China’s investment-oriented insurance premiums fall on crackdown

Aug 18 , 2017

The insurance premium decline is expected to continue as regulators accelerate efforts to weed out risks in the financial system

Investment-oriented insurance premiums in China tumbled by more than half in the first six months of this year, as Beijing’s crackdown on short-term universal life insurance began to bite.

The trend was expected to continue amid the ongoing regulatory drive to steer the industry back to its primary goal of providing long-term security, market watchers said.

In the first half of this year, investment-related life insurance premiums, including universal life insurance and investment-linked insurance, shrank 58 per cent to 364.8 billion yuan (US$55 billion), according to data from the China Insurance Regulatory Commission.

The insurance regulator has since last year, stepped up scrutiny on insurers to curb their aggressive sales of short-term universal life insurance, or essentially wealth management products, to raise funds. Such aggressive tactics adopted by the likes of Anbang Life Insurance and Foresea Life Insurance alarmed authorities who feared that they would inherently add systemic risks to the financial sector.

“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,” said Guo Zhenhua, head of insurance department at Shanghai University of International Business and Economics.

In the first half of this year, premiums at Anbang Life Insurance, the third-largest life insurer after China Life Insurance and Ping An Life Insurance, fell 16 per cent to 191.6 billion yuan. In the second quarter alone, the drop was a steeper 98 per cent, based on calculations of the CIRC data.

China’s total life insurance premiums, including traditional insurance offering protection and wealth management-oriented insurance, fell 5.8 per cent on the year to 2.2 trillion yuan in the first six months of 2017, mainly due to the weaker sales of investment-oriented products, according to the CIRC data.

Long-time life insurance heavyweights, which focused on protection products, also benefited from the tighter scrutiny.

The combined market share of the four listed insurers, China Life, Ping An, China Pacific and New China Insurance was 40 per cent at the end of June, up from 31 per cent as of the end of February 2016, according to Dai Zhifeng, a Zhongtai Securities analyst.

Increasing market consolidation was expected to plough on, Dai said in a research note.

China’s insurance sector has been growing on a fast track in recent years. But it was also eclipsed by aggressive fundraising and acquisition attempts at listed companies, triggering concerns that such activities have not only undermined the stability of the industry, but have also extended to other sectors in an increasingly intertwined financial sector.


@2018 Consult DB Co. Ltd.

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