Haris Ashley
Auto insurance in China is a mandatory requirement for all drivers. There are two types of mandatory car insurance in China: vehicle compulsory insurance, which covers third-party injuries and/or deaths in accidents, and commercial insurance, which covers all related claims not covered by the former. The basic, mandatory insurance is often inadequate, and additional insurance can be purchased to cover vehicle damage, theft, and passenger injuries, among other risks. The auto insurance market in China is dominated by large domestic brands, with foreign insurers having gained full access to the market in 2012.
| Characteristics | Values |
|---|---|
| Types of Mandatory Insurance | Vehicle Compulsory Insurance, Third-Party Liability Insurance, Commercial Insurance |
| Purpose of Mandatory Insurance | Covering third-party injuries and/or deaths in car accidents |
| Additional Insurance Options | Vehicle Damage Insurance, Theft Insurance, Quota-Free Insurance, Passengers Insurance, Driver Insurance, Natural Damage Insurance, Scratch Insurance, Engine Insurance, Vehicle Window Glass Insurance |
| Insurance Companies | People Insurance Company of China (PICC), Ping An Insurance, Tokio Marine & Nichido Fire Insurance Co, Chubb Corp, RSA Insurance Group |
| Insurance Market Size | $32 billion |
What You'll Learn
Mandatory third-party liability insurance
In China, there are two types of mandatory car insurance: vehicle compulsory insurance, also known as third-party liability insurance, and commercial insurance. Third-party liability insurance is compulsory for both private and commercial use. It covers third-party injuries and/or deaths in car accidents and has limited financial coverage. The exact amount of coverage should be checked with the insurance agency.
Third-party liability insurance is a form of liability insurance that protects the insured from claims made by another person or business (the third party). In the context of auto insurance, it covers the costs of injuries and property damage caused to another driver (the third party) in an accident. This type of insurance is important as it can save individuals from having to pay extremely high damages out of pocket.
There are two types of third-party liability coverage: bodily injury liability and property damage liability. Bodily injury liability covers costs such as hospital care, lost wages, or pain and suffering resulting from an accident. Property damage liability covers costs such as replacing landscaping, mailboxes, or compensation for loss of use of a structure.
In China, the premium for compulsory liability insurance is regulated and stipulated by a simple rating table, according to vehicle types and other variables. Foreign-invested insurance companies are permitted to write compulsory liability insurance, subject to the prior approval of the China Insurance Regulatory Commission.
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Commercial insurance
Commercial motor insurance in China offers wider financial protection than the compulsory vehicle insurance. This includes claims for events other than traffic collisions, such as theft, keying, weather or natural disasters, and damage caused by colliding with stationary objects.
There are two segments of commercial motor insurance: basic risks and additional risks. Car owners must purchase insurance for basic risks first, which will then allow them to access additional risk insurance.
Basic risks include:
- Vehicle damage insurance: This covers all damage to the car, regardless of the reason.
- Theft insurance: This covers the vehicle and its contents in the event of burglary or theft.
- Quota-free insurance: This insurance covers the full 100% compensation, regardless of who is held responsible for the accident.
- Passengers insurance: This covers all passengers and is purchased according to the number of car seats.
Additional risks include:
- Free compensation special insurance: The insurance company is responsible for compensation up to the liability limit, according to the deductible amount, based on the rate specified in the corresponding basic insurance clause.
- Risk of spontaneous combustion: This refers to the compensation for the loss of the combustion vehicle caused by the failure of the vehicle’s electrical, wiring, fuel supply system, or the cargo itself.
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Vehicle damage insurance
In recent years, the process of filing damage claims has been made easier with the rollout of a video-based, artificial intelligence app from Ant Financial, an Alibaba affiliate. The Dingsunbao (Loss Assessment Master) app allows drivers to provide detailed car-damage information to insurers and claim vehicle insurance in real time. The AI also ensures a high degree of accuracy in damage assessment, making it more objective and reducing the potential for human adjusters to be influenced by drivers involved in an accident.
It is important to note that vehicle damage insurance is not mandatory in China. The two types of mandatory insurance in China are vehicle compulsory insurance, which covers third-party injuries and/or deaths in car accidents, and commercial insurance, which covers all related claims not covered by the vehicle compulsory insurance.
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Theft insurance
In China, car insurance is divided into two types of mandatory insurance and various types of additional insurance. The two types of mandatory insurance are vehicle compulsory insurance and commercial insurance. Vehicle compulsory insurance covers third-party injuries and/or deaths in car accidents. Commercial insurance covers all related claims that are not covered by vehicle compulsory insurance.
In addition to theft insurance, other types of additional insurance include vehicle damage insurance, quota-free insurance, passenger insurance, driver insurance, natural damage insurance, scratch insurance, and engine insurance for abnormal circumstances.
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Quota-free insurance
In China, drivers are required to have a minimum level of auto insurance. There are two types of mandatory car insurance: vehicle compulsory insurance, and commercial insurance.
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Frequently asked questions
There are two types of mandatory car insurance in China. The first is the vehicle compulsory insurance, or third-party liability insurance, which covers third-party injuries and/or deaths in car accidents. The second type is commercial insurance, which covers all related claims not covered by the vehicle compulsory insurance.
Some additional insurance options include vehicle damage insurance, theft insurance, quota-free insurance, and passengers insurance.
Yes, liability insurance is mandatory and covers third-party injuries and/or deaths in car accidents, while commercial insurance is optional and covers a wider range of claims, including theft, damage caused by natural disasters, and collisions with stationary objects.
In the event of an accident, the police will assess the scene and draw up a responsibility identification notice, which is required to make a claim from an insurance company. It's important to note that the party whose car caused any injuries in an accident is usually expected to pay for the resulting medical costs, regardless of fault.
