process in real-time, enabling car owners to view full-process data through the app, including parts sources (indicating original or aftermarket status), construction steps, and quality inspection reports, ensuring the traceability and verifiability of repair records. This model effectively addresses industry pain points such as “over-repair” and “mixed-use of parts,” enhancing customer trust in repair services by 65%.