The Chinese insurance market, a new giant
With 1 377 billion USD, or more than 28% of the global turnover, the United States is currently the largest insurance market. Over the next decade, China will unseat the United States in terms of premiums.
In 2017, life insurance turnover decreased in mature markets (-4% in the United States, -0.7% in the United Kingdom, -2.7% in France, -6.1% in Japan), regions that generate 45% of the global turnover.
On the other hand, during the same period, emerging markets reported significant growth in life insurance (China +21%, India +17.4%, Indonesia +30.8%, Malaysia +8.3%, Thailand +8.7%, Philippines +4.4%). The Chinese market alone accounts for 72% of the overall premiums of all afore-mentioned markets.
With current growth rates maintained in both life and non-life insurance, China is expected to take the lead in the coming years.
This performance did not go unnoticed by its first economic rival, the United States, which indulged in a commercial standoff with the middle empire. Regulatory changes and the ensuing political tensions will certainly impact an industry characterized by its universal nature.
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Gradual opening of the Chinese insurance market
Since China's accession to the World Trade Organization WTO, the country has adopted a schedule of gradual opening of its insurance market to foreign companies. Over the years, several multinational companies, among which the biggest names in global insurance (AIG, Allianz, Axa, Aviva, Generali, Prudential, Manulife,...) have gained footholds in China.
In November 2017, following the visit of US President Donald Trump in the middle empire, the Chinese government announced the increase of foreign shareholding in the capital of local insurance companies. Previously capped at 50%, this participation goes, at first, to 51% before full foreign ownership was authorized five years later. As a result of this announcement, several foreign insurers have indicated their intention to expand their operations in the country.
At the end of 2017, China was home to 50 foreign insurers, 28 of which in life and 22 in non-life business. Foreign companies, however, accounted for just 6% of the life market and 2% of non-life.
As modest as it may be, the contribution of foreign actors to the local market has increased significantly in recent years. Before China's accession to the WTO, the turnover of foreign insurers did not exceed 1% in the life and non-life classes of business.
The arrival of multinational companies has spurred competition that benefited local insurers who had to improve their services, diversify their products and resort to more innovative technologies.
To discover:
Development of the insurance penetration rate in China: 1980-2017
| Year | Life (%) | Non life (%) | Total (%) |
|---|---|---|---|
| 1980 | 0.00 | 0.10 | 0.10 |
| 1990 | 0.33 | 0.55 | 0.88 |
| 2000 | 0.85 | 0.74 | 1.59 |
| 2007 | 1.65 | 0.95 | 2.60 |
| 2008 | 2.08 | 0.98 | 3.06 |
| 2009 | 2.14 | 1.05 | 3.19 |
| 2010 | 2.34 | 1.17 | 3.51 |
| 2011 | 1.78 | 1.15 | 2.93 |
| 2012 | 1.65 | 1.22 | 2.87 |
| 2013 | 1.60 | 1.32 | 2.92 |
| 2014 | 1.69 | 1.45 | 3.14 |
| 2015 | 1.90 | 1.59 | 3.49 |
| 2016 | 2.35 | 1.82 | 4.17 |
| 2017 | 2.59 | 1.83 | 4.42 |
The insurance penetration rate in China was set at 4.4% in 2017: 2.59% in life insurance and 1.83% in non life. This percentage is below the global average estimated at 6.13% in 2017 (3.33% in life insurance and 2.8% in non-life).
With China’s strong growth potential, the development of the middle class, the proliferation of major infrastructure projects and the increase in GDP should significantly increase the penetration rate of insurance.
Digital transition is also likely to contribute to the improvement of this index as Chinese insurers are fully tapping into the advantages offered by new technologies: more innovative products, new distribution channels, targeted marketing,... The rapid migration to digital technology will facilitate access to insurance and will allow enclaved populations to take out tailored coverages.
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China's insurance market remains highly concentrated
Despite the adoption of a more liberal policy, the Chinese insurance market remains highly concentrated. Out of a total of 169 licensed companies in 2017, only 50 companies are foreign-owned. However, the structure of the market remains balanced, between the players specialized in life insurance (85 companies) and those in non-life (84 companies).
The market is dominated by four national insurers:
- People's Insurance Company of China (PICC),
- Ping An Insurance,
- China Pacific Insurance (CPIC),
- China Life Insurance.
In 2010, these giants accounted for 95% of the overall turnover of the Chinese insurance market, a percentage that dropped to 46% in 2017.
The opening up of the market to foreign insurers and the new opportunities offered by the digital transition will accelerate the emergence of new players who will be gradually gaining shares from traditional insurers.
Chinese insurance market: regulatory changes
China Insurance Regulatory Commission, (CIRC), has repeatedly tightened the regulations governing corporate activities. Compliance with prudential rules, the level of capital required to carry out insurance operations and the quality of the shareholding have come under the scrupulous scrutiny of the regulators.
This move was designed to put an end to bad practices such as those revealed by the Anbang affair, a company put under guardianship since February 2018.
