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Chinatimes (WeChat official account: China Times) reporter Wu Min reports from Beijing.
On January 13th, at the "2018 Huibao Tianxia Insurance Conference", Luo Haiping, executive vice president of China Insurance Group, shared "a look at the development track of property insurance from the change of property insurance cycle". He said that the development cycle of property insurance should start in 1979 and it has been 38 years. He divided these 38 years into five cycles. First, the recovery development period, in this development period, it is a one-man show with people’s insurance, and the insurance business is fully restored; The second is the competition formation period, during which the competition pattern of China insurance market began to take shape; The third is the period of rapid growth, which is mainly driven by a series of policies in the State Council. The development speed of insurance industry in China is quite fast, which is the highest stage; The fourth is to develop a profitable period. The underwriting market of China insurance industry, especially the property insurance industry, began to make profits. It was in 2010 that property insurance entered a profitable cycle. The fifth is the period of steady growth, which is the period of steady growth that we are now in progress.
Luo Haiping said that the insurance industry began to recover in 1979, and in 1996, it was an important time, including 1995 when we had our own Insurance Law. During this period, the premium increased from 460 million to 45.25 billion. At that time, people mainly engaged in property insurance, so the proportion of property insurance over personal insurance was in this range, and it never happened again. Personal insurance was much higher than property insurance.
By the time of competition formation, the number of insurance companies had grown from one to 23, and the competition pattern of China insurance market began to open during this period. An important feature of this cycle is that with the competition in the market, the insurance premium rate dropped sharply. In 2002, the innovation was low, and the annual insurance premium rate was only 3.29‰, which was largely due to the market competition. At that time, we also joined the WTO, which had a great impact on the property insurance industry. At this point in time, the China Insurance Regulatory Commission was established in 1998.
In the third cycle, from 2003 to 2009, the premium entered a period of rapid growth. During this period, several major policies changed the structure and development trend of property insurance business, including the State Council’s first national ten articles, especially in 2007, the State Council introduced the subsidy policy for agricultural insurance business. In 1979, agricultural insurance was very difficult to carry out, so this national policy played a decisive role in policy-based agricultural insurance. At this time, the growth rate reached 22.09%, 1.96 times higher than GDP. At the same time, at this stage, China’s automobile market began to pick up, and the automobile grew rapidly from 2000. The increase in automobile sales injected great energy into the growth of China’s property insurance business.
However, rapid growth has brought losses to the industry. Therefore, during this period, the whole industry underwriting was fully launched, and the cost remained above 100%.
From 2010 to 2014, the industry entered a profitable development period, which is a relatively happy period for the property insurance industry. Shareholders are relatively happy, and colleagues in property insurance are also relatively happy, because everyone made money and bonuses were paid during this period. The growth rate during this period was maintained at 100%, and the strict regulatory policies during this period gave the property insurance business a good profit cycle. It is also at this point in time that the total assets of property insurance exceeded 1 trillion in 2013, and the profit of property insurance also suffered a huge loss of 8.347 billion from 2008 to a profit of 71.607 billion in 2014. In this cycle, the State Council also issued the new National Ten Articles, which injected some positive energy into the development of the insurance industry, and the GDP premium growth was about 1.98 times higher than the GDP growth.
Now, we have entered a period of steady profit growth. The characteristic of this period is that the property insurance industry has realized the insurance rate reform, which has brought great changes to the cost structure of auto insurance and the speed of business has declined. During this period, the non-auto insurance business has developed very rapidly, and at the same time, Internet insurance began to emerge. However, we think that Internet insurance is not enough to affect the whole property insurance cycle of China insurance industry in this period. It will bring some changes in models and products, but it will not affect the whole property cycle.
We think this cycle will be in 2020. The cycle of China’s property insurance industry is generally considered to be a cycle of about five years.
Luo Haiping believes that there are four significant factors that affect the cyclical changes of the property insurance industry. Mainly the macroeconomic trend and the prosperity of the real economy, as well as the relevant national policy-driven and industry regulatory policies.
Regarding the next cycle, he believes that the next important impact on the insurance property insurance industry is the spirit of the 19th National Congress and the Central Economic Work Conference, which has repositioned the financial industry.
Luo Haiping said that there are two judgments. One is to judge the premium. Based on the trend of the macroeconomic situation, the growth of new cars, and the changes in the reform of commercial vehicles, the next financial industry will change from medium-high speed to medium-low speed growth, which is about 10%. The growth rate will be maintained until 2020.
Second, in terms of underwriting profit, we believe that underwriting capacity will be released again in this cycle. In the next step, the cost ratio of the whole property insurance industry will be maintained at 100%, which is 100% of the whole industry, and the gap between the real implementation of each company will be large. Big companies such as PICC, Ping An and Pacific may be within 100%, but many new small and medium-sized companies will be above 100%.
He also summed up the prediction of several major trends in future property insurance. First, in 2018, the proportion of property insurance auto insurance in China will return to below 70%, and the proportion of non-auto insurance will exceed 30%, which is gradually in line with the international market; Second, it is still a trend to reduce the price of auto insurance in the next step. Its logic is that the expense ratio is too high, reaching 40%, which means there is still room for price reduction; Third, the strong are always strong, and the Matthew effect is more obvious; Fourth, the next growth area is in third-and fourth-tier cities and county markets. Affected by the purchase restriction of new cars, there is basically not much increase in auto insurance in cities, and the proportion of auto insurance in third-and fourth-tier cities is getting higher and higher, including the central and western regions, and the development of the eastern region is already at a relatively slow stage; Fifth, the next step of the marketing model is the high integration of online and offline, and the decisive end is the mobile end; Sixth, the application degree of insurance technology in the next step will profoundly change the structure and development trend of the property insurance industry, not only the cost rate, but also the business development, service, precision marketing, precise application of risk identification ability and personalized service, all of which must be solved through the application of insurance technology.
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