News Life and Health11 Oct 2018

China:Top insurance official gives reassurances about life market

| 11 Oct 2018

Mr Huang Hong, a CBIRC vice chairman, has predicted that in the next 20 years, the Chinese life insurance industry will maintain an average double-digit annual growth rate, a large number of insurers will enter the global top 500, and the role of life insurance in the social security system will become more prominent.

In a speech yesterday, Mr Huang sought to give reassurance that the current downturn in life business is just a blip.

He was speaking at the opening of the two-day "2018 China Life Insurance Industry October Qianhai Summit" organised by the Insurance Association of China and a Qianhai cooperation zone administration. The theme of the conference is "Responsibility, transformation, innovation and new-age high quality development in the China life insurance industry”.

He said, "The change from the rapid development of the life insurance industry of the past few years to the negative growth seen so far this year, has confused and puzzled those outside the industry, as well as confused industry players.

“However, if you understand the historical thread of the reform and development of the life insurance industry and the internal logic behind the deliberate restructuring of the sector, the confusion and pessimism are unnecessary. On the contrary, you should be more confident in the future of the life insurance industry.”

He said that it is common for an industry to face short-term restructuring following rapid economic development. At the same time, the current decline in Chinese economic growth, the impact of financial deleveraging and the rise in interest rates have also contributed to the decline in the competitiveness of life insurance products.

More important, the restructuring of the industry and the decline in its growth rate stem from a deliberate move taken by the authorities at a time when the industry was growing rapidly.

Introducing reform at a time when the industry was booming meant that the market was more capable of absorbing the changes and had more room for manoeuvre. In the past two years of restructuring, the life insurance industry has gradually improved its product and actuarial supervision policies.

Month-to-month cumulative decline in premiums is narrowing

On a bright note, Mr Huang said that monthly data showed that the number of insurers that were achieving positive growth was growing, and the cumulative decline in premiums was narrowing month by month.

In addition, the goal of restructuring that has led to the current negative growth is a return to protection insurance. For instance, even as life insurers report lower premium incomes, their premiums from health insurance have soared. The restructuring has led to quality growth instead of volume growth, he said.

The total profit of the life industry in the first half of the year was CNY112.17bn ($16.2bn). Of the 87 life insurance companies operating in the Chinese market, 50 were profitable, an increase of five compared to the same period of the previous year. Although premium growth has declined, the industry structure has undergone a significant transformation, and embedded value and industry profits have increased substantially, Mr Huang said.

For the first eight months of this year, premiums raked in by life insurers reached CNY1,964bn, down by 5.37% year-on-year. The following table shows how the decline in cumulative life premiums has been narrowing month to month:

Period   Rate of decrease (compared to corresponding period in 2017)

January to August

5.37%

January to July

7.39%

January to June

8.50%

January to May

11.54%

January to April

13.60%

January to March

16.82%

January to February

24.31%

January

25.50%

Source: CBIRC

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