China general insurance penetration rate below market average: analyst

This is despite the prediction that the industry would reach $313b by 2025.

China’s general insurance penetration is at 1.3%, way below developed markets’ average of 4% despite being the second-largest general insurance industry globally according to Deblina Mitra, senior insurance analyst at GlobalData.

In a forecast report by data and analytics firm GlobalData, China’s general insurance industry is projected to reach $313b by 2025, a huge growth from $196.8b in 2020 in terms of direct written premiums.

However, Mitra said the industry has a disproportionately reliance on motor insurance which has been negatively impacted by the regulatory restrictions, economic as well as pandemic related challenges in the recent years.

Mitra said that motor insurance was the largest insurance line accounting for 60.7% share of the general insurance DWP in 2020. It recorded a flat growth of 0.7% in 2020 due to changes in regulations, which lowered mandatory motor liability premium prices by up to 50%. Decline in vehicle sales due to lockdown restrictions also impacted premiums in 2020. Motor insurance is expected to record a growth of 6% in 2021 and 2022.

Meanwhile, personal accident and health (PA&H) and property insurance were the second and third-largest general insurance lines with a share of 12.2% and 11.3%, respectively, in 2020. PA&H insurance provided by general insurers recorded the highest growth of 21.2% in 2020 and benefitted from the rising medical expenses and tax exemptions. This insurance line is expected to maintain double-digit growth in 2021 and 2022.

Property insurance also recorded a strong growth of 14.0% in 2020 and was majorly driven by agriculture insurance which accounted for over 50% of the property insurance DWP that year.

Government subsidies on premium prices and insurance to cover frequent Nat-cat losses supported the growth of agriculture insurance in China. New product development initiatives such as the recently proposed grain insurance are expected to enhance the coverage of agriculture insurance over the coming years.

Overall, property insurance is expected to grow by over 11% in 2021 and 2022. Along with the growing insurance demand from the agriculture industry, insurance to cover large-scale ongoing projects – one-belt-one-road and renewable energy, will aid the growth.

“Growth in the general insurance industry over the coming year will be hinged on its non-motor lines of business as motor insurers’ profitability will remain challenged with the stressed automobile sector battling supply chain issues, regulatory restrictions on premium pricing and new pandemic outbreak,” Mitra said.