The development of China’s economy and the improvements of the people’s material conditions, including a greater disposable income, has been mirrored by a steady growth of the insurance industry. As people accumulate more wealth and assets, they want to safeguard themselves against potential losses. To meet the demand for insurance services, Chinese companies have expanded the range and scope of insurance coverage. In recent years, the insurance industry in China has increased its investments in the application of new technology and the development of insurtech.
A large market for locals only
China’s insurance industry has been experiencing rapid development in recent years. In 2022, the premium income of China’s insurance companies amounted to around 4.7 trillion yuan, nearly three times as much as seven years ago. China’s insurance products can be divided into property insurance and personal insurance based on the insurance project. In addition, personal insurance comprises life insurance, health insurance, and accident insurance. While life insurance contributed the largest share of premium income, benefit payments of insurance companies were higher for property insurance.
So far, the insurance market had been dominated by domestic companies, mostly because foreign competitors face two major market entry barriers. First, foreign insurers have to overcome bureaucratic hurdles by acquiring an insurance license and business opening approval from China’s regulatory body, the China Banking and Insurance Regulatory Commission (CBIRC). Second, insurance companies have to develop a market presence by building nationwide sales channels. Among the many ways to reach consumers is M&A, setting up a Wholly Foreign Owned Enterprise, or entering a joint venture with a Chinese partner. So far, overseas insurance companies struggle to gain a significant foothold in China.
Tech it up
Insurtech is the next significant development in China’s insurance sector, gaining a boost alongside the fintech sector, which has recorded significant growth in recent years. Tech giants, such as Alibaba’s Ant Group and Tencent, bring financial services to over a billion consumers, and insurance products are part of this product portfolio. The value of online insurance premiums has increased among all major types of insurance and growth rates have increased significantly.
Insurtech reduces costs and lowers the access barrier for consumers. Using big data and AI technology, insurance providers can offer customized insurance policies based on the consumers’ individual risk assessment without human involvement. As a result, they can offer their customers tailored policies at a much lower cost. In addition to that, the digital nature of the product reaches a much broader share of the population, because consumers only need an internet connection to access insurance services. With its high smartphone penetration, China is the ideal breeding ground for the future development of the insurtech industry.
