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China’s insurance industry has experienced its first dip in premium incomes since 2012, with mixed results in the first half of 2018 attributed to a more prudent approach to risk following several years of aggressive expansion.
For the first half of the year, insurers’ combined premium incomes decreased by 3.33% to RMB2.24 trillion (US$328 billion), according to a report by Caixin, which cited figures from the China Banking and Insurance Regulatory Commission (CBIRC).
Life insurance companies were hit harder, with an 8.5% decrease to RMB1.69 trillion (US$246 billion). Meanwhile, property insurance premiums rose 14% to RMB544.2 billion (US$79.3 billion). A total of 79 insurers have disclosed solvency reports for the second quarter, with 43 of them turning a profit compared to 36 that had incurred losses.
The report said that most large insurers performed well, due to their optimised premium income structures, matching assets and liabilities, and managing controllable risks. The four largest insurers in China – China Life Insurance, Ping An Insurance, China Pacific Insurance Group, and New China Insurance – reaped profits totalling RMB65.9 billion in the first half, or approximately 78% of the entire industry’s profits.
On the other hand, small and medium insurers were hounded by declining premium incomes, insufficient investment capacity, and poor management.
Since early 2017, CBIRC has issued numerous regulations aimed at limiting the sale of short-term life insurance policies, which some insurers used to acquire high-risk assets. Numerous fines for various violations have also been handed out.
China’s regulators are directing the industry to ensure their products are more sustainable by limiting high-risk investment behaviour. A source connected to a large insurer told Caixin that small and medium insurers have limited marketing and sales capability, which is vital in the industry’s shift towards long-term, protection-type insurance products.
