Property and casualty (P&C) insurers in China , which has one of the fastest-growing new energy vehicle (NEV) markets, will see a more profound credit impact from NEV adoption compared to their global peers, says Moody's Ratings.
Favourable government policies and technological advancements will continue to drive strong NEV sales, and this will encourage demand for commercial (i.e. non-mandatory) motor insurance for NEVs (NEV insurance), the global credit rating agency says in a commentary titled, “China’s P&C insurance sector — China's new energy vehicle (NEV) transition supports premium growth but could pressure profitability”.
However, NEVs' high repair costs could pressure insurers' profitability while NEV insurance, a relatively new product, entails high mispricing risks.
The main takeaways from the commentary are:
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Government policies and technological advancements will drive NEV sales, which could boost premiums.
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NEVs' high repair costs could erode insurers' profitability.
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NEV insurance also entails high mispricing risks.
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Threat from NEV makers' own insurance venture is manageable and could foster innovation among insurers.