A deep dive into the Chinese automotive space

A new Swiss Re study is the fourth in a series looking at how automotive trends are reshaping the risk landscape. Entitled, A high-speed journey into the future - Understanding disruptive motor trends in China and the opportunities they offer, the publication provides insights into the world’s second biggest insurance market. It focuses on key trends shaping the Chinese motor insurance business, trends which could also become significant in the global market.

When it comes to combining technology with its risk expertise, Swiss Re has few rivals. Just one example of its prowess in this field is the recent work it did in the Chinese automotive space, which is currently dominated by so-called new energy vehicles (NEVs).

Banning traditional engines

Chinese cities are increasingly banning vehicles that have traditional combustion engines from the roads, replacing them with NEVs to help reduce greenhouse gas emissions. This trend comes with a new set of challenges for the automotive industry and its stakeholders, not only around battery failure, but also around sustainability, and consumer peace of mind. In response, Swiss Re has developed solutions, such as a new extended warranty product, that goes beyond the standard warranty against battery failure. Our experts have also been looking at the broader changes in mobility and how to address these holistically. The aim here is to leverage opportunities around connected, automated and shared vehicles and create new insurance propositions.

As Eric Schuh, Global Head P&C Solutions, points out: "Our work in the Chinese market shows that we do not just consult on solutions. We also work in tandem with insurers to help respond to their market needs to expand insurance reach. This publication shows what’s possible in a highly dynamic market, characterized by innovation and remarkable opportunities for the insurance industry."

The challenges for insurers

The study provides an overview of motor insurance premium development, its strong links to new car sales and the search for efficiency and innovation. It also looks at detariffication expectations, which would open the doors to usage-based Insurance. By assessing the four main automotive trends (electrification, sharing and diverse mobility, automation and connectivity) the authors highlight challenges and opportunities that these pose for insurance companies.

Collaboration

The emergence of NEVs on China’s roads coupled with the country’s ambitious plans to replace traditional combustible fuel vehicles, prompted P&C Solutions to develop a NEV EWI (extended warranty insurance) product to cover battery failure and degradation risk. NEVs are also connected vehicles and generate an enormous quantity of data. Swiss Re's experts also developed an innovative approach to scoring using such data. This publication reflects P&C's collaboration with a major Chinese insurer on risk selection modelling, using both traditional and telematics data as a basis.

Personal motor insurance is, however, only one side of the coin. Given the growing importance of commercial motor for insurers’ profitability, the study also describes Swiss Re's innovative fleet approach. Based on risk management opportunities offered by artificial intelligence (AI), the approach aims at making this business economically sustainable for insurers.

Motor insurance market in China

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