This article first appeared in Insurance Asia on Friday 16th May 2025.
The path to becoming a strong automaking nation lies in developing new-energy vehicles, Chinese President Xi Jinping said in a 2014 speech.
This was perhaps one of the redefining moments for Asia’s auto industry in the last decade, as it signalled to the world that China had a head start in the transition to building and using “the cars of the future.” From a wider regional perspective, estimates show that Asia will soon lead the world in electric vehicle (EV) sales as more than 60% of new EVs sold over the next five years are expected to be made in Asia.
The intersection of technological innovation, supportive regulatory frameworks, and worldwide initiatives to address climate change, has created momentum for the adoption of EVs, autonomous vehicles (AVs), and next-generation mobility solutions in Asia. In particular, the recent advent of generative artificial intelligence is accelerating how much sooner the cars of tomorrow will be arriving than previously thought.
Various countries in Asia are making significant inroads in the auto industry’s transition.
In China, where the domestic market used to be dominated by international manufacturers a decade ago, today has the world’s largest auto market. China now sells more EVs than any other country with a staggering 12.9 million vehicles delivered in 2024.
In Singapore, researchers have been encouraged to use the city and surrounding areas as a laboratory for AV testing. Whilst over in Australia, EV sales penetration has grown to 9.5% in 2024 from less than 1% five years ago.
Given the recent developments, it is certain that big shifts will be taking place, in particular the considerations on liability and safety, which will change auto insurance fundamentally.
By 2030, premiums for traditional personal auto coverage are estimated to reach more than $300b up from about $229b currently. Over the same period, new insurance models are expected to emerge, using sophisticated pricing telematics to offer coverage for new kinds of AVs and EVs, which has up until recently been quite complicated.
In this new era, carriers will require new products, technological know-how, and distribution tactics to adapt to this transition.
Assessing risk and liability in the era of EVs and AVs
The evolving risks and repair costs associated with EVs and AVs for example, are challenging the insurance industry economics.
In China, the average insurance premium for EVs was 81% higher than ICE (Internal Combustion Engine) in 2023. Despite this, Chinese EV insurance providers reported a combined ratio above 100%. Similar outcomes have been observed in the UK, with EV repair costs estimated to be 25% greater than equivalent ICE vehicles and repair time being ~10-15% longer.
One driver for this is that battery costs are a material proportion of a total EV’s value and in some markets, this has led to insurers replacing the car rather than just replacing the battery packs. Delays in sourcing parts and scarcity of experienced repairers has also contributed to the above.
The expectation is that as battery and overall EV costs reduce, and supply chains mature and stabilise, both the cost and delays observed in the past should materially decrease. In the meantime, insurers can seek to develop preferred repair networks where they can secure sufficient repair capacity.
From a liability standpoint, the future of auto insurance may shift from drivers to automakers and tech providers. Doing this is complex though and will need to be done thoughtfully.
This reliance on artificial intelligence and machine learning introduces new complexities in liability allocation.
For instance, if a lane-departure warning fails or is disregarded, who should be responsible for an accident? Similarly, EVs could also be more susceptible to cybersecurity and software risks compared to traditional vehicles; shall a hack occur, who should be liable?
To solve this, several insurers in Asia have partnered with technology firms to better understand AV risks and are already offering automated driving insurance aimed at pilot tests. As vehicles reach higher levels of autonomy (L4 or L5), the shift of liabilities to original equipment manufacturers and tech providers is likely to become more evident.
Negotiating such a transition will require close partnership with regulators, industry groups, and consumers. If such a shift takes place, it could spur demand for commercial auto premiums, creating profitable avenues for reinsurers.
From a safety perspective, the integration of artificial intelligence and machine learning is expected to enhance overall passenger safety as computers can’t get distracted whilst driving. However, although EVs and AVs may reduce accident frequency, repair costs could rise significantly. Currently replacing a conventional windshield costs a few hundred dollars; this will be significantly more for one infused with sensors.
A new age for auto insurance
The demand of an evolving auto insurance landscape will give rise to a new age of insurance startups. Insurtech startups and automakers—armed with valuable vehicle data—will be able to enter the market, potentially bundling insurance with sales.
Although incumbent insurers might retain advantages like brand trust and customer relationships, strategic partnerships with carriers may emerge as a key path to growth in this dynamic and evolving landscape.
But uncertainty and disruption can open the door to opportunity. The simple fact is that different kinds of mobility will require different kinds of insurance.
Carriers who develop the best sense of direction, and the skills to adapt to change, will put themselves into the best position to drive into the future with confidence.