Government support gives China's insurance sector a boost
Source:CCTV.com
China’s insurance sector is back in the spotlight thanks to a lift from a government package of supportive policies for the industry. Newly reported earnings of the major insurers show higher net profits than a year ago. But underlying concerns and risks remain for the sector. 
 
Will China’s insurance sector boom in the years ahead? The upside is higher profitability among insurers.
 
Four of the five largest listed insurers in China reported growth in their net profits with New China Insurance leading the way with a jump of more than 70 percent in net profits from a year ago. The key drive behind the gains has been a government push that’s led to a market based pricing plan for premiums and wider investment channels for insurers.
 
"To be honest, health and medical insurance segments have some reliance on government support. Overall, the two segments and the industry as a whole have large room to grow," said Lin Dairen, President of China Life.
 
That potential for growth is also visible in the industry’s fundamentals. International research shows that the insurance sector has only a 3-percent penetration rate in China. That’s only half the global standard, and almost no change from a decade ago. Meanwhile, the total amount of premiums in China is only one-fifth the level of that in the U.S. and around 80 percent of that in the United Kingdom.
 
The downside to China’s insurance sector is a high withdrawal rate mostly caused by bank financial products that feature shorter maturity periods and higher returns.
 
"There have been a boom of insurance products with dividends between 2007 and 2009. But many of those products’ returns were lower than expected. That’s why we see a peak of withdrawals lately. It’s an industry wide problem." said Zhu Ying, Chief Risk Officer of New China Insurance. 
 
The high number of withdrawals is also why many insurers have created quirky products for such circumstances as protection for accidental pregnancies before honeymoons or childrens’ development of bad habits. International insurers are getting in on the action. Germany’s Allianz joined forces with China’s Alibaba last year to sell insurance products betting on a full moon for the mid-autumn festival.

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