Tesla Revitalizes China's Auto Insurance Market. Recently, according to information from Tianyancha, Tesla Insurance Brokerage (China) Co., Ltd. (hereinafter referred to as "Tesla Insurance Brokerage") has been established, with the legal representative and chairman both led by Zhu Xiaotong, one of Tesla's core executives. This marks Tesla's second foray into the domestic auto insurance market. The official launch of Tesla Insurance Brokerage is less than four months after the insurance brokerage company it once registered was canceled. As early as August 2020, Tesla Insurance Brokerage Co., Ltd. announced that it was wholly owned by Tesla Motors Hong Kong Limited. Due to reasons such as the license approval process, the company issued a simplified cancellation announcement in March 2024 and was officially canceled in April of the same year. Compared with the previous one, Tesla's newly established insurance brokerage company not only added the word "China" to its name but also changed its corporate type from a wholly foreign-owned enterprise by Hong Kong, Macao, and Taiwan legal persons to a wholly foreign-owned enterprise by foreign legal persons, established directly by the headquarters. The registration address has also changed from Shanghai to Beijing. According to public media reports, Zhu Xiaotong, who led the insurance this time, has become the actual person in charge of Tesla's automotive business since he was promoted to the senior management of Tesla last year, and is the "second person" after Tesla CEO Elon Musk. It is worth noting that Zhu Xiaotong also led the layout of Tesla's supercharging stations in China and the production of the Shanghai Super Factory. On the afternoon of May 23 this year, the Tesla Shanghai Energy Storage Super Factory, located in the Lingang New Area of Shanghai, officially started construction, and Zhu Xiaotong also appeared at the commencement ceremony. In the official news release, his latest identity is Senior Vice President of Tesla. In April of this year, during Musk's personal visit to China, Zhu Xiaotong accompanied him throughout the visit. Many industry insiders analyzed that Tesla's re-establishment of its insurance brokerage company is also related to the increased feasibility of FSD (Full Self-Driving: Full Autonomous Driving) landing in China. Tesla has made a revolutionary attempt in the pricing model of new energy vehicles. If the new pricing model is combined with China's auto insurance products, it will have a significant impact. The underwriting of autonomous driving is also one of the directions currently being studied in the insurance industry. According to a senior executive of a foreign-funded property insurance company, the insurance brokerage license can also achieve customization and design of insurance products. In the future, Tesla will not rule out looking for a suitable property insurance license. Not only Tesla is aiming at the insurance business, but many new forces in car manufacturing are also entering the "insurance circle". Ideal, NIO, BMW, and others have all obtained insurance brokerage licenses. Among them, BYD, the domestic sales brand with the highest volume, is the most concerned and is the only one among the new forces in car manufacturing to choose to "personally enter the field" and obtain a property insurance license. As a representative of the "explorer" of new energy vehicle insurance in international and domestic markets, the modes and prospects of Tesla and BYD's exploration of insurance are different. According to analysis by many industry insiders, Tesla's advantage and core are in front-end pricing, while BYD focuses on cost control in the automotive aftermarket, and its front-end sales will be limited by dealers. Looking at the future development blueprint, BYD's self-operated car insurance mainly aims to reduce the cost of the automotive aftermarket to increase the sales volume of new energy vehicles. Tesla, in addition to reducing vehicle costs, also hopes to enter the field of autonomous driving through UBI insurance. Looking at the model, Tesla established an insurance brokerage company, which is an intermediary business. However, according to a person in charge of actuarial aspects of a large insurance company, looking at Tesla's model in the United States, it acquired the insurance brokerage license by acquiring the American Markel Company and also cooperated with traditional insurance companies, but the product design and pricing are all dominated by Tesla. According to the analysis of the senior executive of the new energy vehicle insurance platform, the insurance brokerage license is of great significance to Tesla, but the challenge is how to coordinate and cooperate with large insurance companies, as well as to subsidize the initial losses of insurance. The person in charge of actuarial aspects of the large insurance company revealed that in terms of product design and pricing, due to the privacy law constraints in California, real-time vehicle network data is prohibited from being used for pricing by insurance companies, so Tesla's insurance pricing method in California is still a more common static pricing, that is, the premium is not dynamically adjusted during the insurance period. In terms of insurance liability scope, Tesla insurance is also basically the same as the insurance liability of traditional car insurance, such as vehicle damage insurance, third-party liability insurance, of course, there are also some characteristic guarantee responsibilities, such as autonomous driving vehicle protection, network security, etc., mainly to supplement the design and driving aspects of new energy vehicles that are different from traditional fuel vehicles. In October 2021, Tesla launched a new form of "Tesla Insurance" in Texas, and in the American model, insurance has become an important part of Tesla's sales. Looking at BYD, the path to entering the insurance industry is to wholly control Yi'an Property Insurance and obtain a property insurance license, no longer needing to cooperate with other insurance companies, and it can operate car insurance on its own. In June this year, BYD Insurance has officially opened online insurance entry, and online insurance covers seven provinces including Anhui, Guangdong, Shaanxi, Hunan, etc. According to a senior person in the new energy vehicle insurance industry, the core difference between the insurance company and the insurance company is that the former does not have the functions of underwriting claims, actuarial, etc. At the same time, it said that the development right of insurance products in China is naturally the right of insurance companies, and insurance companies are in a cooperative state, and they need to find insurance companies for cooperation to develop customized products. "Insurance companies can use their own resources to help the scope of insurance products, pricing data, and scene sales." The senior person in the new energy vehicle insurance industry of the insurance company said that from the perspective of insurance companies, due to different resource control, Tesla's layout in the domestic insurance market can complement with insurance companies in fields such as product development and claims services. As for BYD Insurance, it is a "competitor". According to an informed person, Tesla is currently working with five insurance companies including China Life, PICC, and Ping An on a total-to-total basis. It is understood that some large and medium-sized property insurance companies are also striving for it. In terms of the current domestic vehicle network data security, industry insiders said that there is no relevant restriction, and the paid pricing data is currently used in China, and it is possible to include dynamic data in the pricing model. "Tesla's use of vehicle network data for pricing is more likely, which can make the rate more fair." According to Zhang Yiwen's analysis, for Tesla, it has a very mature UBI car insurance experience abroad, and it is very likely to continue to explore the landing of UBI car insurance in China when it restarts the insurance business in China. Tesla's advantage lies in its strong data-driven advantages and advanced manufacturing technology. By using insurance as a means of payment and service connection, it provides a full cycle of car use services for car owners. However, whether UBI car insurance can be realized in China still requires industry supervision and authorization for the use of data privacy, etc. BYD's car insurance business has been officially operated, and some car owners have reported that car insurance prices have decreased to varying degrees. BYD's advantage lies in that it is purely self-developed and self-produced, mastering all the industrial chains upstream and downstream of the vehicle. In this way, if it can achieve disassembly and maintenance in vehicle design and reduce the vehicle zero-integral ratio, and connect insurance claims and vehicle design, it can maximize the reduction of compensation costs. Li Xin believes that on the one hand, Tesla expects to reduce the accident rate through UBI insurance, and on the other hand, it encourages customers to use Autopilot and pay for FSD functions more, taking UBI insurance as an entry point to form a positive feedback revenue loop of hardware-software-service. "For car manufacturers, Tesla's innovative business model has reference significance, and many new forces in car manufacturing have also begun to build their own innovative insurance. For insurance companies, finding the right position in cooperation and game is also crucial."For the data in question, a detailed analysis by a major insurance company's expert in the new energy field reveals that, first and foremost, the rate increase for vehicle collision in vehicle damage insurance is notably significant. In the filing documents, the rate increase for this segment is 62%, whereas to achieve the expected payout rate target, the actual increase should be 111.1%. Looking back at the original equipment manufacturers (OEMs) operating insurance businesses, the OEMs' own maintenance and spare parts pricing should have been an advantage over traditional insurance companies. However, this substantial adjustment indicates that Tesla's maintenance is not as imagined. Secondly, the rate for rental car expense compensation has surged significantly. It is estimated that the average waiting time for Tesla vehicle repairs is around 25 days, or even longer. Moreover, according to user feedback on Tesla vehicle forums, the long repair wait times are mostly due to the need to wait for new vehicle parts, not a lack of repair personnel. Both of these issues suggest that Tesla has not been performing well in the backend of vehicle maintenance and spare parts production and transportation.
"Given the current cost rate of nearly 120% for Tesla Insurance, if it cannot change the current situation of high cost rates in the short term, the sustainability of the insurance business will be in question," said the expert from the major insurance company in the new energy field. As expected, since the second half of 2022, Tesla Insurance has applied for rate increases in almost all states where it operates, with the increase exceeding the industry's average level. Calculated through actuarial methods, the rate increase needs to reach 47.4% to meet the expected payout rate target for Tesla Insurance. Currently, Tesla's quarterly performance meetings have not mentioned Tesla Insurance-related matters and specific measures for four consecutive quarters. Tesla's promoted UBI (Usage-Based Insurance) is still in the exploratory and adjustment phase with the market. It is understood that in the first nine months of 2023, Tesla Insurance suffered a loss of 16 million US dollars. At the same time, Tesla vehicle owners' premiums have been reduced by about 30%. According to Zhang Yiwen's analysis, at present, the general range of premiums for new energy vehicle insurance is around 3K-1W yuan. In the short term, the new energy vehicle insurance market will still face the challenge of high payout rates, while in the long term, it will need to achieve sustainable development through product innovation, technology application, and industry cooperation.
Firstly, for insurance companies, they can engage in deeper collaboration and cooperation with the after-sales claims departments of car manufacturers. Secondly, for car manufacturers, increasing technological investment during vehicle research and development and manufacturing can reduce the vehicle's parts-to-whole ratio, which in turn will naturally lower the insurance prices after the repair costs decrease. Lastly, for ordinary consumers, minor scratches and dents in daily life, if the repair cost is below 1000 yuan, can be avoided from commercial insurance claims. With fewer claims, the insurance prices will also decrease. Overall, many car manufacturers are currently focusing on insurance layout with service package products. Taking NIO as an example, it has launched an insurance and service package product—Service Worry-Free, which has become a typical case of car insurance innovation by car manufacturers. In addition, NIO is also actively promoting car insurance product innovation in the direction of battery leasing and in-vehicle software. According to insiders at NIO Automobile, the service-oriented insurance is the starting point for all things, allowing users to truly perceive the quality of insurance services, which makes it possible to extend more automotive ecosystem closed loops. Regarding car manufacturers entering the "insurance circle," a senior actuarial executive in the property insurance industry stated that OEMs directly operating car insurance have a better ability to operate "data-defined products" (such as UBI-type products) than traditional insurance companies. However, these products have issues such as complex pricing factors that are difficult for consumers to understand and dynamic price changes that are hard for consumers to adapt to. At the same time, an important element of car insurance operation is customer service and claims service, which requires time accumulation and a significant resource investment. OEMs have a disadvantage in these areas compared to large traditional insurance companies. The senior actuarial executive believes that, overall, if OEMs independently operate car insurance businesses, it is difficult to achieve better cost rates and financial results than large traditional insurance companies. If OEMs fully integrate car insurance operations with vehicle manufacturing and sales, subsidize each other, balance the cost structure of consumers' car purchasing, insurance, and maintenance, and optimize the user value of the entire life cycle of car owners, then they may gain a certain competitive advantage. "The impact of new energy vehicle companies joining the insurance industry on the insurance industry is limited," said Yu Ze, Vice President of China People's Insurance, at the 2022 performance conference on March 27. As for the reasons, he stated that first, because car insurance is a managed risk type, it requires a large reserve of talent, including sales teams, pricing capabilities, etc., and it is not just about having enterprises and sales channels. Secondly, the company's accumulated historical data can maintain a leading advantage in actuarial and pricing; in addition, car insurance has high requirements for underwriting and claims service outlets, and the vast network service system poses a significant challenge for car companies entering the car insurance industry.
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