The great Chi­nese in­sur­ance rush

So­cio-eco­nomic and de­mo­graphic fac­tors push con­sumers and in­vestors to­ward the pro­tec­tion busi­ness

China Daily (USA) - - BUSINESS - ByWUYIYAO in Shang­hai wuyiyao@chi­

Zhang Fanyi, a 35-year-old pri­mary school teacher in Shang­hai and mother of a five-year-old boy and an in­fant, re­cently spent 23,000 yuan ($3,480) on in­sur­ance poli­cies for her fam­ily.

The in­vest­ment was trig­gered by an in­ci­dent. “One of my mother’s close friends fell sick and she could barely af­ford the treat­ment, From then on, I was think­ing about in­sur­ance. Also, as my chil­dren grow up, we’ll travel fre­quently, so in­sur­ance is nec­es­sary,” said Zhang.

She is one of mil­lions of Chi­nese who are spend­ing more than ever on in­sur­ance these days. With ag­ing peo­ple mark­ing the so­ci­ety, health­care, ed­u­ca­tion and as­set­build­ing have be­come im­por­tant; so have life and non-life in­sur­ance prod­ucts, said an­a­lysts.

A re­search note from North­east Se­cu­ri­ties said in­ter­net-based distribution chan­nels en­able in­sur­ance buy­ers to ob­tain more in­for­ma­tion about the prod­ucts they would like to buy, and con­sumers have more trust now. De­mand for life in­sur­ance has surged among fam­i­lies with ag­ing par­ents and young chil­dren. At the same time, up­graded con­sump­tion, rise in dis­pos­able in­comes and mount­ing wealth have also pushed up de­mand for non-life in­sur­ance.

The fast-ex­pand­ing in­sur­ance mar­ket has at­tracted not only more con­sumers but in­vestors.

About 200 com­pa­nies have ex­pressed in­ter­est or sought li­cense to set up an in­sur­ance com­pany, ac­cord­ing to data of the China In­sur­ance Reg­u­la­tory Com­mis­sion.

In the last year, more than 10 com­pa­nies have been given ap­proval to ob­tain in­surer’s li­cense. These 10 are backed by more than 70 com­pa­nies, in­clud­ing Ten­cent, the Shen­zhen-based tech­nol­ogy gi­ant, and Fo­sun, a Shang­hai-based in­vest­ment group.

More than 200 ap­pli­cants are keen to ap­ply for li­cense, ac­cord­ing to Xiang Junbo, chair­man of the CIRC.

From gar­ment mak­ers to liquor firms, var­i­ous en­ter­prises are back­ing new in­sur­ers.

“Prof­its of in­sur­ers are much higher than that in many sec­tors. Get­ting an in­surer li­cense is like se­cur­ing a guar­an­teed profit. An in­surer can raise funds eas­ily by sell­ing in­sur­ance at a cost much lower than many other fundrais­ing chan­nels. It is not a se­cret that an in­sur­ance com­pany serves like a deep pocket from which com­pa­nies can eas­ily draw funds,” said Yang Di, re­searcher with Shang­hai Shenda As­set Man­age­ment Ltd.

Ac­cord­ing to CIRC data, to­tal as­sets of China’s in­sur­ance in­dus­try have more than dou­bled from 5 tril­lion yuan in 2010 to 12 tril­lion yuan in 2015.

In the first half of 2016, life in­sur­ers’ pre­mi­ums reached 1.176 tril­lion yuan, up 50 per­cent year-on-year, and prop­erty in­sur­ers’ pre­mium reached 463.2 bil­lion yuan, up 8.5 per­cent. Over­all pre­mi­ums grew 37 per­cent year-on-year.

But au­thor­i­ties have warned that overly fast growth of in­sur­ers’ in­come should not tempt com­pa­nies to mis­use the funds or de­ploy them in un­re­lated chan­nels.

In a re­cent meet­ing, CIRC’s Xiang said in­sur­ers must stick to their orig­i­nal plan of pro­vid­ing pro­tec­tion to in­sur­ance buy­ers and should not di­vert funds to non-in­sur­ance busi­nesses. He said in­surer li­censes are not tools to ac­cess low-cost funds.

The en­try of new in­sur­ers is ex­pected to in­ten­sify com­pe­ti­tion in the mar­ket and sharpen fo­cus on product devel­op­ment and sol­vency ca­pac­ity man­age­ment, said an­a­lysts.

Ding Wen­tao, a re­searcher with Si­no­link Se­cu­ri­ties Ltd, said, “We es­ti­mate that the fast growth of pre­mium in­come will last for another decade. In­ter­net-based sales chan­nels, and grow­ing num­ber of niche mar­kets will pro­vide more op­por­tu­ni­ties for the new­com­ers than ever. In­sur­ers that de­velop prod­ucts for spe­cific needs of buy­ers, and have a strong ca­pac­ity to man­age risks and sol­vency, are more likely to win.”

are keen to ap­ply for in­sur­ance busi­ness li­cense, ac­cord­ing to Xiang Junbo, chair­man of the CIRC


A man passes by the bill­board of New China Life In­sur­ance Co at an in­sur­ance fair in Bei­jing.


A vis­i­tor checks his cell­phone at the gate of the China In­sur­ance Reg­u­la­tory Com­mis­sion.

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