Shares of China-based auto insurance intermediation service provider SunCar Technology (NASDAQ:SDA) are moving up modestly today. Earlier this morning, the company announced a one-year intermediation service agreement with Nio (NYSE:NIO), a popular electric vehicle (EV) maker in China. Although the EV maker stumbled on Wednesday, both NIO and SDA stock may benefit from a burgeoning insurance paradigm.
According to the Council of Insurance Agents & Brokers, “Insurance intermediaries serve as the critical link between insurance companies seeking to place insurance policies and consumers seeking to procure insurance coverage.” Such intermediaries — traditionally known as brokers, agents or producers — provide guidance, information and other services related to the sale process of insurance products.
Over the last several years, the role of insurance intermediaries has evolved beyond their core guidance service. Specifically, they can also provide “the evaluation and implementation of alternative means of funding for potential losses, risk management strategies and claims management.” As well, the role of advanced technologies have significant implications for SDA and NIO stock.
SDA Stock May Rise on Platform Expansion
According to the aforementioned agreement’s accompanying press release, SunCar — which also provides other aftermarket services in China — “develops and operates online platforms that seamlessly connect drivers with a wide range of automotive services and insurance coverage options from a nationwide network of provider partners.”
Moving forward, the deal may further bolster SunCar’s leadership in China’s business-to-business (B2B) automotive after-sales services and online insurance market for EVs. Company Chairman and CEO Ye Zaichang stated the following in the press release:
“SunCar leverage[s] the experience of NEV customers and partners like Nio, who are NEV industry leaders in China. We have witnessed strong growth momentum for NEVs in China, driven by the increasing general customer acceptance of products, services, and technologies. We will continue to expand our diverse services platform and look forward to supporting more leading NEV companies as they ramp up production and delivery capabilities.”
One major benefit for SDA stock is that the agreement may benefit underlying customers (drivers) through personalized services. Since EV makers generally command treasure troves of data, SunCar may be able to facilitate more meaningful offerings.
NIO Stock Benefits From Connectivity Implications
On the surface, the advantages for NIO stock regarding the insurance intermediation deal don’t appear obvious. After all, shares are printing red ink during the midweek session. However, over time, the popular EV maker may rise on the underlying connectivity implications.
According to McKinsey & Company, the rise of EVs and the concerted effort to push autonomous mobility may be of vital importance to the future of the U.S. auto insurance industry. Fundamentally, it should be no different in China. Essentially, the myriad telematics-related data may spark a paradigm shift regarding insurance underwriting to claims processing and other services.
While it’s impossible to list all nuances here, the main takeaway for NIO stock is the concept of embedded telematics. Through on-field data collection, Nio can better understand its customers’ driving tendencies, recurring issues and other behavioral analytics. Enhanced connectivity may also usher in new market opportunities. Ultimately, today’s move seems like a win-win for both NIO and SDA stock.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.