Insurers team up as Chinese motor insurance market shifts into high gear

Insurers team up as Chinese motor insurance market shifts into high gear | Insurance Business Asia

Motor & Fleet

Insurers team up as Chinese motor insurance market shifts into high gear

Collaboration to focus on two key areas

Motor & Fleet

By
Roxanne Libatique

Cheche Group Inc, a Chinese auto insurance technology firm, has entered a strategic partnership with Tokio Marine & Nichido Fire Insurance Company (China) Limited (TMNCH).

The collaboration is part of Cheche’s efforts to strengthen its network of partnerships within the expanding Chinese insurance market.

TMNCH, a subsidiary of Japan’s Tokio Marine & Nichido Fire Insurance Co Ltd, underwrites a range of products including property, liability, guaranty, and short-term health insurance. It became the first Japanese insurance company to establish a foothold in China’s insurance sector.

“Not only is our capacity for innovation vastly increased as we expand and strengthen our relationships with insurance companies and automobile manufacturers, but our leadership position as the intelligent insurance platform in China is underscored as well,” he said.

The partnership will focus on two key areas: co-developing specialised insurance solutions and refining sales strategies to better serve the automotive industry.

This collaboration is expected to not only expand Cheche’s service offerings but also help scale operations in traditional automotive markets, potentially leading to future partnerships with Japanese car manufacturers.

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Chinese motor insurance sector’s growth

The partnership comes as China’s motor insurance sector is expected to see steady growth over the coming years.

This anticipated growth is driven by increased vehicle sales, rising demand for new energy vehicles (NEVs), and evolving regulatory policies.

Sutirtha Dutta, an insurance analyst at GlobalData, stated that the motor insurance market had rebounded with 5.6% growth in both 2022 and 2023, following a prior decline.

The sector is expected to continue expanding, fuelled by economic recovery and growing vehicle sales, particularly in the NEV category, which has gained momentum due to government incentives.

Vehicle sales in China

The China Association of Automobile Manufacturers (CAAM) reported that vehicle sales increased by 10.6% in the first quarter of 2024, reaching 6.72 million units.

NEV sales, in particular, have been supported by policies such as purchase tax exemptions of up to CNY 30,000 (US$4,188.50) and trade-in subsidies of CNY 10,000 (US$1,396.20) that were introduced in 2023. NEVs now account for 30% of total vehicle sales, reflecting a growing shift toward electric and hybrid vehicles.

With the increased adoption of NEVs, insurance premiums are expected to rise as electric vehicles tend to have higher associated costs due to expensive components such as batteries. This shift is likely to further contribute to the expansion of the motor insurance market.

Rise in motor insurance claims in China

In addition to vehicle sales growth, China has seen a rise in road accidents, leading to more insurance claims.

The Ministry of Public Security’s Traffic Management Bureau reported 1.75 million road accidents in 2023, an 8% increase over the previous year. This trend is anticipated to result in higher payouts for insurers, prompting them to reassess risk and adjust pricing in the year ahead.

Regulatory adjustments impact Chinese motor insurance sector

Regulatory adjustments are also influencing the sector. The China Banking and Insurance Regulatory Commission introduced changes to pricing structures in May 2023, allowing insurers greater flexibility in setting premiums.

The revised pricing coefficients provide a framework that enables insurers to better assess the risk of high-profile vehicles and reward safer drivers with lower premiums.