China’s burgeoning electric vehicle (EV) insurance industry is most likely to be insulated from tariff impacts, as continued pressure on repair costs and a possible increase in total losses drive EV motor insurers outside of China to revisit pricing.
While EV insurance was loss-making in China last year, with insurers more prudent in growth, large insurers have aggressively expanded into the private EV market in China, Lucie Huang, Senior Financial Analyst at AM Best, told (Re)in Asia.
China’s top three insurers currently dominate the country’s new energy vehicle (NEV) market, accounting for 70% of NEV premiums, having seen gains in underwriting over the last seven years, according to a January AM Best report.
“Chances are that EV motor [in China] could achieve break-even [or even profit] in 2025 — with more sufficient rate adequacy [as required by local regulator],” said Huang.
Tariffs are likely to push Chinese manufacturers to accelerate the development of domestic chip production, increasing domestic chip usage, Huang said. A protracted trade war has also prompted EV manufacturers to avoid direct exports, with big brands like Tesla setting up local factories instead.
Lucie Huang
Senior Financial Analyst at AM Best“For Chinese EV manufacturers, while most parts could be produced domestically, they do rely on imports for some high-value parts – particularly high-end chips, precision materials and key control components,” Huang said.
Declining maintenance costs and EV parts costs may also help China’s EV insurance industry turn a profit, she added. So too will advanced driver assistance systems (ADAS) and improved risk selection through telematics.
“With the growth of ICE (internal combustion engine) premiums reaching its cap, it is inevitable for Chinese insurers to embrace the escalating EV premium,” Huang said.
Elsewhere, Pressures are shifting
Outside of China, supply chain shifts have put continued pressure on repair costs, potentially increasing total losses and forcing insurers outside of China to revisit pricing.
“We anticipate continued upward pressure on repair costs and a possible rise in total loss claims for cars, including EVs,” says Manik Bucha, Group Chief Underwriting Officer at Oona Insurance. “This could prompt insurers to revisit pricing structures.”
In May, reinsurer Swiss Re issued a report warning of global trade tensions driving motor insurance rates, as tariffs threatened to disrupt supply chains and increase repair costs. While trade volatility has reduced in recent weeks, with China and the US agreeing to delay new tariffs until August 12, it may still be too early to determine the full extent of tariffs’ impact on pricing.
Manik Bucha
Group Chief Underwriting Officer at Oona Insurance“Tariffs could increase the cost and reduce the availability of EV parts,” said Alvino Kor, Senior Vice President, General Insurance at Singlife. “This may lead to longer repair times, and in some cases, make it uneconomical for insurers to approve repairs – resulting instead in the vehicle being written off.”
Despite that, capacity constraints are unlikely in the short term. However, “if the tariff strain persists on the insurance industry, reinsurers may become cautious and hence reduce capacity or raise reinsurance rates, which will impact the industry growth potential,” Bucha adds.
Tariffs are expected to accelerate shifts in the global supply chain for EVs, said Bucha, potentially affecting the entire repair lifecycle. “Delays in sourcing key components such as batteries, sensors and specialised panels are already being felt on the ground,” he added. “Supply chain delays increase repair time, inflate labour costs, and reduce predictability – all of which directly drive up claims costs. This inevitably puts pressure on premiums.”
EV production may be accelerated in Southeast Asia as a result of the US tariffs, which could stabilise supply chains, Bucha said. “But this remains to be seen.”
Alvino Kor
Senior Vice President, General Insurance at SinglifeRefining assessments
The flux in tariff volatility presents an opportunity for insurers to assess EV risks, says Kor. Insurers can take this chance to re-examine their risk models and include considerations like battery health, manufacturer repair networks and supply chain resilience.
“If certain EV brands have limited authorised repair facilities or face recurring delays in sourcing battery components, we may factor these into our risk models and pricing to better reflect the true cost of insuring those vehicles,” Kor added.
Oona Insurance is actively revising its underwriting assumptions to reflect evolving realities, working closely with OEM-authorised repair centres to understand and manage the real costs of insuring EVs, Bucha said. “This allows us to stay accurate and responsible in how we price and underwrite protection.”
The insurer is also taking proactive steps to digitise and streamline claims journeys. It recently launched a fully integrated claims management system, automating document handling, enabling real-time customer updates, and improving coordination among workshops and suppliers in Indonesia, Bucha said. “This reduces our reliance on long-tail supply chains and minimises delays.”
Insurers are upskilling repair networks and claims teams to handle EV-specific requirements, said Angat Sandhu, partner at McKinsey.
These efforts resolve long-standing issues with insuring EVs, including a chronic shortage of qualified technicians and repair shops. Australia faces a shortage of 9,000 EV service technicians, while in Singapore, only 2% of automotive technicians are receiving basic EV training as of 2023.
“Near-term challenges remain in the supply chain, with typically inadequate supply of parts, expensive batteries, and training of the claims repair network,” said Sandhu.
Insurers can scale up the adoption of usage-based insurance for more accurate assessment and pricing of EV risk, Sandhu added, by tailoring their products.
“Asian insurers are adapting to the rise of EVs by offering tailored products, such as coverage for EV batteries and charging stations, and value-added services like mobile charging assistance,” he added.
Angat Sandhu
Partner at McKinseyWhile China’s National Financial Regulatory Administration has set out regulatory guidance to promote EV insurance, loosening rules to expand supply chains, Chinese insurers will have to embrace escalating EV premiums as sales increase in the short term.
Insurers are also investing in R&D on EV battery security so they can gradually shift their roles from merely being underwriters to creating value up the value chain, says AM Best’s Huang. “Top insurance players are cooperating with EV manufacturers on improving risk control capability,” she adds.
Ultimately, the challenges insurers face reinforce a need for digital agility, says Bucha. “Insurers that modernise quickly across claims, pricing and distribution will be the ones that continue to offer both protection and value in an increasingly volatile environment.”
