China's general insurance industry is set to grow by more than 50% within just five years, forecasts by data analytics and consulting firm GlobalData suggest.
In terms of direct written premiums (DWP), the country's general insurance industry is expected to grow to $313bn (£232bn) by 2025, up from $196.8bn in 2020.
A compound annual growth rate of 9.5% is anticipated over 2020-2025, however, the forecast remains shadowed by regulatory changes, ongoing economic challenges and the resurgence of the COVID-19 pandemic.
Property insurance is expected to grow by over 11% in 2021 and 2022, while increasing insurance demand from the agriculture and renewable energy sectors, and for coverage for large-scale projects from the China Belt and Road Initiative, are also set to aid growth.
Deblina Mitra, senior insurance analyst at GlobalData, said that, despite being the second-largest general insurance industry globally, China’s market penetration at 1.3% is way below 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.
She continued: “Growth in the general insurance industry over the coming year will be hinged on its non-motor lines of business.”
Motor insurance was the largest line in 2020, accounting for a 60.7% share of general insurance DWP. However, growth flatlined at 0.7% due to changes in regulations, which lowered mandatory motor liability premium prices by up to 50%.
A decline in vehicle sales due to lockdown restrictions also impacted motor insurance premiums last year, although these are forecast to experience record growth of 6% in 2021 and 2022.
Personal accident and health and property insurance were the second and third-largest general insurance lines last year, with a share of 12.2% and 11.3%, respectively.
Government subsidies on premium prices and insurance to cover frequent nat cat losses supported the growth of agriculture insurance in China, while new product development initiatives, such as grain insurance, are expected to enhance coverage over the coming years.
Looking at the outlook for motor insurance, Mitra said: “Insurers’ profitability will remain challenged with the stressed automobile sector battling supply chain issues, regulatory restrictions on premium pricing and new pandemic outbreak.”
Image credit: iStock
Author: Chris Seekings
