China to withstand virus-induced insurance slowdown: report
China’s insurance industry is set to overcome COVID-19-induced economic recession, thanks to supportive government policies and the public's rising risk awareness, an industry study finds.
Life premium growth is expected to average around 2 percent this year before picking up to nearly 10 percent in 2021, according to the latest Swiss Re Institute’s sigma report.
The impact of COVID-19 on life insurance is mixed. On one hand, economic slowdown and implementation of stringent containment measures are hindering agent sales, the predominant distribution channel.
But demand will benefit from growing risk awareness and increasing focus on protection products, as volatility in the financial markets is undermining the appeal of savings products, the research concludes.
Primary life insurance premiums in China grew by 6.7 percent in 2019, reversing a 5.4 percent contraction in the previous year due to tightened regulations on sales of universal life products.
That growth was mainly driven by strong demand for protection-type products.
As such, insurers are fast adopting digital channels in lieu of face-to-face sales and accelerating product development to better align with public demand for protection.
Swiss Re expects non-life premium growth to fall to around 8 percent in 2020, the slowest growth since 1998, as the unfolding economic crisis will see China’s economy grow at its slowest pace in more than three decades this year.
Specifically, motor insurance will remain under pressure due to a sharp drop in car sales in early 2020 amid ongoing motor insurance liberalization.
Non-motor business lines, however, are expected to be more resilient. In particular, agriculture and liability insurance will maintain fast growth on the back of the government’s rural revitalization strategy and a strong push on compulsory liability insurance in areas such as environmental pollution and food safety, the report added.
Of note, China may launch more fiscal stimulus to support growth, including investment in new infrastructure, which will bring opportunities for many commercial lines including property, engineering, credit and surety.
In 2019, non-life insurance premiums continued to grow strongly, with health, guarantee, agricultural and liability segments outperforming.
Supportive government policies are a key driver behind growth of agricultural and liability insurance.
In contrast, motor premium growth slowed to below 2 percent.