Sino-Singapore Jingwei, January 13 (Li Ziman) Recently, the China Banking and Insurance Regulatory Commission issued the "Notice on Expanding the Floating Range of Independent Pricing Coefficients of Commercial Auto Insurance" (hereinafter referred to as the "Notice") to further expand the pricing autonomy of property insurance companies. rights, and it is clear that local conditions should be implemented in various places.

  In the view of interviewed industry insiders, theoretically auto insurance premiums can be reduced by up to 23%, but companies will not blindly reduce prices.

For insurance companies, the "Notice" expands the independent authority of insurance companies in auto insurance pricing, and businesses that are stuck at both ends of the original independent pricing coefficient may have development opportunities.

In theory, auto insurance premiums can be reduced by up to 23%

The possibility of price cuts by large insurance companies may be higher

  The first part of the "Notice" is mainly to clarify that the floating range of the independent pricing coefficient of commercial auto insurance has been expanded from [0.65, 1.35] to [0.5, 1.5].

  According to the latest statistics from the Ministry of Public Security, as of the end of September 2022, the number of motor vehicles in the country will reach 412 million.

The number of motor vehicle drivers nationwide reached 499 million, of which 461 million were car drivers.

  Soochow Securities non-bank financial industry analyst Ge Yuxiang’s team believes that this adjustment will make auto insurance pricing more refined, “good car owners” with good driving habits will have lower premiums, and “high-risk car owners” will face upward pressure on premiums.

Calculated according to the commercial auto insurance premium calculation formula (commercial auto insurance premium = benchmark premium × NCD coefficient × independent pricing coefficient), theoretically, the adjusted auto insurance premium price can be reduced by up to 23% and increased by up to 11%.

  As one of the coefficients for calculating auto insurance premiums, the higher the independent pricing coefficient, the higher the auto insurance premiums.

At present, the influencing factors of the independent pricing coefficient include the driving skills, driving habits and driving age of the car owner.

  The NCD coefficient refers to the non-compensation preferential treatment coefficient, that is, the value of the NCD coefficient is determined according to the insured's continuous insurance period and the number of accidents, thereby affecting the cost of vehicle insurance.

  Will insurance companies take price cuts?

Sino-Singapore Jingwei contacted a number of property insurance companies and learned that since the "Notice" was issued not long ago, each company has not yet formulated a complete relevant policy, and it is inconvenient to make a specific response.

  Industry experts told Sino-Singapore Jingwei that after the "Notice" is issued, insurance companies may reduce prices according to their own comprehensive conditions.

Affected by factors such as the comprehensive reform of auto insurance, small and medium-sized property and casualty insurance companies still have a relatively high comprehensive ratio, and the possibility of price cuts will be lower than that of large property and casualty insurance companies.

At present, the accident data of car owners is online, but due to the different pricing strategies of each company, insurance premiums for the same car of the same car owner will vary.

Due to the large amount of insurance coverage, large insurance companies will spread pricing risks to a certain extent.

Therefore, for some vehicles with higher risks that choose to insure in large insurance companies, their auto insurance premiums are not too high compared to insuring in small and medium-sized companies.

The "Notice" may be more beneficial to companies with finer pricing

Businesses that are stuck at both ends of the original independent pricing coefficient may have development opportunities

  The auto insurance business has always been an important business segment of most property insurance companies.

What impact will the "Notice" have on property insurance companies?

  Xu Yuchen, a senior actuary, told Sino-Singapore Jingwei that, on the whole, the adjustment of the independent pricing coefficient of commercial auto insurance in the "Notice" is more beneficial to companies with more refined pricing.

Generally speaking, the larger the company's scale, the better its pricing power, and its actuarial and pricing research power will be greater, which has a scale effect.

  Industry experts pointed out that in addition to large companies, auto insurance companies under the OEMs of auto companies may also benefit from the "Notice".

Compared with small and medium-sized property insurance companies, such companies have greater advantages in data and sales channels.

However, how to transform the advantages into operation and pricing is a test of the company's overall operating capabilities.

  Regarding the impact of the "Notice" on the company's business side, Xu Yuchen said that after the adjustment of the independent pricing coefficient of commercial auto insurance, it will have a relatively large impact on the two types of business of property insurance companies.

One is the business with the original independent pricing coefficient of 0.65, and the other is the business with the original independent pricing coefficient of 1.35.

For vehicles with good risk data and good driving behavior, insurance companies can lower their pricing coefficients to enhance customer stickiness.

For high-risk vehicles, such as commercial vehicles, insurance companies can balance risks by increasing their own pricing coefficients and provide them with underwriting opportunities.

  Sino-Singapore Jingwei learned that before, for high-risk vehicles, such as motorcycles, agricultural vehicles, commercial vehicles, trucks, pickup trucks, etc., insurance companies often attached various harsh conditions and cumbersome procedures when underwriting.

For example, when calculating the insurance premiums of compulsory motorcycle insurance for motorcycles, insurance companies need to calculate the actual insurance premiums based on the motorcycle model and engine displacement, and add vehicle and vessel taxes.

  Xu Yuchen believes that, on the whole, whether companies can achieve business breakthroughs through the adjustment of independent pricing coefficients requires further observation.

(The opinions in this article are for reference only and do not constitute investment advice. Investment is risky, and you need to be cautious when entering the market.)