Car insurance market in China report by daxue consulting asian risks

TO ACCESS MORE INFORMATION ON THE INSURANCE MARKET IN CHINA, PLEASE CONTACT DX@DAXUECONSULTING.COM
dx@daxueconsulting.com +86 (21) 5386 0380
THE AUTO INSURANCE MARKET IN
CHINA
March. 2021
HONG KONG | BEIJING | SHANGHAI
www.daxueconsulting.com

© 2021 DAXUE CONSULTING – ASIAN RISKS MANAGEMENT SERVICES
ALL RIGHTS RESERVED
2
CONTENT OUTLINE
Industry overview
1. 03
Business models
2.
Competitive landscape
3.
13
17
Winning strategies
4. 22

3
ALL RIGHTS RESERVED
Industry overview
1

ALL RIGHTS RESERVED
The largest car market in the world
4
4.2 4.4 4.4 5.1
24.7
21.7 21.4 20.2
2017 2018 2019 2020
Vehicle sales in China
(million units, 2017-2020)
Commercial vehicles Personnal vehicles
Sources: China’s Association of Automobile Manufacturers, Statista, Chyxx, Zcqtz, designed by daxue consulting
2018 was the first year the Chinese car market had known negative growth. However, the market has shown resilience after the
COVID-19 pandemic, showing year-on-year positive growth for most summer months despite the pandemic restrictions.
China still beat other car markets around the world with 25.3 million car sales in 2020. As the Chinese middle class keeps on
growing, especially in rural areas, it is expected that vehicle sales will follow the same trend.
Top 10 vehicle sales markets in the world and YOY growth
(units,2020)
25.3 million
-2%
14.5 million
-15%
4.5 million
-12%
3.2 million
-19%
2.1 million
-24%
2.8 million
-19%
2.0 million
-27%
1.9 million
-28%
1.8 million
+5%
1.6 million
-9%

ALL RIGHTS RESERVED
683.5
752.1
783.4
818.8 824.5
10.3%
10%
4.2%
4.5%
0.7%
0%
2%
4%
6%
8%
10%
12%
0
100
200
300
400
500
600
700
800
900
2016 2017 2018 2019 2020
Auto insurance premium income & growth rate
(Billion yuan)
Auto insurance premium income Growth rate of auto insurance
China’s car insurance market continues to grow at low speed
5
Source: Chinabaogao, Eastmoney, Oriental Fortune Network, Yicaiglobal, designed by daxue consulting
Car insurance
57%
Health insurance
10%
Farm insurance
7%
Liability insurance
7%
Guaranteed insurance
5%
Other insurances
14%
Market shares of the non-life insurance industry
in China
(2020)
Despite the negative growth of vehicle sales in China in recent years, the car insurance market has continued to grow with
revenues equal to 824.5 billion RMB in 2020
The car insurance market represents the largest market in the non-life insurance industry, although that share has slowly
decreased over time in favor of the health insurance industry.

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Chinese auto insurance policies are changing for consumers' rights
6
In China, every vehicle owner
must take out compulsory
liability car insurance. This
insurance covers basic
damages to third parties in case
of a car accident, although its’
limits of indemnity are low
which encourages most
Chinese drivers to subscribe to
a commercial insurance.
As the commercial insurance
market was overpriced but kept
expanding, consumers are
increasingly demanding of a
better coverage. This has
prompted the government to
pass new regulations in 2019
for higher limits of indemnity
and lower premiums in
commercial coverage.
Comprehensive reform of auto insurance issued by China Bank & Insurance Regulatory Commission
(2020 September)
Some of additional
insurance were
transferred into
main commercial
insurance.
The coverage of
main commercial
auto insurance
was wider.
Sum insured of
compulsory liability
auto insurance
increased.
Both of
commercial auto
insurance and
insurance premium
were declined.
Some of
disclaimer
policies were
deleted.
Decreasing insurance prices
Increasing sum insured Enlarge insurance range
Sum insured in
case of death,
disability and
medical expenses
raised from 110k to
180k yuan.
Sum insured of
medical
expenses raise
from 10k to 18k
yuan.
If the customer
hadn't a traffic
accident in the last
3 years, the
insurance premium
would be reduced
by 50%.
Source: CBIRC, designed by Daxue consulting

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China insurance policies benefits foreign players
7
Insurance regulations are gradually lifting, creating new opportunities. In 2019, the premium income from foreign or Sino-foreign JV
insurance companies increased by 29.9%, which exceeded the growth rate of domestic companies twofold. Along with the full
implementation of the less restrictive market access policies, the market share of foreign insurance companies is expected to further
increase.
CBIRC announced its plan to
release 19 policies to further open-
up the China market
Advances the transition period for
removing foreign ownership caps in
foreign-invested life insurance
companies to 2020.
Amendment of the Regulations on
Administration of Foreign Funded
Insurers
Eases the entry conditions for foreign
insurance companies by removing
the requirement that “they must have
more than 30 years’ experience in
insurance business, with a
representative office set up in China
at least 2 years ago prior to the
submission of the application”.
Amendment on Administrative
Measures on Foreign Insurance
Companies
The terms for local insurance
companies are now equally
applicable to foreign companies.
Notice on Clarification of the Time
frame for the Cancellation of
Foreign Ownership Restrictions on
JV Life Insurers
Foreign ownership restrictions on life
insurance Joint Venture is relaxed,
allowing 100% foreign ownership,
starting from 1 January 2020.
Allianz (China)
Insurance Holding
Co. Ltd launches in
Shanghai.
AIA announced its
intention to convert
its Shanghai branch
into a wholly foreign-
owned life insurance
subsidiary.
ERGO (Germany)
and Great Wall
Motors (China)
signed a JV for auto
mobility insurance.
Chubb purchased
an additional
15.3% stake in
Huatai, increasing
shareholding to
46.2%.

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Car insurance sellers leverage rebate to attract customers
8
Companies which have insurance intermediary licenses
2. Direct sales (Direct contact between a seller and a consumer)
Telesales, brand official stores and websites
Insurance companies assign sellers work in 4S
stores, so customers can buy directly with them
when purchasing cars.
Compared to the online market, 4S stores’ price is
higher. Sellers usually recommend unnecessary
products to customers to increase their commission.
1. Physical stores
4S retail stores (4S=sales + spare part + service + survey) Auto repair stations
The insurance premiums will be reduced (by cash
back), and car wash and repair are given as gifts.
Generally, consumers are promised cash refunds or
free repair if they buy car insurance products.
Fast claim settlement, convenient car repair, and the
premium is cheaper than 4S shops.
Sales staff may recommend unnecessary insurance
to raise the commission. Customers may encounter
opaque services such as opaque claims process
and use shoddy parts to repair cars.
Convenient, cheap and autonomous. Online car
insurance is 15% cheaper than physical stores.
Customers need to leave personal information when
purchasing insurance, after that they often receive
phone calls from insurance companies for
promotion.
Giving free gifts such as tachograph, shopping card
and service pack.
Gives car-related services and reduce insurance
premiums.
3. Insurance agents (offline & online)
Price is even cheaper than direct sales, offering the
same claim service as insurance companies.
Agents promise rebates to customers by offering
them unwanted insurance products or services as
free gifts.

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Many Chinese consumers still prefer offline sales channels
9
17%
27%
9%
5%
37%
8%
24%
17%
2%
13%
46%
60%
35%
39%
26%
44%
60%
48%
40%
26%
21%
44%
38%
7%
21%
12%
6%
9%
7%
9%
11%
32%
UK
Australia
Germany
Italy
Canada
Japan
USA
China
Market share of auto insurance sales channels in different countries
(2020)
Telesales Offline Online-computer Online-mobile
Source: Deloitte designed by Daxue consulting
Even though China is the most
developed e-commerce market, auto
insurance products sell in China still rely
on offline distribution channels. Many
insurance firms set selling points in car
sales stores, customers can have new
cars and insurance at once together, and
stores can benefit from insurance
commissions.
The online market share of Chinese auto
insurance was not high compared to
other countries, but insurance sales on
mobile Internet are much higher than
other countries. The main reason is that
more Chinese consumers tend to use
mobile phone to search and purchase
car insurance.
Additionally, according to Deloitte’s
report in 2020, among these 8 countries,
Chinese car owners are the least worried
about sharing personal privacy with
insurance companies when they
purchase online.

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Auto insurance searched on mobile is twice as on the computer
10
Source: Baidu index designed by Daxue consulting
Average index:
1,508
Search trend on Baidu (PC): auto insurance
Search trend on Baidu (mobile Internet): auto insurance
Average index:
825 1.6
46.7
42
8
1.5
≤19 20-29 30-39 40-49 ≥50
Age distribution
2011-07-18 2013-03-18 2014-11-17 2016-07-18 2019-11-18
2018-03-19 2021-02-15
2011-07-18 2013-03-18 2014-11-17 2016-07-18 2018-03-19 2019-11-18 2021-02-15
The search index peak is related to
new policy and regulations since
Chinese consumers are interested in
the trend of premium and insurance
coverage.
The search index of auto insurance
on mobile internet is double than that
of the computer, that is because
people from 20-30 years old are
shifting as the main car customers
and they use mobile Internet more
often. Therefore, in order to attract
those clients, Chinese insurance
companies and agents developed a
mature close-loop on the mobile
internet from search, purchase to
claim services.
The comprehensive rate of auto
insurance remained high, and
80% of property insurance
companies underwriting losses
Property insurance
companies were fined
because of fake premium list
China’s government issued 16 basic
indicators in order to standardize
claims management and services
The China Banking Regulatory
Commission fines companies
that are not qualified for
insurance sales and exceed the
scope of business

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People tend to become knowledgeable before buying a car insurance
11
Compulsory traffic insurance
Pacific auto insurance
Price of auto insurance
Types of commercial
auto insurance
Types of auto insurance
Auto insurance reform
Which insurance company
is better for auto insurance
Renewal
rate Ping An auto
insurance
Beijing auto insurance
Types of auto insurance
Auto
insurance
knowledge
What kinds of auto
insurance generally buy
2020 auto
insurance fee
revised price list
Auto insurance ranking
Samsung auto
insurance
How to buy auto insurance
Third party
liability insurance
Auto insurance
calculation
A large interest in the topic is met with a lack of knowledge, thus many people searched about, type of auto insurance, price, how to buy and
renew auto insurance.
Also, large insurance companies’ names have high search frequency as consumers tend to know products on their websites before purchasing.
Source: Baidu index designed by Daxue consulting
Search index: low High
Search trends: rising trend declining trend
Auto insurance

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Consumer perception: price and claims are keys
12
Customer perception summary
Despite several interventions by the government,
insurance prices in China are still perceived as being
too high for the service provided. The insurance
industry in China suffers from trust issues from
customers worried about disputes about claims and
lack of transparency.
While phone marketing is still widespread in China and
still represent a major distribution channel in many
industries, a lot of people complain about unsolicited
commercial calls. The insurance industry is
progressively shifting toward online retail.
Customer service and claim resolution issues are the
main source of complaints outside of price. As word-
of-mouth is important in a competitive market, the
insurance industry has shifted toward more consumer-
friendly services. Chinese consumers tend to have
more confidence in big insurers, even if they tend to
be pricier.
Source: Weibo.com, designed by Daxue consulting
Negative feedback
’’
平安车险的价格一天一个样，貌似是越来越贵，要是早知道会这样，与个
月之前我就买了。
Ping An’s auto insurance price changes every day, it seems to
become more and more expensive, had I known, I would have had
bought it a month ago.
Price
从9点05到现在，我接到了3家车险公司11个电话，座机，手机都有，我车
3月15日保险才到期。---- 1月23日
’’
From 9:05 am to now, I got 11 phone calls from 3 auto insurance
companies, both landline and mobile phone. My car insurance expires
on the 15th of March, but today is the 23rd of January.
Telesales
Service
太平洋车险真的好烂，理赔定损效率真低，服务态度也不好，拖拖拉拉。
’’
Pacific auto insurance was so poor that claim and loss assessment
efficiency was too slow, and service was bad.
Chinese consumers are mostly sensitive to prices and the ability to resolve claims quickly.

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13
2
Business models

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Traditional business model
14
Auto insurance
companies
Consumers
Telephone
sales
Insurance
agency firms
4S stores Car repair
shops
Offline sales
channels
Telephone sales, 4s stores, garages and insurance agency firms are the main sales channels of the traditional business model.
Offline distributors (4s stores, insurance agencies, etc.) usually gain higher revenue than insurance companies since they have
more bargaining power.

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New business model
15
The new business model is centered around online sales and promotions. This decreases costs and improves services. Self-
operated and third-party platforms are the main sales channels of the new business model.
Auto insurance
companies
Companies’
websites
Mobile apps
Consumers
Third-party platforms
(They usually have heavy traffic)
Self-operated platforms

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Car insurance business models
The traditional business model brings high costs to the development of car insurance in China, many companies are now operating
under the new business model.
16
New business model Traditional business model
• Car insurance online. Internet
plays a very important role in the
new business models of the auto
insurance industry in China.
Insurance companies can
effectively reduce costs by
gradually replacing offline
distributors with online platforms.
• Placing consumers’ need at the
center. Auto insurance companies
build precise consumers profiles
through big data, they are able to
carry out precision marketing and
improve claim settlement services.
• Sales agents. Most China’s
insurance companies sell their car
insurance through sales agents,
such as 4s stores. Those
distributors usually secure high
margins by increasing the price of
insurance.
• High costs and investments. In
order to have more market share,
many insurance companies are
keen on setting up branches in
different cities and starting price
war, resulting in higher costs.
V.S

17
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3
Competitive landscape

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Top 2 property insurance companies seized a half of the market
18
* The service rate index is calculated by case settlement rate of claims, timely rate of handling complaints, and other 8 variables.
Top China auto insurance companies in 2019
(million yuan)
Rank
Insurance
company
Premium
income
Market
share
Service
rate *
1
People’s
property
Insurance
431.6 33.2%
AA
2
Ping An Property
Insurance
270.9 20.8%
3
Pacific Property
Insurance
132.2 10.2%
4
Taiping Property
insurance
26.9 2%
5
Sunshine
Property
Insurance
Corporation
39.5 3%
A
6
Da Di Property
Insurance
Corporation
48.4 3.7%
Source: Shenlanbao insurance agency, designed by Daxue consulting
PICC and Ping An dominate the Chinese insurance industry. More than 60% market share are distributed among the top 5 insurance companies.
While the market has been further opened to foreign investments since 2018, foreign joint ventures and wholly foreign owned companies grabbed
more market share and the competition from abroad pushed domestic players to serve consumers efficiently.
PICC is one of the largest historical insurance
companies in China. It is a state-owned property
insurance company with the most offline claims and
service points in China. The resolution of small
claims is faster than most other players.
Ping An is is one of the largest insurance companies
in China. It has 42 subsidiaries, and more than 2,600
service points in China. Ping An also provides fast
services during consumption and claims.
Pacific is a Chinese state-owned property insurance
company. In 2019, its comprehensive solvency
margin ratio was 20% higher than Ping An.
Additionally, the auto insurance premium is relatively
lower than PICC and Ping An.
The advantage of auto insurance in the top 3 car insurance
companies

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China's auto insurance products provide applicants with full-range protection
19
Source: CBIRC, designed by Daxue consulting
Main types of auto insurance in China
Insurance types Full-coverage insurance Economic insurance Basic insurance Premium
Compulsory car insurance √ √ √ 950RMB
Vehicle damage insurance √ √ / 2,635RMB
Third-party liability insurance 2 million sum insured 1 million sum insured
1 million sum insured: 1,630RMB
2 million sum insured: 1,830RMB
Personnel liability insurance / / / 50RMB/seat
Robbery and theft Insurance √ / / 1,003RMB
Full glass coverage √ / /
Domestic car 300RMB
Imported car 500RMB
Spontaneous combustion loss insurance / / / 300RMB
Car scratch damage insurance √ / / 400RMB
Engine waterlogged insurance / / / 72RMB
Exclude odds risk √ √ √ Depends on the situation
Vehicle loss insurance, cannot find third
party special insurance
/ / / 36RMB
Designated Repair Plant Insurance / / / 50RMB
All quotations are based on original car insurance for a new 200k RMB vehicle
Plan’s premium 8,171RMB 6,015RMB 2,906RMB /
The coverage of auto insurance is expanding along with the automobile popularization in China.

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Domestic players’ advantage: a well established offline network
20
Large domestic insurance firms developed dense sales and service networks over the country, therefore they can respond and
solve customers' issues faster than foreign players, it is the most important advantage for them.
Ping An offers compensation to customers before they
repair cars. Customers can deliver claim documents to the
insurance company to different places, such as repair
stations or 4s stores.
The company has local desks in 324 cities around China,
and consumers can take their claim in any of those
branches.
For simple cases, customers will receive insurance
indemnities in 1 day, and company can assess losses in
15 minutes.
During rush hour, customers don’t need to wait for an on-
site investigation.
Ping An Insurance (Group)
Company of China Ltd.
Service of claim,
consulting and
investigation run 7 days
x 24 hours.
There are over 10k
branches in China
which is convenient for
fast claim for traffic
accidents.
The entire claim
process can operate on
PICC mobile app or the
company website.
PICC gives
compensation to
customers before the
car repair
People's Insurance
Company of China
China Pacific
Insurance(group) Co.,Ltd.
Company gives abundant gifts, such as designated
drive, car washing, car security test and so on.
There are more than 2,600 service points in China,
they offer claim and consulting services to clients.
Price is relatively cheaper than Ping An and PICC.
Source: Official web of PING AN, PICC and CPIC, designed by Daxue consulting

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Foreign players’ advantage: quality of service
21
AXA Tianping P&C
Insurance Co., Ltd.
SAMSUNG INSURANCE
CO,LTD.
Offers an all-day site survey and response report in 10
minutes.
Customers can receive under 10K compensation in 8
hours. The rest compensation will be paid in 10 days.
Clients’ questions will be replied under 4 hours and
solved in 3 days.
The company supports
the whole procedure
online claims for mild
loss cases.
AXA can separately file
each single car claim
on multi cars accidents,
and prepay medical
compensation fees
Customers can give
claim documents in
various ways, such as
at repair stations, on
the car accident site.
Compensations under
10k RMB can be paid
on the day of the
accident
China Taiping Insurance
Group Ltd.
The company will contact customers within 5 minutes after
accepting the report.
During the claiming procedure, customers will receive 3
calls from Samsung to check the progress and solve their
problems.
Insurance specialists will accompany injured clients for the
whole journey from hospital to examine the wound at
Judicial Expertise Center.
The company will pay compensation on the same day if the
claim is under 50k RMB. The compensation can be paid
separately by different types of losses.
Source: Official web of SANSUNG, AXA and China Taiping, designed by Daxue consulting
The terms for foreign insurance companies had equally applicable to local firms since 2020, but the capital injection is still
limited by the Chinese government, so that they can not expand their business as easily as Chinese players.
Foreign companies don’t have many service points in China and their claim service is slower than large domestic firms.
Therefore, in order to attract customers, foreign car insurance companies offer high-quality and fast response services.

23
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Market entry strategies
In China’s auto insurance market, foreign investors must adapt their strategy based on their assets.
23
Represent lower risks by requiring less initial
investment than a wholly foreign-owned enterprise.
Allows the company to benefit from their Chinese
partner’s local distribution network and other
valuable resources
Offer less managerial control than a wholly foreign-
owned enterprise. Although since 2004 foreign
companies are allowed to buy the remaining shares
in their joint venture.
Possible risk of intellectual property right violations.
Success depends highly on the Chinese partner’s
reliability and the terms of the joint venture contract.
Finding the right partner and negotiating fair
partnership terms are essential success
determinants.
Unparalleled managerial control and flexibility over
the company.
No risk for intellectual property rights violations, no
need to negotiate partnership agreements.
The application process takes considerably longer
than setting up a joint venture and takes more
resources.
Without a local partner, building up a nation-wide
distribution network can take 3 to 5 years all the
while fighting fierce competition from local
companies. The company would also be alone in
bearing the financial weight of the expansion,
increasing further the cost of this strategy compared
to a joint venture
Wholly foreign-owned enterprise
Joint venture

24
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Digitalizing business model is a key strategy
Online distribution channels are gaining ground as the industry shifts toward a consumer centric model.
24
Sources: Eastmoney, BCG, Digfin Group, designed by Daxue consulting
In a saturated competitive market in an industry where differences
in products are minimal and often poorly understood by
consumers, being able to market one self's product efficiently is
paramount. AXA’s strategy to focus on a specific consumer
question and then target specific advertisement channels has
proven to be effective. The key is to produce a memorable add
campaign and try to play on key purchase determinants for
Chinese consumers such as success and reliability.
As younger drivers are taking a growing share of car insurance customers and that Chinese buying habits are progressively shifting
towards online shopping, providing online distribution channels and customer service is becoming an important competitive tool.
Chinese insurance companies are placing consumers’ need at the center and are digitalizing their business models, they expanded online
channels for sales and service, such as WeChat mini-programs, WeChat official accounts and mobile apps.
Digital innovation represents an opportunity in the insurance industry. It is estimated companies could cut the costs of claims by up to 10%
and nonclaims by 12% with data extracted by artificial intelligence.
AI is already used in user-friendly solutions through apps that can assess damages from car accidents within a few minutes. On top of
providing a better user experience, these algorithms cut on time and expenses for insurance companies that do not need to send employees
for the bulk of routine damage assessments.

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Insurance broker in China
Entrepreneurship is associated with risks, let’s turn risks into gains
26
Asian Risks Management Services Limited (ARMS) advises
corporates on insurable risks in China, individuals on medical
insurance and home insurance.
With a presence in Beijing and Shanghai, we provide services
all over China.
INDEPENDENT from any insurance providers, ARMS combines
international and local expertise in the insurance industry
with more than 15 years of presence in the Chinese insurance
market, we act to the BEST INTERESTS of our clients.
Life Insurance
人寿保险
Employee Benefits
员工福利
General Insurance
综合保险
Medical Insurance
医疗保险

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Have access now to our risk mitigation solutions in China
Asian Risks Management Services offers tailor-made and innovative insurance solutions for corporates and individuals
27
CONTACT US
010-6500 3217
www.asian-risks.com
info@asian-risks.com
Etc…
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29
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Car insurance market in China report by daxue consulting asian risks

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