Growth incoming for China life insurance industry

Yasmine Raso

Senior Journalist, Financial Newswire

2 November 2022

The Chinese life insurance industry is set to record a compound annual growth rate (CAGR) of 6.3 per cent from 2021 to 2026, growing from $484 billion to $666 billion in five years in terms of direct written premiums (DWP).

Figures from GlobalData’s Global Insurance Database attributed the forecasted growth to a recovery in agency distribution capabilities and new product introductions that meet changing consumer needs.

GlobalData said agencies and bancassurance remain the main avenues of life insurance distribution in China, accounting for 60.1 per cent and 30 per cent of new business DWP in 2021, respectively and registering 2.2 per cent and 3.9 per cent growth in 2021, respectively.

“Agencies are the main distribution channel for whole life insurance products, which accounted for 75% of life insurance DWP in China in 2021,” Deblina Mitra, Senior Insurance Analyst at GlobalData, said.

“Over 85% of high net worth (HNW) investors in China prefer life insurance in their inheritance planning, which is one of the main drivers of whole life insurance. The affluent population is expected to grow at an average annual growth of 9% over the next five years, boosting the demand for life insurance.”

The growth forecast comes after a series of changes for China’s life insurance industry came into effect, including hybrid insurance products that combine healthcare and protect with savings and the implementation of individual private pensions that allow individuals to make tax-exempted contributions up to $1,872 annually and can be invested in products such as commercial endowments from life insurers.

“Whole life and annuity insurance with riders, such as critical illness and accident, are the other examples of hybrid insurance products in China,” Mitra said.

“The large middle-income population, which is expected to reach 90% by 2030, and the aging demography in China are the key consumers of these products.”

The rising demand for personal accident and health insurance also contributed to the life insurance industry growth, recording a 24.5 per cent share of the DWP in 2021 and a CAGR of 13.8 per cent from 2017 to 2021.

“The current pension system with state pension covering 70% of the population and voluntary employee pensions is deemed inadequate to fully support China’s retirement requirements. The new pension plan has opened an untapped opportunity for insurers,” Mitra said.

“The life insurance industry in China is expected to weather the ongoing economic slowdown caused by frequent lockdowns and will expand over the next five years, aided by an influx of foreign capital.”