China’s general insurance industry is forecast to grow by 3.8% in 2020, compared to 5.7% registered in 2019, according to GlobalData, a leading data and analytics company.
GlobalData has revised China’s general insurance forecast in the aftermath of COVID-19 outbreak. As per the latest data, China’s general insurance industry is forecast to grow at a compound annual growth rate (CAGR) of 5.2% during 2019-2023 against the earlier forecast of 8.6%, primarily due to the scaling down of business activities and economic uncertainty imposed by the pandemic.
Sangharsan Biswas, Insurance Analyst at GlobalData, comments: “Despite signs of recovery, the Chinese economy continues to grapple with sluggish business activity as new cases of infection are being reported. The recent floods will further dampen economic growth, resulting in lower premium growth for general insurers.”
The slowdown is most evident in motor insurance segment, which accounts for two-thirds of general insurance premium in 2019. Between January 2020 to June 2020, new vehicle sales declined by 16.9%, compared to the same period last year due to reduced consumer spending and lockdown restrictions. As a result, motor insurance premium is forecast to slow down to 1.3% in 2020.
Similar trend can be observed in property insurance, which accounted for 10% of general insurance premium in 2019. Due to suspension of economic activity in Q1 2020, sales of commercial properties fell by 5.4% in the first half of 2020 on year-on-year as per the National Bureau of Statistics. Slowdown in residential property sales and weak global economic outlook is expected to limit property insurance growth.
To improve business activity, regulatory authorities are exploring new business options. China Banking and Insurance Regulatory Commission (CBIRC) is promoting digitization. Furthermore, regulatory body is also encouraging insurers to expand their offerings of smaller product lines such as environmental pollution liability cover to drive new premium growth.
Mr Biswas concludes: “The ongoing economic uncertainty compounded by the second wave of infections and worsening global trade scenario is expected to slow down growth in China’s general insurance industry. Despite push from regulators for a faster recovery, it is expected to be a protracted one.”