The personal insurance sector in China is poised for substantial growth and significant transformation in the coming years. According to projections by Boston Consulting Group (BCG), it is expected to expand at an annual rate of 5% to 10%, reaching a value between $910 billion (RMB6.6 trillion) and $1.74 trillion (RMB12.6 trillion) by 2035, up from $550 billion (RMB4 trillion) in 2021. The driving forces behind this growth are the ageing population, a growing focus on health and wellness, and the increasing demand for pension and health insurance products. Notably, these two product categories are anticipated to account for 50% of the market by 2035.
The product landscape is set to change dramatically. Currently, life insurance holds a dominant position with 72% of the market share, trailed by health insurance at 27% and pension insurance at a mere 1%. However, by 2035, life insurance’s share is forecast to decline to 45% to 50%, while health insurance is expected to exceed 35% and pension insurance to rise to 15% to 20%. Policies will evolve to become more comprehensive and long-term, integrating savings, protection, and health and pension services. In terms of financial integration, it will progress moderately, with investment-linked products growing, although they will remain below 10% of the market due to the high volatility in financial markets. Distribution channels will also diversify, with a decreasing dependence on insurance agents, whose share is projected to drop from 57% to 45%. Bancassurance will maintain a 35% share, and brokerage sales are predicted to triple to 15%.
The pension insurance market in China, still in its nascent stage, will target middle- and high-income groups, providing more flexible offerings and long-term investment strategies to mitigate longevity risks. Health insurance will experience growth in products that complement basic social security, especially for out-of-pocket expenses, premium medical services, and income loss during illness. Insurers will need to enhance their operational systems to manage the complexity of health insurance claims and integrate with social security systems. Digital transformation remains a top priority, with significant strides expected by 2025 under the policies of the China Banking and Insurance Regulatory Commission. Despite the challenges, insurers are urged to adopt customer-centric approaches, boost operational efficiency, and build advanced technological infrastructure. Given China’s relatively low per capita GDP of $12,500 and insurance penetration of 3.28%, there is ample room for growth. BCG recommends insurers to invest in innovation, broaden their product assortments, and fortify partnerships to capitalize on the opportunities in health and pension insurance and ensure long-term value creation in a rapidly evolving market.
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