Insurance: Product sales, investments prompt insurance rebound
Low category penetration promises great potential
Insurance rebounded, increasing 21 percent in value after declining 6 percent a year ago. The decline resulted from regulatory intervention to stabilize the insurance market against speculation, which had driven a 44 percent increase in category value the prior year.
Following this bumpy history, the insurance category has evolved, with growing understanding and acceptance of the category among middle class Chinese who increasingly purchase insurance for protection rather than investment. Meanwhile, the relatively low penetration of insurance in China, and the expansion of online access, continued to drive strong category growth.
Strong product sales and improved investment results boosted the profits of China’s publicly listed insurance companies. Shares of Ping An surged, and the brand increased 36 percent in value, the most of any insurance brand. Ping An ranks the No. 1 most valuable insurance company in the world, in the BrandZ™ Top 100 Most Valuable Global Brands report.
A recent investment in HSBC made Ping An the global bank’s second-largest shareholder. Ping An owns an online healthcare service and operates clinics throughout China as part of its broad positioning as a financial services company. And it is deeply committed to internet financial technology.
Benefiting from its investment in transforming to an internet-based company, New China Life increased 27 percent in value, making it second-highest riser in the insurance category. CPIC, which rose 23 percent in value, announced that it would alter its investment strategy to serve the national agenda by channeling funds to utilities and infrastructure projects.
China Life collaborated with Baidu to launch an internet investment fund. China Life also planned to increase its overseas engagement and invest in projects intended to help reform the State-Owned Enterprises and reduce their debt load. China Life and CPIC also rank in the Insurance Top 10 in the BrandZ™ Global Top 100 report.
China’s aging population and the need for more extensive national health coverage should open growth possibilities for insurance products. Similarly, the sharing economy is expected to require new insurance products. More consumers share bicycles, for example, which raises potential liability coverage issues. Although government regulations may moderate the growth rate of insurance in China, growth potential has attracted competition from outside the insurance category, particularly among major internet brands, such as Alibaba and Tencent.