Market Trends of China Motor Insurance Industry
Recovery in Vehicle Sales is Driving Motor Insurance Market
China's vehicle sales increased 12% last year to reach 30.09 million units, surpassing the 3% growth target from the previous year. It was driven by higher global demand, particularly for electric vehicles, as well as fierce competition between automakers who offered discounts and new models. Additionally, there was a renewed appetite for commercial vehicles. China remained the world's largest car market in the current year, with record auto production and sales. Vehicle production and sales in China increased two-digit year-on-year in the current year. The passenger vehicle market continued to grow, with CV volume recovering to four million units.
In comparison, NEWvolume increased to more than nine million units and a market share of more than 30%. With the rising middle-class population in China, the needs and demands of consumers are changing. Sales data from China automobile dealers’ association, shows that the new growth engine for the industry is young adults living in developing cities. Meanwhile, tier 2, 3, and 4 towns are developing fast and offer a new generation of young consumers willing and able to afford a car. Moreover, the motor insurance segment is expected to grow as automobile sales improve due to the proposed extension of subsidy for electric vehicles last year.
The Rise of Usage-Based Insurance in China's Motor Insurance Landscape
China, being one of the largest automotive and electrical vehicle markets, holds quite potential for Usage-based motor insurance. Despite a large and mature auto insurance market, the UBI market in China is still in the infancy stage. Numerous enterprises have begun actively delving into the implementation of UBI in both passenger cars and commercial vehicles through the execution of pilot programs. However, the development of UBI pre-pandemic was short-lived due to the absence of precise regulations to support Usage-based insurance products.
In September 2020, the China Banking and Insurance Regulatory Commission (CBIRC) issued the regulation named “Guide on Implementing Comprehensive Reform of Auto Insurance”. It was the first time that the authority recognized the UBI in its regulation.
The mature automobile market, favorable regulation from the authorities, and improved digital and data processing capabilities all make China a potential market for UBI.
