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The life insurance industry in China is projected to grow from CNY3.2 trillion (US$459 bn) in 2020 to CNY4.5 trillion (US$665.7bn) in 2025, in terms of direct written premium (DWP), according to GlobalData, a leading data and analytics company.
As per the latest data from GlobalData, China’s life insurance industry is forecasted to grow at a compound annual growth rate (CAGR) of 7.4% over 2020–2025, supported by demographic trends, development of private pension sector and growing demand for protection-type life insurance products such as long-term care insurance and health insurance.
Deblina Mitra, Senior Insurance Analyst at GlobalData, comments: “China’s life insurance industry is dominated by traditional life insurance products such as whole life insurance which accounted for around 75% of the life insurance DWP in 2020.”
Demand for whole life insurance benefitted from the growing middle-income population and rising disposable income. Per capita disposable income in China grew at a CAGR of 7.9% during 2015–2020, according to government statistics.
Ms Mitra continues: “Health insurance sold by life insurance companies accounted for 22.3% of overall life insurance DWP in 2020. China’s aging population and rising life expectancy created demand for protection and personal accident and health insurance products to cover morbidity risks. At the same time, rising medical expenses coupled with tax exemption supported the uptake of health insurance products.”
Given the growing retired population, there is a conscientious push by industry stakeholders to develop pension insurance market in China. Presently, the market for private pension is negligible in China due to a lack of product development and presence of large informal sector.
To develop private pension sector, in September 2021, 17 financial establishments including the Insurance Association of China established a new national pension company. The new company will provide commercial pension and health insurance in collaboration with life insurance companies. This development will allow life insurers to gain substantial business from China’s overall US$1.2 trillion pension sector.
Ms Mitra concludes: “China’s short-term economic outlook is exposed to the ongoing government’s reforms on private sector. Recent fallout in property sector and power crisis is also expected to impact economic growth resulting in slowdown in life insurance growth in 2021. Recovery is expected from 2022 once full-scale impact of these structural changes are mitigated.”