Can China’s $140b motor insurance market survive a 70% loss ratio?

Loss ratios surged from 57% to 70% in four years as NEV repair costs and parts prices spiked.

China’s motor insurance segment is seen to bag $140b this year, influenced by rising vehicle sales, regulatory changes, and the rapid adoption of new energy vehicles (NEVs) projections from GlobalData showed.

The market is also forecasted to grow 5.4% through 2030, reaching $174b (gross written premium (GWP)).

“The Chinese motor insurance industry will reach $133.1b in 2025, reflecting an annual growth rate of 4.4%, supported by the recovery in vehicle sales, regulatory reforms, and rising new energy vehicle (NEV) penetration,” the GlobalData report stated.

Vehicle production in China rose by 3.7% in 2024, whilst sales increased by 4.5%.

Data from the China Association of Automobile Manufacturers shows that in July 2025, commercial vehicle sales grew by 14.1% year-on-year, whilst passenger car sales rose by 16.3%.

This growth in vehicle sales is directly supporting demand for motor insurance.

Government measures are also contributing to market growth. China’s trade-in incentive offers a subsidy of $2,800 (RMB20,000) for NEVs and $2,100 (RMB15,000) for traditional fuel-powered vehicles when old cars are scrapped and replaced with new ones.

This is part of efforts to meet the National IV emission standard. Buyers also receive a 10% purchase tax exemption, followed by an additional 5% tax exemption.

NEVs accounted for 49.7% of total new vehicle sales in 2025. Between January and July 2025, NEV sales reached 8.22 million units, up 38.5% from the same period in 2024.

Data from the National Financial Regulatory Administration shows that NEVs contributed around 15% of total motor insurance premiums in 2024.

According to GlobalData, reforms to compulsory third-party liability insurance and wider adoption of telematics are expected to support premium growth between 2026 and 2030.

Car manufacturers are also entering the insurance market, leveraging access to vehicle and battery data. In May 2024, the regulator approved BYD to offer compulsory traffic accident liability insurance in eight regions.

NEV insurance premiums remain higher than those for conventional vehicles due to higher risks and repair costs.

To address concerns over affordability, regulators have issued guidelines aimed at stabilising the EV insurance market.

Insurers have introduced measures such as separate battery and vehicle coverage, usage-based insurance, and risk-sharing mechanisms for high-risk vehicles.

Loss ratios in the motor insurance segment have risen in recent years. GlobalData noted that the loss ratio increased from 57.32% in 2020 to 70.04% in 2024, driven by higher repair costs, parts prices, and increased exposure to NEVs.

Insurers are responding by investing in technology to improve claims processing, damage assessment, and customer service.

The market is moving towards more digital platforms, automated claims, and differentiated products.

“The growth of the Chinese motor insurance market remains positive during 2025–30, benefitting from higher vehicle sales, accelerating NEV fleet additions, and government measures to achieve National IV emission standard,” Swarup Kumar Sahoo, Senior Insurance analyst at GlobalData, said in the report.

“Regulators’ focus on claims transparency and pricing flexibility will support risk-based premiums. The profitability of insurers will depend upon the deployment of NEV actuarial capacities, telematics, and claims automation, and ongoing collaboration with traffic authorities to contain loss severity,” Sahoo added.