Investment-oriented insurance premiums in China have declined by more than 50% for the first half of 2017, as the insurance sector feels the brunt of the government’s crackdown on short-term universal life insurance.
China Insurance Regulatory Commission (
CIRC) data showed that investment-oriented insurance premiums, which include universal life insurance, fell by 58% to RMB364.8 billion (US$55 billion).
According to market experts, the trend is expected to continue as the CIRC has pivoted the industry towards its original goal of providing long-term security.
Since 2016, the regulator has scrutinised several insurers, such as
Anbang Life Insurance and Foresea Life Insurance, for their aggressive sales of short-term universal life insurance, which are akin to wealth management products, to raise funds. These actions were frowned upon by the regulator as they exposed the insurance sector to systemic risks.
“The trend of lacklustre performance of investment type insurance would continue amid the ongoing regulatory drive to guide the industry back to its core fundamentals,” Guo Zhenhua, head of the insurance department at Shanghai University of International Business and Economics, told the South China Morning Post.
While China’s insurance sector has seen stellar growth in past years, it was rocked by scandals surrounding the aggressive fundraising and acquisition attempts of listed companies by some insurers. These raised concerns that certain insurers and their activities have undermined the stability of the insurance industry, extending to other sectors as the financial world becomes more and more intertwined.
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