Maturity assessment insurance China report by daxue consulting and Asian risks

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Maturity assessment of
China’s insurance market
November 2020
HONG KONG | BEIJING | SHANGHAI
www.daxueconsulting.com

© 2020 DAXUE CONSULTING – ASIAN RISKS MANAGEMENT SERVICES
ALL RIGHTS RESERVED
Credit Insurance4.
2
Personal insurance1.
Property insurance2.
03
09
14
19
Liability Insurance3.
CONTENT OUTLINE

3© 2020 DAXUE CONSULTING – ASIAN RISKS MANAGEMENT SERVICES
ALL RIGHTS RESERVED
The personal insurance
market in China
1

ALL RIGHTS RESERVED
Life insurance in China: The growth has slowed
4
China Life
22.3%
Ping An
13.9%
China Pacific Insurance
6.8%
New China Life
Insurance
4.5%
China Taiping
4.4%
Taikang
4.3%
Foresea Life Insurance
3.9%
PICC
3.8%
Others
36.1%
Market share of life insurance in China by premium income
(2020 January - April)
Source: EY, China banking and insurance regulatory commission, designed by daxue consulting
The growth of China’s life insurance premium slowed down due to China’s Banking and Insurance Regulatory Commission
limiting the aggressive sales of universal life policies.
China’s life insurance market is dominated by a few large players. However, in 2020, China’s Banking and Insurance Regulatory
Commission has allowed foreign investors to raise their stakes in Chinese life insurance companies to 100%, which makes
Chinese insurance companies face more competition from foreign players.
Premium income
refers to what
insurance companies
collect from
insurance policies
sold.
1,744.2
2,145.5
2,072.2
2,275.4
2016 2017 2018 2019
Premium income of life insurance in China
(billion RMB)

ALL RIGHTS RESERVED
Life insurance in China has unbalanced regional development
China’s life insurance sales are closely related to the population and economic development.
5
No. Province Premium income Market share
1 Guangdong 254.5 billion RMB 9.34%
2 Jiangsu 245.8 billion RMB 9.02%
3 Shandong 189.9 billion RMB 6.97%
4 Henan 176.6 billion RMB 6.48%
5 Sichuan 146.6 billion RMB 5.38%
6 Beijing 137.1 billion RMB 5.03%
2
1
4
3
5
6
Source: China banking and insurance regulatory commission, designed by
daxue consulting
Jiangsu
Beijing
Shandong
Guangdong
Sichuan
The TOP 6 regions by life insurance premium income
(2018)
Henan
 Guangdong, Jiangsu and Shandong are leading regions
with market share exceeding 25%.
 Life insurance sales mainly came from eastern and southern
coastal areas, and inland provinces with large population.Source: China banking and insurance regulatory
commission, designed by daxue consulting

ALL RIGHTS RESERVED
Accident insurance: COVID-19 caused the first drop in 5 years
6
31.0
37.1
43.6
75.0
90.1
107.6
117.5
60.0
2013 2014 2015 2016 2017 2018 2019 2020.01-06
Total premium income of accidental insurance in China
(billion RMB)
Source: China banking and insurance regulatory commission, designed by daxue consulting
In the first half of 2020, the
premium income decreased by
6.8% compared to 2019H1,
which was the first time it turned
negative in past 5 years.
Before 2020, the accidental insurance market in China grew consistently as financial security and health awareness were on the
rise.
COVID-19 had seriously influenced sales in the first half of 2020. Online channels could not make up for offline sales agents’
lost sales and have not yet earned the trust from older insurance customers.

ALL RIGHTS RESERVED
Health insurance is a promising market in China
7
Source: CBIRC, designed by daxue consulting
The health insurance market shows a promising prospect driven by
political support, the aging population, and increased personal
health expenditures.
Critical illness insurance and medical insurance are the two
largest premium income sources, while long-term care insurance
and disability insurance only constitute 1% of total.
112.3
158.7
241.0
404.2
438.9
544.8
706.6
2013
2014
2015
2016
2017
2018
2019
Premium income from health insurance in China
(in billion RMB)
+529%
Growth since
2013
Source: CBIRC, insurance yearbook 2019 designed by daxue consulting
15.3%
19.0%
Market share of leading players in China’s heath
insurance market
(2019)
64.4% 34.6%
Health insurance premium structure
(2019)
Critical illness
insurance
Medical
insurance
Others

ALL RIGHTS RESERVED
The medical insurance market is developing continuously with a steady but high growth.
However, with the proportion of the elderly population increasing, the demand is expected to further expand to make up for
the limitations of social medical insurance.
Medical insurance keeps a steady development
8
Source: CITIC, designed by daxue consulting
87
113.2
141.5
184.8
244.2
30.1%
25.0%
30.6%
32.1%
2015 2016 2017 2018 2019
Premium income of medical insurance in China
(in billion RMB)
36.1% 28.0% 32.3% 33.9% 34.6%
63.9% 72.0% 67.7% 66.1% 65.4%
2015 2016 2017 2018 2019
Share of medical insurance in the health insurance
market
Medical insurance Others
Proportion of the elderly population (≥65 years old) in China
Growth rate
10.4% 12.6%
2015 2019
Source: CITIC, national bureau of statistics, designed by daxue
consulting
143.8
million
176
million
China’s elderly population is
growing faster and faster,
which is driving all medical
and health related
industries..
+ 22.3%

ALL RIGHTS RESERVED
2 The property insurance market
in China

ALL RIGHTS RESERVED
Car insurance is the main contributor to the market
Overall, the Chinese property insurance market is developing steadily but due to being closely tied to car sales, was highly
impacted by COVID-19.
Motor insurance is the most important part of the property insurance market, taking 70.3% market share.
10
533.1
621.2
720.3
799.5
872.4
983.5
1,077.0
1,164.9
818.3
2012 2013 2014 2015 2016 2017 2018 2019 August
2020
Premium income of property insurance in China
(in billion RMB)
Source: Forward-The Economist, Statista, designed by daxue consulting
Company property
insurance
3.6%
Personal insurance
0.7%
Car insurance
70.3%
Engineering
insurance
0.9%
Agricultural
insurance
5.8%
Others
18.7%
Distribution of property insurance premium income in
China by insurance type
(2019)

ALL RIGHTS RESERVED
15.1
19.5
24.2
36.2
42.2
42.4
69.1
117.4
247.4
388.0
Tianan Insurance
China Export & Credit Insurance
China Taiping Insurance
Sunshine Insurance
China United Insurance
China Continent Property & Casualty Insurance
China Life Insurance
China Pacific Insurance
Ping An insurance
PICC
Top property insurance companies in China by premium income
(in billion RMB, 2018)
High market concentration in the property insurance sector
The property insurance market is relatively concentrated with PICC, Ping An, and China Pacific taking up a majority of the market.
As part of an effort to make the industry more competitive, the government reduced control, emphasized greater investments in
increasing transparency and exposing the companies to the demands of the market and shareholders.
11
Source: Investopedia, designed by daxue consulting
The top 3 insurance companies will continue dominate the
property insurance market:.
• PICC, Ping An and CPIC each hold a huge network of and
agents to assist customers across the country. Compared to
other companies, they offer faster claim settlement services
and more comprehensive insurance coverage.
• PICC, Ping An and CPIC also take the leading position in
motor insurance, which strengthened their claims settlement
capability on the competitiveness in China.
Top 3
companies
Other
companies

ALL RIGHTS RESERVED
The “decay” of car insurance VS. the “rise” of other property insurances
Despite the fact that car insurance is still leading the market, its growth rate is slowing due to decreasing car sales, which
COVID-19 dampened even further.
On the flip side, other property insurance lines are on the rise.
12
400.5
472.1
551.6
619.9
683.4
752.1
783.4
818.8
546.3
17.9%
4.5%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2012 2013 2014 2015 2016 2017 2018 2019 Aug-20
Premium revenue from car insurance in China
(in billion RMB)
Premium income Growth rate
75% 76% 76% 77% 78% 76% 73% 70% 66%
25% 24% 24% 23% 22% 24% 27% 30% 34%
2012 2013 2014 2015 2016 2017 2018 2019 August
2020
Premium income structure of property insurance in
China
Car insurance Other property insurance
Source: Northwest Securities, China banking and insurance regulatory commission, designed by daxue consulting

ALL RIGHTS RESERVED
China’s agricultural insurance has huge development potential
Agricultural insurance has annual double-digit annual growth, higher than that of the industry average.
Due to the extensive agricultural production area in China and high risks of natural disaster, the government has released several
policies and regulations to support its development.
13
24.1
30.6 32.6
37.5
41.8
47.9
57.3
67.5
16.5%
15.9%
11.0%
9.1%
12.7%
9.5%
8.2%
2012 2013 2014 2015 2016 2017 2018 2019
Premium revenue of agricultural insurance in China
(billion RMB)
Premium income Growth rate of property insurance
Proportion of agricultural insurance in asset
insurance by premium income
Source: Forward-The Economist, designed by daxue consulting
2018
5.3%
2019
5.8%
August
2020
8.1%

ALL RIGHTS RESERVED
3 The liability insurance market
in China

ALL RIGHTS RESERVED
Policy support built a favorable environment for liability insurance
Liability insurance applies to a wide range of fields. Due to preferential policies and increased downstream market demand, the size
of China's liability insurance market has increased by 400% in eight years, from 14.8 billion RMB to 75.33 billion RMB.
15
14.8
18.38
21.66
25.33
30.18
36.24
45.14
59.09
75.33
0
100
200
300
400
500
600
700
800
2011 2012 2013 2014 2015 2016 2017 2018 2019
Chinese liability insurance premiums income
(billion RMB)
February 2016
January 2018
"Several Opinions on Further Strengthening the Management of
Urban Planning and Construction”
《关于进一步加强城市规划建设管理工作的若干意见》:
Required to implement project quality responsibility, strengthen
the construction of the project quality liability insurance system,
and improve the project risk prevention function.
June 2019
"Opinions on Promoting the Development of Urban Safety”
《关于推进城市安全发展的意见》:
Required to vigorously implement safety production liability
insurance to enhance accident prevention functions.
"Opinions on Promoting the Quality and Capacity Expansion of
the Domestic Service Industry"
《关于促进家政服务业提质扩容的意见》：
Supporting insurance companies to develop domestic service
liability insurance products and encourage domestic companies
to participate in employer and employee liability insurance.
Source: NBS, designed by daxue consulting

ALL RIGHTS RESERVED
62% 61% 60%
38% 39% 40%
2016 2017 2018
China’s liability insurance market share
PICC, Ping An and CPIC Other companies
High concentration in regional development and insurers
16
Beijing
Guangdong
Shanghai
Jiangsu
Zhejiang
Source: NBS, designed by daxue consulting
Source: Swiss Re, designed by daxue consulting
Business is more concentrated in Beijing, Shanghai, Jiangsu, Zhejiang and Guangdong, which are all coastal areas.
High market concentration: the top three insurers Ping An, PICC, CPIC took about 60% of the liability insurance during the past a
few years, but the market share of small and medium size companies show growth.
Geographical distribution of liability insurance sales in China
(top 5 regions, 2019)

ALL RIGHTS RESERVED
Employer liability
27.3%
Financial line
8.8%
General liability
(includes public
liability)
32.3%
Product liability
11.3%
Others
20.3%
Liability insurance market share by premiums income
(2018)
High coverage and limited claims are important drivers
General liability and employer liability insurance account for approximately 60% of total liability insurance premium income. The
former has a broader coverage while the latter one has a higher number of claims in the market compared to other types of liability
insurance.
17
1
2
Characteristics of China’s liability insurance
High consumption but low severity
Medical malpractice and claims occur frequently.
However, the severity is usually low.
Limiting factors of compensation
Passenger carrier insurance has a wide variety of
subdivisions and types. Except for the additional
compensation limits, the other limitations must also
be considered: the means of transportation,
transportation area, transportation risks, and the
number of seats.

ALL RIGHTS RESERVED
Policy, product innovation and growing demands all bring potential
With the steady growth of the traditional business, market patterns subtlety change.
18
The government encourages the
use of liability insurance to deal
with social disputes
In January 2018, the government announced an
increase in the number of industries with
compulsory production safety liability insurance
from four to nine and encouraged all other
sectors to use production safety liability
insurance to manage their risks.
Traditional employer liability is the
most oversized non-profitable
product
Employer liability insurance has high claims.
However, it is one of the easiest businesses to
acquire with sufficient market capacity,
insureds can get coverage at low prices. The
quality of the insurance coverage still has room
for improvement.
Product innovation will bring more
business potential for product
related insurance
To support the development of the advanced
manufacturing industry, the insurance companies
have launched new materials and product
insurance. These insurances are currently
government-subsidized, and continued fast
growth of these insurance products is expected
for the next few years.
Domestic financial risk is
changing
As a result of the misrepresentations in Chinese
domestic stock market, the frequency and
severity of such claims have increased
significantly over the past five years. As a result
of these risk trends, the demand for domestic
financial insurance is expected to increase and
insurers are exploring potential business
opportunities.

ALL RIGHTS RESERVED
4 The credit insurance market
in China

ALL RIGHTS RESERVED
Credit & guarantee insurance in China: a surging market
20
Compared to credit insurance which experienced an overall steady market, guarantee insurance unleased its huge potential in
the past years.
In 2019, guarantee insurance reached a premium income of 84.4 billion yuan, increasing 358.7% since 2016.
20.1 19.2 20.1 21.4
24.2
20.020.0 20.8
18.4
37.9
64.5
84.4
2014 2015 2016 2017 2018 2019
Premium income of credit & guarantee insurance in China
(in billion RMB)
Credit insurance
Guarantee insurance
The rapid rise of P2P (Peer-
to-Peer) lending platforms
since 2016 along with a
series of supportive policies
directly contributes to the
spiking demand for financing
guarantee insurance.
Nonetheless, with high benefit
payments and stricter
regulation control, the growth
rate of guarantee insurance
market is expected to slow
down within a few years.
+ 358.7%
Source: National Bureau of Statistics, designed by daxue consulting

ALL RIGHTS RESERVED
A deeper look at the insurance market’s main overseas sector
21
40.9 42.6
48.9
58.1
61.3
2015 2016 2017 2018 2019
The insured amount of overseas investment
insurance of SINOSURE
(in billion USD)
363.9
375.2
412.8
481.4
486.9
21.8
22.3
23.9
23.5
11.9
2015
2016
2017
2018
2019
The insured amount of export credit insurance of
SINOSURE
(in billion USD)
Medium and long-term Short-term
Generally, the overseas investment insurance market has a stable growth.
However, it is notable that the insured amount of short-term export credit insurance was halved as a direct result of the
decline in exports due to the US-China trade war.
Source: SINOSURE annual report 2019, designed by daxue consulting
More short-
term but less
medium and
long-term
credit
insurance
sales due to
the US-
China trade
war.

ALL RIGHTS RESERVED
Short-term export
credit insurance,
79.8%
Overseas
investment
insurance, 10.1%
Domestic trade
credit insurance,
7.9%
Others, 2.2%
Insured amount structure of SINOSURE
(2019)
Case study: China Export & Credit Insurance Corporation
22
2.7 2.9
2.1
2017 2018 2019
Premium underwritten
(in billion USD)
China Export & Credit Insurance
Corporation (SINOSURE) is a
state-funded and policy-
oriented insurance company
established and supported by the
state in 2001 to promote China’s
foreign economic and trade
development and cooperation.
As an independent legal person, it
provides principal products
including medium and long-term
export credit insurance, short-term
export credit insurance, overseas
investment insurance, domestic
trade credit insurance, etc.
The premium decline in
2019 is mostly caused by
the drop in short-term
export credit insurance
that composes the
majority of the premium
income.

ALL RIGHTS RESERVED
Insurance broker in China
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24
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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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25
CONTACT US
010-6500 3217
www.asian-risks.com
info@asian-risks.com
Etc…
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Who we are
27
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We are daxue consulting:
• A market research firm specializing on the Chinese
market since 2010
• With 3 offices in China: in Shanghai, Beijing and Hong
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