With a single quarter of 4 million policies, Cheche Technology, which recently won a major contract with Tesla UBI, aims to shake up the car insurance market

All along, the new energy vehicle insurance track has been filled with car owners complaining about high prices and insurance companies complaining about losses. The argument that "there are no real winners" has been incessant, but this has not stopped car companies from venturing into insurance.

Following BYD's issuance of the first car insurance policy in May this year, Tesla has recently made new progress in its insurance business in China. Titanium Media App found that Tesla has provided online car insurance services for users in multiple provinces in the country. However, Tesla's car insurance services are implemented through a third-party insurance SaaS system called "Cheche Technology". Through this system, Tesla owners can access their own behavioral data to obtain personalized "car insurance plans". In the industry, this kind of individualized insurance plan is also known as UBI car insurance, which stands for Usage-Based Insurance, with the core principle being the calculation of premiums based on the user's actual driving behavior, rather than the insurance company's statistical principles.

With the rapid development of the new energy vehicle market, especially as car companies' autonomous driving technologies become more mature, the car insurance market is rapidly expanding and undergoing a profound transformation. The demand for convenience, intelligence, and personalization from young insurance consumers continues to stimulate the market space for insurance technology companies.

Cheche Technology is one of the insurance technology companies that has gone public in the United States riding on this trend. Starting with digitalized car insurance transactions, Cheche's current business covers online insurance transactions, new energy car insurance solutions, empowering insurance intermediary SaaS systems, research and development of AI intelligent pricing assistance systems, and more. It has established partnerships with over 10 brands including "Weixiaoli", Volkswagen, and Avita. In the second quarter of this year, the total number of insurance policies reached 4 million, with a total premium scale of 5.6 billion yuan.

Currently, the Chinese car insurance market is still dominated by a few traditional insurance giants, with a highly concentrated market share. The entry of car companies will gradually break this situation. "Car companies will become the main 'gateway' for car insurance, contributing at least 20% to 30% of the market share," said Cheche Technology CEO Zhang Lei. "This will also bring new opportunities to small and medium-sized insurance companies. The existence of aggregation platforms will help small and medium-sized insurance companies better participate in market competition."

Tesla "indirectly" lands UBI insurance in China

Tesla is actually the "first crab eater" among new energy car companies to tap into the insurance market. As early as 2016, Tesla partnered with third-party insurance companies to launch customized insurance plans in Australia and Hong Kong, China. This business was later expanded to the North American market in 2017. In 2019, through the acquisition of the American company Markel, Tesla obtained an insurance brokerage license and officially launched its insurance services in California, USA.

"With time, insurance will become one of the company's main products, with the value of the insurance business accounting for 30% to 40% of the overall vehicle business value," Tesla CEO Elon Musk predicted at the third-quarter earnings conference in 2020. It was around this time that Tesla began exploring the Chinese insurance market In August 2020, Tesla established "Tesla Insurance Brokers Co., Ltd." in Shanghai. However, for over three years following that, Tesla had been unable to obtain an insurance brokerage license. Eventually, the company issued a simple deregistration notice in March of this year and officially changed its corporate status from active to deregistered on April 16.

Nevertheless, Tesla did not give up on the "blue ocean" market of China. Instead, within just three months, it quickly returned. According to the National Enterprise Credit Information Publicity System, on July 30, Tesla Insurance Brokers (China) Co., Ltd. was established with a registered capital of 50 million RMB, fully owned by Tesla Insurance Services Co., Ltd. The legal representative and chairman is Zhu Xiaotong, Senior Vice President of Tesla's automotive business. Industry insiders indicate that the company's insurance brokerage business can only commence operations after approval from the relevant departments of the China Banking and Insurance Regulatory Commission.

However, Titanium Media App discovered that in several provinces, users can already directly purchase insurance for their vehicles through the Tesla App. This service is achieved through Tesla's collaboration with Cheche Technology. Specifically, users access Cheche Technology's system through the Tesla App, which then utilizes user data provided by Tesla (Shanghai) Company. Based on the user's driving behavior and actual needs, in conjunction with partnerships with several domestic insurance companies, tailored insurance plans are created for Tesla owners.

For example, for novice drivers with limited driving experience and relatively high accident risks, Cheche Technology can design insurance products that include more driving training courses, on-site accident assistance, and other value-added services. On the other hand, for experienced drivers with no accidents for many years, products with greater discounts and coverage for high-risk, low-probability accidents (such as vehicle damage in extreme weather conditions) are designed.

This signifies that the Usage-Based Insurance (UBI) concept has indirectly landed in China. In 2021, Tesla was the first to launch its own UBI auto insurance in the United States, with its major highlight being the independently developed safety rating system. This system is not just an evaluation metric but is directly linked to the insurance costs of the vehicle owner—higher safety-rated owners will enjoy lower insurance prices based on driving data collected by in-car sensors, such as collisions, emergency braking, sharp turns, etc.

Tesla's auto insurance also adopts a more flexible monthly adjustment mechanism, where each owner's premium dynamically changes based on their monthly safety rating. This pricing method not only ensures transparency and fairness in rates but also incentivizes owners to reduce insurance costs by improving their driving habits, thereby to some extent reducing Tesla's payout costs and creating a win-win situation.

Not for profit, but for autonomous driving?

Not only Tesla, in recent years, domestic new energy vehicle companies such as BYD, "Weixiaoli," and others have also ventured into the auto insurance field.

As early as 2018, XPeng Motors established Guangzhou XPeng Insurance Agency Co., Ltd., but did not receive approval from regulatory authorities until August 2022 when it acquired Qingdao Miaobao Insurance Agency Co., Ltd., obtaining a national insurance agency license. Nio and Li Auto similarly acquired insurance brokerage licenses through the acquisition of insurance intermediary companies. BYD, on the other hand, directly obtained an insurance license by acquiring Yian Property in May 2023 The logic here is not difficult to understand. Continuous price wars have led to varying degrees of losses for car companies, especially in the field of new energy vehicles. For example, in the first half of this year, among the five new car-making forces including Li Auto, ZEEKR, Nio, XPeng, and Leapmotor, only Li Auto achieved profitability, while the other four companies collectively lost nearly 20 billion yuan in the first half of the year. With the increasing penetration rate of new energy vehicles, the car insurance market is growing rapidly with huge potential. "In 2023, the new energy vehicle insurance market will exceed 100 billion yuan for the first time, an 85% year-on-year increase. It is estimated that the market size may reach 200 billion yuan within the next three years," Zhang Lei said. New energy vehicle companies can seize this market opportunity by entering the car insurance business, creating new profit growth points.

On the other hand, Zhang Lei pointed out that car insurance has become the largest post-purchase cost after buying a new energy vehicle, accounting for about 60%-70% of total expenses. Against the backdrop of current disintermediation and the restructuring of the "people, cars, factories" relationship in new energy vehicles, insurance is expected to become a "super entrance" linking users. Car companies can improve their service chain by offering a one-stop service system from pre-sales consultation, sales, after-sales maintenance to car insurance services. This not only enhances the overall user experience but also strengthens user brand loyalty.

However, Musk recently made it clear that Tesla's entry into the car insurance business is not for profit, but to use the data of safe drivers who do not have traffic accidents to train Tesla's Full Self-Driving (FSD) model. This means that Tesla's car insurance business is to some extent to support the development of its autonomous driving technology. By selecting good driving behavior owners, Tesla can reverse optimize and improve the FSD system.

It is reported that Tesla plans to launch the FSD function in the Chinese market in the first quarter of 2025, but the specific timing still needs to wait for regulatory approval. During this process, Tesla will further optimize its autonomous driving technology using high-quality driving data obtained from the insurance business, and through the deep integration of dynamic data with insurance business, form a closed-loop technology and service ecosystem.

Data-driven personalized car insurance pricing

Overall, currently only a few OEMs, such as BYD, GAC, and FAW, have their own property insurance companies and direct underwriting capabilities. Most OEMs only hold insurance brokerage licenses or agency licenses and mainly participate in insurance business as intermediaries.

"A car company needs to interface with 10-20 insurance companies for core system integration. Even if the car company has strong R&D capabilities, the cost investment within one or two years is still very high. At the same time, the car insurance business has a high degree of localization, with each province and city having separate operational policies and contract configurations. Many car companies' insurance departments have only ten or even five people, which are simply unable to complete the operational work on the ground. In addition, insurance companies are also unwilling to provide comprehensive service support to a single car company because the business volume of car companies is usually not large," Zhang Lei frankly stated.

This has led new energy vehicle companies to face challenges in key aspects of insurance operations, the most obvious being the lack of sufficient control over the design, pricing, and claims processes of insurance products. This makes it difficult for them to tailor insurance products and services according to their own brand positioning and customer needs, while also limiting their ability to take an active role in the claims process Therefore, about 80% of car companies choose to adopt the "end-to-end" model to manage insurance business, aiming to reduce users' insurance costs and increase user satisfaction through data integration, precise pricing, digitalized, intelligent user insurance platform, and online claims process. Third-party technology platforms typically play roles such as data exchange hub, technology solution provider, and custom product developer.

Taking the cooperation between Cheche Technology and Volkswagen as an example, on the insurance end, through online insurance and claims systems, Cheche Technology has accumulated a large amount of risk data and can access driving data and driving behavior data of car companies. These data not only support the design of car insurance products but also help achieve more precise pricing.

• Integrate data differentials such as vehicle mileage, driving time, driving area road conditions for differentiated pricing. For example, vehicles that frequently drive on congested roads during peak hours will have their insurance prices appropriately increased based on risk assessment. Cheche Technology data shows that in a certain city, vehicles that drive less than 5000 kilometers a year mainly in the suburbs have an average premium around 30% lower than vehicles driving 20,000 kilometers or more in the city center.
• Dynamically price based on real-time driving data of vehicles. For instance, when there are frequent bad driving behaviors such as sudden braking and sharp turns, the system will adjust the premium price fluctuation factor in a timely manner to better match the current risk status of the vehicle. If the bad driving behavior data of a vehicle exceeds a certain threshold within a month, the premium for the next month may increase by 10%-20%; conversely, if good driving behavior is maintained, the premium may decrease accordingly.

On the claims end, after an accident occurs, the car owner can report the case with one click through the car company's application and automatically package the image data of the minutes before the accident into a detailed accident report, which is then synchronously transmitted to the insurance company's loss assessment center and claims center through Cheche Technology's system. At the same time, this accident information will also be automatically reported to the car company's after-sales department, which will take immediate action to assist the car owner, such as arranging a replacement car or towing service.

Zhang Lei believes that future car insurance may no longer be just a standalone financial product but deeply embedded in the overall service package of car companies, becoming part of the car owner's experience. Car insurance pricing will also achieve personalized pricing for each individual. By analyzing the driving behavior data of car owners, such as safe driving scores, insurance companies can provide more accurate premium pricing, avoiding misjudgments caused by data silos in traditional models. (This article was first published on the Titanium Media App, Author | Liu Mengmeng)