When insurance is the best policy

More are paying for cover to safeguard health and travel costs

Zhang Fanyi, a teacher and mother of two young children in Shanghai, has just spent 23,000 yuan ($3,440; 3,070 euros) on insurance policies for her family.

"One of my mother's close friends fell ill and could barely afford the treatment," the 35-year-old says to explain the reason behind the investment. "Also, as my children grow, we'll travel frequently, so we need insurance."

Millions of Chinese are today spending more than ever on insurance. With the aging population, life coverage has become important along with issues relating to healthcare, education and financial savings.

A research note from Northeast Securities says online distribution channels have given consumers more access to information on such products, and that consumers have gained more trust in the industry.

Demand for life insurance has surged among families with elderly parents and young children. At the same time, the rise in disposable income has pushed up demand for other forms of insurance.

The fast-expanding market has attracted not only more consumers, but investors, too.

About 200 companies have expressed an interest or sought licenses to set up insurance companies, according to China Insurance Regulatory Commission data.

In the past year, licenses have been issued to more than 10 companies underwritten by more than 70 firms, including tech giant Tencent and investment group Fosun.

"Profits for insurers are much higher than in many other sectors," says Yang Di, a researcher at Shanghai Shenda Asset Management Ltd. "Getting an insurer license is like securing a guaranteed profit. An insurer can raise funds easily by selling insurance at a cost much lower than many other fundraising channels.

"It's no secret that an insurance company serves like a deep pocket from which companies can easily draw funds."

According to the commission's data, the total assets held by China's insurance industry have risen from 5 trillion yuan in 2010 to 12 trillion yuan last year.

In the first half of this year, life insurers' premiums reached 1.176 trillion yuan, up 50 percent year-on-year, and property insurers' premiums have reached 463.2 billion yuan, up 8.5 percent. Overall premiums grew 37 percent year-on-year.

Authorities have warned that rapid growth in insurance revenues should not tempt companies to misuse funds or deploy them in unrelated channels.

In a recent meeting, Xiang Junbo, chairman of the China Insurance Regulatory Commission, said insurers must stick to their original plan of providing protection to customers and should not divert funds to noninsurance businesses. He said insurer licenses are not tools to access low-cost funds.

The entry of newcomers to the market is expected to intensify competition and sharpen focus on product development and solvency capacity management, analysts say.

"We estimate that the fast growth of premium income will last for another decade," says Ding Wentao, a researcher at Sinolink Securities Ltd.

"Online sales channels, and a growing number of niche markets, will provide more opportunities for the newcomers," he says.

wuyiyao@chinadaily.com.cn

(China Daily Africa Weekly 09/30/2016 page31)