Aowei predicts that China will overtake the United States as the world’s largest life insurance market in 2030; Entering a stable mature period around 2040, the penetration rate of personal insurance is expected to reach 11-13%.
Shanghai, March 10, 2022 – the latest Chinese life insurance industry report of Aowei consulting points out that although the industry faces weak growth in the short term, when China’s per capita disposable income exceeds US $7 Tcl Technology Group Corporation(000100) 00, the annual growth rate of life insurance premium scale is expected to be as high as 13%, and surpass the United States to become the world’s largest life insurance market in 2030. By around 2040, China’s life insurance penetration rate is expected to reach a stable level of 11-13%, and it is expected to achieve a premium scale of 45 trillion yuan (RMB, the same below) in 2050 (see the figure below).
The report, entitled “forging ahead and waiting for flowers to bloom: the future outlook of China’s life insurance market”, focuses on the long-term potential and breaking ideas of the life insurance industry. Combined with a large-scale survey covering 12000 life insurance customers and in-depth interviews with agents from 12 insurance companies and representative channels, it reveals the current widespread market myth. The report proposes to release the long-term value of the life insurance market through customer-centered structural reform.
Qian Xing, the author of the report and director partner of Aowei consulting, said: “the expected increase of nearly 10 times means that there is still a huge guarantee gap for Chinese residents, especially for medical insurance, pension annuity, term life insurance and lifelong life insurance. These needs will become an important engine for the future growth of China’s life insurance market.”
medical insurance, pension and traditional life insurance become the pillars of future scale growth
It is estimated that all Chinese residents are currently facing about 1600 trillion yuan of risk exposure for the rest of their lives; Among them, 1050 trillion yuan of medical expenditure and 370 trillion yuan of pension expenditure are the largest financial expenditure needs of Chinese families.
The social medical insurance has been under pressure, while the commercial medical insurance has a high coverage on the surface, but the actual compensation is insufficient. According to the data, in China’s overall medical expenditure structure in 2019, public expenditure accounted for 58% and commercial health insurance accounted for 7%. The penetration rate of medical insurance was significantly low, resulting in a 35% medical expenditure gap that needs to be solved at its own expense.
The protection of longevity risk and early death risk is also insufficient, highlighting the shortcomings and gaps in China’s pension annuity and traditional life insurance product market. At present, China’s social endowment insurance (the first pillar) can only fill the needs of less than half of residents for pension expenditure, and the replacement rate of the first pillar is declining year by year, and the supplement of the third pillar is increasingly urgent. However, annuity and other products can only cover the pension demand of about 30 trillion yuan, which is far lower than the market gap.
As the third pillar, commercial endowment insurance is regarded as an important measure to alleviate the pressure of China’s aging society. Qian Xing believes: “insurance companies have rich experience and ability in longevity risk management and asset liability management, and have unique advantages in the development of commercial pension products. If they can effectively give full play to the distribution advantages of Bancassurance channels, life insurance companies should occupy an important place in the third pillar market.”
In addition, at present, traditional life insurance such as term life insurance and life insurance has not provided sufficient protection for the income substitution demand related to non accidental early death. It is estimated that the income substitution demand related to non accidental early death is about 60 trillion yuan, while the current protection of traditional life insurance is only 10 trillion yuan.
digital channels are difficult to shake the current distribution pattern, and agent empowerment and reform are the key
Although the analysis shows that the long-term prospect of China’s life insurance market is good, the short-term challenges encountered by the industry in recent years still need to be solved. Data show that the growth rate of the original premium of China’s life insurance industry fell to single digits, and the premium fell for the first time for three consecutive years in the first year. “Many people believe that digitization can help turn the tide in the life insurance industry, and the traditional agent model is no longer useful. However, our research results point to different conclusions,” Qian said
At present, online channels only contribute 5-6% of the original premium income, which is difficult to shake the mainstream status of exclusive agents (60%) and bancassurance channels (30%). The survey found that consumers are more used to obtaining information through online channels or buying simple basic insurance products, while offline channels are still the first choice for buying large and complex life insurance products. Trust based on “human nature” is indispensable for life insurance business.
The report believes that digital channels and digital tools are only means, and the empowerment and reform of agents are the top priority. The current “big in and big out” agent model is difficult to sustain, and unstable and low-quality agents are difficult to match the service quality required by middle-class and rich customers. In the process of reform, the introduction of high-quality agent optimization and digital tools is only the first step. More importantly, the effectiveness of these tools and the subsequent changes in agent behavior patterns.
focus on customers and release 45 trillion potential market value
The report points out that building a customer-centered business model, effectively opening up customer information and needs, product and service delivery channels and comprehensive insurance ecology are very important to break short-term challenges and release long-term potential. The core of the first mock exam is the upgrading of the purpose of insurance business, that is, from single sales product to the demand of the whole life cycle of service customers. The realization of the first mock exam requires the establishment of multi-level trust in the form of trust, trust in sales staff, trust in product services and trust in insurance companies. In order to build such trust, insurance companies need to build a customer-centered ecosystem that can combine various financial and health needs.
“Insurance companies need to strengthen their confidence, resolutely implement measures conducive to the long-term development of the industry, and constantly invest resources and efforts to release the potential market value of $45 trillion. The market needs to be patient with the transformation period when the industry meets short-term challenges and experiences growth pains. In short, we are full of confidence in the bright future of China’s life insurance market,” Qian said
