'Like Tesla' Chinese BYD Acquires Ian Sonbo... Enters Insurance Industry

From Electric Vehicle Sales to Insurance... Preparing One-Stop Service
Some Say "Already a Red Ocean... Investment Costs Will Also Be Huge"

BYD, the world's number one electric vehicle company from China, is entering the insurance industry. Similar to Tesla, which launched its insurance subsidiary in 2019, this move is interpreted as a preemptive strategy to respond to the rapid growth of the electric vehicle insurance market.

On the 9th (local time), according to Chinese economic media Caijing and other local outlets, the China Banking and Insurance Regulatory Commission approved BYD's acquisition of 1 billion shares, representing 100% ownership, of Ian Property & Casualty Insurance. As a result, BYD will be able to directly operate in the property and casualty insurance business.

[Image source=Reuters Yonhap News]

Founded in 2016, Ian Property & Casualty Insurance is considered one of China's four major internet insurance companies. However, due to insufficient solvency, it was seized by the Banking and Insurance Regulatory Commission in July 2020 along with China Life Insurance, Tianan Property Insurance, and Ian Property Insurance. Subsequently, Xiao Chenhua, the founder of Ian Property & Casualty Insurance and a Chinese-Canadian, was sentenced to 13 years in prison by the Shanghai court on charges including embezzlement of deposit funds, worsening the company's situation. In March last year, after an audit by an accounting firm, it was confirmed that the company was in a state of bankruptcy, and in July last year, it sought strategic investors. BYD has reportedly shown interest in acquiring the company since then.

Ian Insurance is a rare internet insurance company licensed to operate nationwide without opening branches. However, it has not dealt with automobile insurance products until now, so the industry expects BYD to enter the related market after the acquisition.

BYD's entry into the insurance business is interpreted as an effort to secure a separate electric vehicle insurance market, where premiums are higher compared to traditional internal combustion engine vehicles. As a complete vehicle manufacturer, BYD is expected to benefit from bundling insurance products with vehicles or cross-promoting the two products. Tesla also launched its own insurance company in 2019 to respond to the related market. Tesla's insurance products apply premiums about 30% lower than similar products in the industry.

There are several precedents of complete vehicle manufacturers entering the insurance market in China. Guangzhou Automobile Group also became the second-largest shareholder by investing 33.33% in Zhongxing Auto Insurance in 2021. Caijing forecasted, "New energy vehicle companies have better access to customer information, driving habits, and vehicle risk data compared to traditional automakers," adding, "They will be able to use this information to classify customers and accurately price insurance premiums." Furthermore, it emphasized, "One-stop service from vehicles to insurance will also be possible."

On the other hand, some believe that entering the fiercely competitive insurance market will not be easy. China Suzhou Securities stated, "Competition in the automobile insurance industry is already a red ocean," and predicted, "They will face challenges in setting risky (low) prices and responding to increasing demands." It added, "There are many complex issues such as compliance, planning, pricing, liability determination, and multiple liabilities, and huge investments are required for offline service stores and insurance reserves," explaining, "This is why existing complete vehicle manufacturers have not ventured into the insurance business."

This content was produced with the assistance of AI translation services.