Four property insurance companies are set to have "pay as you drive" motor policies approved by the CBIRC. The four are PICC, Ping An, Sunshine and ZhongAn. Their mileage based motor policies of the four insurers recently passed a review by the Insurance Association of China (IAC).
Once approved, a pilot scheme for “pay as you drive” motor policies will be implemented in Guangxi, Shaanxi and Qinghai, reports Shanghai Securities News.
This is regarded by the insurance industry as a milestone breakthrough in the domestic auto insurance arena.
Forecasts are that by 2020, the market share of mileage based motor insurance will not be lower than 20-25%, with the annual premium volume between CNY250bn ($37bn) and CNY300bn.
The introduction of mileage based motor insurance means that pricing of auto insurance will see some innovation. The traditional pricing model with a single dimension will be broken. The new system will benefit not only those who have low mileage but also provide opportunities for small and medium sized insurers.
Several factors favour the implementation of “pay as you drive” motor policies. Firstly, the increasingly tight traffic environment in large cities in China provides a market for mileage based insurance. Secondly, telematics and technological advances such as the Internet of Things and sensor technology provide the foundation for motor insurance innovation as well as more precise auto insurance pricing.