The motor insurance market in China is expected to grow at a compound annual growth rate (CAGR) of 5.4%, with gross written premiums (GWP) rising from CNY 912.2 billion (US$127.4 billion) in 2024 to CNY 1,125.7 billion (US$158.9 billion) by 2028, according to projections from data and analytics firm GlobalData.
Research from GlobalData’s Insurance Database indicated that the sector would grow by 5.2% in 2024, supported by increased vehicle sales, a surge in demand for new energy vehicles (NEVs), and positive changes in regulatory frameworks.
“The Chinese motor insurance market has witnessed a consistent growth of 5.6% in 2022 and 2023 after declining by 5.7% in 2021. The recovery in the economy after the prolonged impact of COVID-19 and rising vehicle sales has supported the growth of motor insurance. The trend is expected to continue in 2024 and 2025,” said Sutirtha Dutta, an insurance analyst at GlobalData.
According to the China Association of Automobile Manufacturers (CAAM), vehicle sales saw a 10.6% increase in the first quarter of 2024, reaching 6.72 million units, a significant rise from the previous year.
“The sale of NEVs has shown considerable growth in the last couple of years, driven by the government’s push towards switching from internal combustion engine (ICE) vehicles to electric vehicles. The higher motor insurance premiums on EVs and hybrid vehicles due to their costly batteries and spare parts will support motor insurance growth,” Dutta said.
In efforts to encourage the adoption of NEVs, the government announced in June 2023 a purchase tax exemption of 10% up to CNY 30,000 ($4,188.5) for vehicles bought from January 1, 2024, to December 31, 2025. April 2024 also saw the introduction of a CNY 10,000 ($1,396.2) vehicle trade-in subsidy.
CAAM data showed that NEVs made up 30% of total vehicle sales in the first 10 months of 2023, with China’s global market share for new energy passenger vehicles rising from 41% in 2020 to 65% in 2023.
The Traffic Management Bureau of the Ministry of Public Security recorded 1.75 million road accidents in 2023, marking an 8% increase from 2022.
“China has witnessed a rise in road accidents in 2023, which is expected to result in higher claim payouts for motor insurers. The increase in claims will prompt motor insurers to reassess their risk exposure and raise motor insurance premium prices in 2024, which will support motor insurance growth,” Dutta said.
Regulatory changes are also poised to bolster the motor insurance sector. While China regulates motor insurance rates, it allows insurers a range of pricing coefficients for flexibility in premium determination.
In May 2023, the China Banking and Insurance Regulatory Commission adjusted these coefficients from 0.65-1.35 to 0.5-1.5, facilitating insurers in setting competitive premiums for high-risk vehicles and rewarding drivers with good safety records with lower rates.
“Growing demand for new and next-generation vehicles will support the growth of China’s motor insurance industry during the next five years. However, higher claim payouts due to inflation and rising road accidents are expected to impact the profitability of Chinese general insurers in the short term,” Dutta said.
GlobalData also released its latest forecast on the Indian general insurance market, specifically an expected growth of INR 4.89 trillion (US$57.3 billion) GWP by 2028.
