CHINA’S rapid adoption of new-energy vehicles (NEVs) is posing a problem for many insurers in the country. They are losing money on insuring the vehicles, as strict pricing rules mean they cannot raise their premiums to the point of profitability. This is despite already charging far more to insure NEVs.

The SU7, Chinese tech giant Xiaomi’s debut NEV, retails for 215,900 yuan (S$39,873). However, getting it insured costs around the same as for a combustion-engine vehicle more than twice its price. This is more or less standard, as NEV owners are about twice as likely to file a claim, according to data provided by LexisNexis Risk Solutions.

Risky business

Insurers’ gauge of NEVs’ risk probability – a policyholder’s likelihood of filing a claim in a year – is higher than for traditional fossil-fuel cars.

Liu Shulin, president of the CIRI Auto Technology Institute, a research institute specialising in insurance-related car technology, cited several reasons for NEVs’ elevated risk probability in an April article.

One reason is that NEVs can accelerate significantly quicker than traditional cars. Liu pointed out that a Tesla Model 3 can hit 100 km per hour in just 4.4 seconds, nearly twice as fast as a similarly priced BMW combustion-powered car.

Another reason is that NEVs, particularly their batteries, are expensive to repair. Some NEVs can only be repaired by their manufacturers instead of general auto repair shops, pushing up costs.

Liu also cited the widespread adoption of NEVs in the ride-hailing industry – which means they are being driven far further per y...