New research findings by GlobalData, a leading data and analytics company, have indicated that the general insurance industry in China, the world’s fastest growing economy, could grow, in terms of direct written premiums (DWP), from CNY 1.36 trillion (USD 196.8 billion) in 2020 to CNY 2.13 trillion (USD 313.0 billion) in 2025.
The firm’s latest figures showed that the general insurance industry in China could grow at a compound annual growth rate (CAGR) of 9.5% over 2020-2025.
However, the forecast could be altered by regulatory changes, the ongoing economic challenges and the resurgence of the COVID-19 pandemic.
Commenting on the latest research findings, Senior Insurance Analyst at GlobalData, Deblina Mitra, said: “Despite being the second-largest general insurance industry globally, China’s general insurance penetration at 1.3% is way below the developed markets’ average of 4%.
“This is mainly because the general insurance industry’s growth is disproportionately reliant on motor insurance, which has been negatively impacted by the regulatory restrictions, economic as well as pandemic related challenges in the recent years”, the industry expert added.
According to GlobalData, Motor insurance was the largest insurance line accounting for 60.7% share of the general insurance DWP in 2020, with flat growth of 0.7% due to changes in regulations, which lowered mandatory motor liability premium prices by up to 50%.
A further analysis of the report indicated that 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.
The analytics firm further reported that 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, projecting that this insurance line is expected to maintain double-digit growth in 2021 and 2022.
Similarly, 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.
Industry analysts also noted that government subsidies on premium prices and insurance to cover frequent catastrophe (cat) losses supported the growth of agriculture insurance in China.
It is also projected that new product development initiatives such as the recently proposed grain insurance are expected to enhance the coverage of agriculture insurance over the coming years.
GlobalData further projected that overall, property insurance would likely grow by over 11% in 2021 and 2022, driven by growing demand from the agriculture industry, as well as large-scale projects from belt-and-road and renewable energy projects.
Mitra concluded: “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.”