Create a closed loop? BYD Insurance is officially approved. What kind of huge changes will the auto insurance market bring?

Are you dissatisfied with the current new energy vehicle insurance?

Their prices are unreasonable, compensation is difficult, and there are all kinds of wrangling.

Now, a new player has arrived. On May 6, the State Financial Supervision and Administration Bureau officially approved BYD Insurance to use the national unified compulsory traffic insurance clauses, basic insurance premium rates and corresponding rate floating coefficients in eight cities, namely Anhui, Jiangxi, Shandong, Henan, Hunan, Guangdong, Shaanxi and Shenzhen.

So, how should we eat this melon?

1. What happened?

BYD has been the global sales champion of new energy vehicles for two consecutive years. How did its insurance business come about?

BYD first became involved in insurance a year ago. On May 9, 2023, BYD took over 100% of the equity of Yi'an Property & Casualty Insurance, thus entering the insurance industry; on November 2, 2023, BYD was approved to carry out auto insurance business; during the May Day holiday in 2024, BYD's official APP quietly opened the insurance business entrance; on May 6, it was officially approved.

BYD has become the first automaker to have an independent insurance company. Prior to this, Tesla, NIO, Li Auto and other manufacturers have all made plans for insurance business, but they usually do so through insurance brokerage companies. This time, BYD is selling insurance itself.

In other words, if you buy a BYD car in the future, your insurance service provider may be BYD.

2. What kind of tricks can you come up with?

So, what can BYD do if it sells insurance itself?

In fact, BYD's idea is very simple, that is to create a closed loop. Currently, BYD has new car sales, official second-hand cars, manufacturer finance, and now insurance, forming a complete business chain. BYD can provide various businesses related to new energy vehicles.

This can greatly reduce BYD's overall costs and provide better services on this basis. In fact, this is still BYD's classic "vertical integration" gameplay. The key links are all owned by itself, which makes it easier to control costs.

In the automobile production process, BYD can independently produce all automobile parts except tires and automobile glass; now, BYD has also achieved this at the service level.

If nothing unexpected happens, BYD's auto insurance business will take the route of small profits but quick turnover in the short term, not seeking profits, but cultivating insurance as a selling point for BYD to boost sales. For example, in the past, when you bought a BYD car, you might only care about the product performance and after-sales service, but now you buy a car because its insurance is easy to use.

3. What benefits will consumers get?

You may say, this is BYD’s business, what does it have to do with me, an ordinary consumer?

First of all, we need to figure out why the national financial regulatory authorities approved BYD’s insurance business and allowed it to be piloted in eight regions in a very short period of time?

One of the main reasons is that the current auto insurance market needs to be “rectified.” When consumers buy cars, they will come into contact with different insurance companies. These companies seem to be in fierce competition, but in fact they are in a monopoly position. Consumers have very limited choices and are in a weak position.

At the same time, many insurance companies discriminate against new energy insurance, not only with inflated prices, but also with various preconditions. Not long ago, there was news that a new energy vehicle owner was denied insurance after driving 20,000 kilometers a year. This situation is actually not conducive to the development of new energy vehicles.

BYD is the global sales champion of new energy vehicles. It can develop exclusive new energy insurance services based on users' actual vehicle usage. Prices are expected to drop significantly, services will be more in place, various preconditions full of pitfalls will be cancelled, and there may even be "insurance on demand".

In fact, this is not difficult to understand. For other insurance companies, auto insurance is mainly a profit-making tool, and the more money they can make, the more money they will make. But for BYD, auto insurance is a service and a selling point. The two are fundamentally different in positioning, and the actual experience they bring to users is naturally different.

4. What impact will it have on the industry?

In fact, before BYD, many automakers had considered insurance, but they did not shake the basic structure of the auto insurance market. BYD's entry, however, is likely to bring a huge impact.

The reason is not complicated. BYD is too big. BYD's annual sales will exceed 3 million vehicles in 2023, and it is expected to exceed 3.6 million vehicles in 2024, accounting for more than 30% of the domestic new energy market. This is a huge blow to traditional insurance companies. If all BYD models use their own insurance, it is equivalent to BYD taking away more than 30% of the cake. This change is enough to shake the industry landscape.

Moreover, BYD is only the first automaker to directly sell insurance, and it is unlikely to be the last. If BYD's insurance operations go smoothly and provide users with high-quality services, regulators are likely to approve more manufacturers to enter the auto insurance market and continue to divide the market of traditional insurance companies.

You know, major new energy manufacturers have a huge amount of user data in their hands. They understand what kind of insurance services new energy vehicle owners need, and they are naturally superior to traditional insurance companies. If everything goes well, auto companies directly operating insurance will become a new trend.

Traditional insurance companies are essentially third-party service providers. If direct insurance by auto companies becomes the mainstream, their interests will be seriously damaged. In order to survive, all these insurance companies can do is reduce premiums, improve service quality, and beg users to buy insurance. The entire industry landscape will change.

Of course, it is unlikely that the regulatory authorities will approve so many auto insurance licenses in a short period of time, but as long as BYD does a good job in its own insurance, it will be enough to shock those traditional insurance companies that are counting money until their hands are tired. If they improve their service quality in time, BYD's entry may just be a catfish; if they continue to harvest users, then BYD, the catfish, may become a shark.

Conclusion: BYD's entry into the insurance business is good news for users, but it is also a shock to the auto insurance market. It is hard to say how the auto insurance market will change in the future, but one thing is certain: as the auto market rapidly shifts to new energy, the insurance "play" that was originally formed by relying on traditional fuel vehicles must also keep pace with the times.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.