Written by / Qian Yaguang
Editor/ Liu Baohua
Design / Zhao Haoran
On March 2, the State Administration for Market Regulation officially approved "BYD Insurance Brokerage Co., Ltd.", and the approval document number (country) name is set up with characters [2022] No. 115124. This indicates that BYD, which proposed the implementation of UBI's personalized pricing insurance service in 2018, officially entered the insurance industry.
At the end of 2021, the China Insurance Industry Association issued the Exclusive Clauses for Commercial Insurance of New Energy Vehicles (Trial), which led to a sharp increase in the premiums of some new energy vehicle owners in the short term.
After entering 2022, the new energy vehicle supplement has further declined, resulting in a number of new energy vehicle companies have raised the price of new cars, and more and more new energy vehicle customers have found that their car insurance part has risen compared with the past.
After the sharp rise in premiums, Cui Dongshu, secretary general of the Association, pointed out that "the launch of new energy vehicle insurance is a very good thing." However, the increase in cost is high, and the fuel money saved by new energy vehicles may have to pay insurance, resulting in new energy vehicles that seem to be not cost-effective, forming a phenomenon that cannot be afforded, which is not conducive to the promotion of new energy vehicles. Therefore, car companies should establish their own insurance varieties, establish their own low-premium insurance system supported by data, the industry should have more accurate insurance calculations, and the state should also support reasonable subsidies for insurance costs. ”
Most of the new energy vehicles are highly intelligent and have the attributes of online, data-based and intelligent, which provides an opportunity for car companies to use their own big data advantages to establish new insurance types customized for drivers with more reasonable prices. The car insurance of electric vehicles can be said to be another outlet for the future development of new energy vehicles.
On February 22, according to German media Welt, Tesla German Insurance Company has now officially registered, and the car insurance business customized for Tesla Motors is expected to be launched in 2022. Tesla Insurance is reportedly seeking everything from auto liability and comprehensive insurance to accident insurance and legal protection.
Back in April 2019, Tesla acquired Markel Corp in the United States and obtained an insurance brokerage license. It is a financial holding company that underwrites and sells specialized insurance products primarily in the United States and internationally.
In August 2019, Tesla Insurance began to be launched in California, usa, underwritten by State National, a well-known property insurance company in the United States, and then expanded to Texas, Illinois, Arizona and Ohio in the next 2 and a half years.
At the 2021 annual general meeting, Tesla CEO Musk hopes to have Tesla insurance in most parts of the United States in 2022, and it is expected that Tesla can insure 300,000 cars by 2025.
Musk has said that the premium of this insurance is roughly based on personal driving records, car age, location, etc., relatively larger than traditional car insurance, floating space is larger, he wants to use low premiums to reward those who drive safely. Tesla has a large amount of data on the behavior of cars, such as acceleration and braking, sudden lane changes and other data. Therefore, the premiums set according to big data are more fair for owners who drive safely.
The nature of Tesla insurance – UBI
In fact, Tesla's insurance form is not a new thing, it is based on usage pricing insurance (Usage Based Insurance) and user behavior pricing insurance (User Behavior Insurance), its theoretical basis is: drivers who drive safely should get premium discounts, and the safety evaluation of driving behavior depends on the comprehensive consideration of actual driving time, place, specific driving methods and other indicators.
UBI collects data on driver driving behavior and habits through on-board devices and transmits it to the cloud via the Internet of Vehicles. Insurance companies collect comprehensive data information such as the driving behavior, vehicle status, location information, driving time, mileage, etc. of the owner," make a more accurate measurement of driving risk, and assess the driver's driving risk through further processing of big data, so as to realize the personalized pricing of premiums, so that drivers with safe driving behavior should get preferential premiums.
At present, the mainstream car insurance pricing model is "model pricing", and the "use-based pricing" model of UBI car insurance is to introduce the "human" factor into the car insurance pricing to solve the contradiction between the difference in the degree of risk of vehicle use and the unified premium standard.
The earliest UBI auto insurance product was a new auto insurance project developed by Progressive in 1998. At present, the global UBI market is divided into three main categories according to the type of policy: pay-as-you-drive( PAYD); pay-by-driving behavior (Pay-how-you-drive, PHYD) and manage-how-you-drive (MHYD).
PayD premiums are usually determined by the mileage of the vehicle; PHYD emphasizes the tracking of driving behavior, including acceleration, travel time, driving route and sudden braking; MHYD not only manages driving behavior, but also actively intervenes in driving risk based on the on-board advanced driver assistance system (ADAS) to reduce the risk rate and loss rate.
Nowadays, the application of UBI car insurance in European and American countries has been carried out earlier, with Italy, the United States and the United Kingdom as the main representatives. In 2019, the number of IoV policies in Italy was about 6.4 million, with a penetration rate of 16%, and the number of IOV policies in the UK was about 900,000 to 1.5 million, with a penetration rate of about 3%-5%. The top 10 insurance companies in the United States have launched UBI products, and the number of vehicle networking policies is about 10 million, with a penetration rate of about 3%.
In China, since 2013, there have been insurance companies trying to do UBI car insurance; in 2015, the original Insurance Regulatory Commission issued a document on car insurance reform, encouraging and guiding insurance companies to provide customized car insurance services for insurance consumers; by 2016, there were more than 300 technology companies involved in the concept of UBI in the market; by the end of 2017, the industry still had insufficient pricing experience data, insufficient infrastructure construction, and inadequate equipment in promoting UBI car insurance. Bottlenecks such as the lack of property insurance underwriting and claims service capabilities have resulted in the closure of a large number of UBI auto insurance startups, and there are no mature UBI auto insurance products in China.
From the actual operating situation, whether in the domestic or overseas markets, the performance of UBI car insurance is not satisfactory. The main reason is that the collected data is not comprehensive, accurate and timely, and it is difficult to form a mature pricing system and operating model.
Most of the Insurance companies in the United States collect user data through OBD hardware and cooperation with OEMs, the amount of data collected by this method is relatively small and the data dimension is not comprehensive enough, such data can not support scientific pricing; industry data is scattered in the hands of a large number of OEMs and hardware manufacturers, not integrated, OBD manufacturers, insurance companies The main business determines that its data analysis capabilities are insufficient, it is difficult to process complex driving data, and it is difficult to determine a reasonable pricing model. UBI's extensive pricing and claim settlement methods have led to unsatisfactory results in the actual use of users, and UBI car insurance has little effect.
UBI is priced based on the history and current state of the car, and the core of everything is data. Therefore, UBI must not only be supported by big data, but also personalized big data.
Features of Tesla UBI
New energy vehicles, especially intelligent new energy vehicles, provide a good soil for the implementation and promotion of UBI car insurance. And data happens to be one of Tesla's leading edges in the industry.
Unlike any other telematics or use-based insurance product, the special design architecture of electric vehicles allows Tesla to eliminate the need to install additional equipment in the vehicle, and with the authorization of the user, the collected data includes the driver behavior and driving data of all Tesla owners, including camera records and sensor readings, giving a more accurate estimate of the risk of accidents and the cost of repairs, thus achieving differentiated pricing.
Therefore, the basis of Tesla insurance pricing is based on personal personalized big data, which is a huge advantage over insurance companies that will only share risks based on social statistics, but will not be homogeneous.
"We believe that the price of your insurance should be determined by your driving situation, and we will not increase your insurance premiums for a driving accident, whether the accident occurred before or after signing a Tesla insurance contract." Tesla's official website explains.
Specifically, every Tesla vehicle has a safety score, and the higher the safety score, the lower the premium. Safety scores are based on Forward =Warnings per 1000 Miles, Hard Braking, Aggressive Turning, Unsafe following distance, and Forced Autopilot Disengagement) and five other indicators assess the driving behavior of car owners.
Tesla's UBI insurance has the following characteristics, first of all, pricing is based on driving big data, according to the owner's real-time driving behavior, to the owner's driving record (including the use of the vehicle time, mileage, driver habits and other information) as the benchmark for pricing, for Tesla car owners group can achieve "thousands of people and thousands of prices"; secondly, the owner's premium payment method is more flexible, the owner can pay the insurance premium on a monthly basis, without paying other fees; third, if the owner is not satisfied, Tesla Insurance can cancel or change the pricing method at any time, which is the most essential difference between Tesla's car insurance model and the traditional car insurance model.
At the end of September 2021, Tesla FSD Beta 10.1 was launched, and the insurance calculator has been bound to launch. Tesla uses in-car sensors to collect driver behavior data and then converts the collected data into a safety score between 0 and 100, and the higher score means safer driving habits and less likely to have accidents, so it gets a lower car insurance price.
Tesla made it clear that pricing does not take into account the credit score, age, gender, marital status, historical insurance, traffic violations and other important risk factors used by traditional car insurance products. The daily safety score is not affected by miles traveled or hours. Each month, Tesla combines its daily safety scores into a 30-day mileage-weighted average to calculate a safety score that updates each customer's premium.
Tesla will continuously adjust the amount of monthly installments based on each owner's safety score. The average driver can save 20% to 40%, and the safest driver can save 30% to 60%, which is a great help for traffic safety.
Musk estimates that Tesla Insurance's future valuation may reach 30% to 40% of the auto business. Based on Tesla's current valuation of $909.373 billion, the ideal valuation of Tesla's insurance business can reach at least $270 billion, which is much higher than the valuation of most insurance companies in the mainland.
Follow-up of new energy vehicle companies
Car companies entering the insurance is not a new thing, in foreign countries, GM, Ford has been involved in the car insurance business. As early as 2011, the domestic GAC Group led the establishment of Zhongcheng Automobile Insurance, and in 2012, China FAW also initiated the establishment of Xinan Automobile Insurance, and traditional car companies such as SAIC, Geely, Dongfeng, Great Wall, Changan, BYD, and BAIC have participated in the insurance market to varying degrees.
Judging from the current way traditional car companies get involved in insurance, most of them are carried out through the establishment of insurance intermediaries, which will definitely involve the conflict between automobile risk data and customer data, and have not brought an essential major impact to the market.
With the rapid increase in the penetration rate of new energy vehicles, because the intelligent networking and data communication capabilities of new energy vehicles have the prerequisite conditions for using UBI car insurance, new energy vehicle manufacturers have a high enthusiasm for UBI car insurance.
In September 2018, Xiaopeng Automobile also established Guangzhou Xiaopeng Automobile Insurance Agency Co., Ltd. and began to get involved in the field of automobile insurance.
On August 6, 2020, Tesla registered tesla insurance brokerage co., LTD. in Shanghai with a registered capital of 50 million yuan, starting with brokerage business, and is expected to realize the customization of insurance products.
On January 19, 2022, NIO Holdings Co., Ltd. officially established "NIO Insurance Brokerage Co., Ltd." with a capital of 50 million yuan. NIO also said that it is evaluating the possibility of setting up an exclusive insurance product for NIO.
From the perspective of ownership, the number of new energy vehicles in mainland China will reach 7.84 million in 2021, accounting for 2.6% of the total number of vehicles in mainland China. According to Shenwan Hongyuan analysts, the scale of new energy vehicle insurance premiums will reach 154.3 billion yuan in 2025, accounting for about 15.7% of the total premiums of automobile insurance; it is expected that the premium scale of new energy automobile insurance will reach 1279 billion yuan in 2030, accounting for about 31.3% of the total premiums of automobile insurance.
According to public data, the average premium of new energy vehicle policies is 21% higher than that of non-new energy vehicles. According to the information previously released by industry associations and insurance companies, new energy commercial insurance is a loss-making insurance, even if the premium rises now, it is still necessary to adjust the rules through actuarial calculation, it is difficult to bring profits to insurance companies with the help of new energy car insurance, and it is necessary to resolve the contradiction between high growth and high compensation of new energy car insurance premiums from many aspects.
At the end of last year, the China Insurance Industry Association issued the "Exclusive Clauses for Commercial Insurance for New Energy Vehicles (Trial)", which led to a sharp increase in premiums for some new energy car owners in the short term, and even insurance companies even began to selectively refuse insurance for brands and models.
As a chicken rib in the eyes of insurance companies, new energy commercial auto insurance has become a "fragrant food" that everyone wants to try in the eyes of automobile manufacturers. Especially for new energy vehicle companies, UBI may be a good way to solve the contradiction between insurance supply and demand.
Traditional car to achieve UBI to the vehicle to install OBD device, both for insurance companies and users are troublesome, after the popularization of ADAS (Advanced Assisted Driving System), you can use a variety of sensors installed on the car, anytime and anywhere to sense the surrounding environment, collect data, static, dynamic object identification, detection and tracking, and combined with the navigator map data, systematic calculation and analysis, to achieve double dynamic data collection of people and vehicles. Therefore, based on the new energy vehicle ADAS, it can provide more complete driving behavior data for UBI.
From the perspective of improving new energy auto insurance, there is undoubtedly an opportunity for auto companies to enter the UBI auto insurance market.
Car companies are involved in the pros and cons of car insurance
At a time when intelligent and connected vehicles are becoming more and more popular, the entry of car companies is of great benefit to the optimization of UBI insurance products. The implementation of UBI auto insurance on new energy vehicles is first of all conducive to deepening the results of comprehensive reform of auto insurance. It can optimize the cost structure of insurance companies, improve operational efficiency, enable insurance companies to achieve differentiated development through characteristic products, and create new profit growth points.
Second, it is conducive to improving the level of social governance. On the one hand, it can allow low-risk car owners with less mileage, good driving habits and low insurance frequency to enjoy more premium discounts. On the other hand, it assists in improving the driving habits of drivers and ensuring the driving safety of car owners.
Finally, it is conducive to meeting diverse consumer needs. By establishing multi-dimensional models such as people, cars, and roads for accurate pricing, it can meet the personalized needs of different types of consumers and improve the experience and satisfaction of car owners.
However, in the eyes of regulators, the underlying logic of UBI insurance is to divide the cake, not the model of making the cake bigger, and there will be some high-risk users who will be abandoned, causing some social problems.
After the new energy vehicle company launches UBI car insurance, it may make some high-risk new energy car owners unable to enjoy car insurance services. Because the price of UBI car insurance is much lower than that of ordinary insurance, most owners with better driving habits go to car companies to buy UBI insurance and be happy.
But drivers with bad driving habits are miserable, because the risk of accidents is high, so the UBI premium is high, they can only go to the insurance company to buy ordinary car insurance. But ordinary insurance companies believe that most of the owners of this brand have bought UBI, and only high-risk car owners have bought traditional car insurance, which has led to the brand's users having no value to insurance companies.
Because the insurance company does not have a large enough premium pool, the premium of this high-risk user is simply not enough to compensate, and as a result, the traditional insurance company has to increase the price of this part of the car owner, or do not accept the order, resulting in a small number of high-risk users without insurance, increasing the hidden danger of traffic accidents can not get insurance compensation.
In general, after the rise of the direct operation model of new energy vehicles, the rights of booking, delivery, and insurance have begun to return to car companies, and car insurance is a just-needed attribute for car owners. With sufficient data support, new energy vehicle companies can comprehensively analyze the basic information of the vehicle, such as battery status, vehicle usage, user driving habits, etc., and calculate the more accurate UBI car insurance price based on these data.
Therefore, in the context of the rise in new energy vehicle insurance premiums, UBI may be one of the feasible solutions to develop a car insurance that is both recognized by customers and does not lose money.
Although there are no mature UBI products to choose from in China, but the future UBI is the direction, and new energy vehicle companies like Tesla and Weilai, the products are sold in a direct sales manner, and they also have advantages in car owner services, data collection, etc. It is entirely possible to customize some products with insurance companies, and then launch their own UBI products when the legal conditions are ripe.