Our analysis on the business insurance market in China

As an experienced insurance broker in China, ARMS has a bird’s eye view of the business insurance market in China. This analysis on China’s insurance market is based on a report created in partnership with the China market research firm, daxue consulting.

The allure of starry cities and a blossoming economy have attracted lots of overseas enterprises and start-ups to China. Even with affluent commercial resources and opportunities, it is also a place enshrouded in uncertainty and risks, which could wipe out a business before it gets off the ground. Therefore, finding a way to shift, mitigate or even avoid risks is necessary before landing your business in China. Business insurance in China is the starting point for risk management.

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The most common insurance products for companies in China

There are four common insurance products available on the business insurance market in China.

Company asset insurance

company asset insurance in China
Source: Asian-Risks and daxue consulting, business insurance in China official report, company asset insurance in China

Company asset insurance refers to insurance with subjects of companies’ tangible assets, relevant interest and liability. This includes commercial property insurance, profit loss insurance, cargo insurance, engineering insurance and commercial vehicle insurance.

For example, commercial property insurance allows you to claim for indemnity when direct financial losses to enterprise property happen. On the other hand, your property may be intact, but your business operations are affected. In this case, profit loss insurance can relieve your financial burden, which targets indirect economic losses.

Company liability insurance

company liability insurance in China
Source: Asian-Risks and daxue consulting, Business insurance in China official report, company liability insurance in China

Liability insurance refers to the form of property insurance in which an insurer bears the liability to compensate a third party in accordance with the law. Company liability insurance includes product liability insurance, public liability insurance, employer liability insurance and professional indemnity insurance.

Specifically, product liability insurance focuses on compensation for personal injury or property damage caused by the insured product. Public liability insurance bears liability that occurs during production and operation activities in public venues, such as schools and cinemas. Employer liability insurance is designed for labor accidents and occupational diseases to employees. Professional indemnity insurance provides compensation for financial loss while providing professional services.

Credit insurance

credit insurance in China
Source: Asian-Risks and daxue consulting, Business insurance in China official report, credit insurance in China

Credit insurance refers to the insurance policy in which the insurer is liable for the economic losses suffered by the insured when the debtor refuses to perform the contract or fails to pay off the debts.

Credit insurance has five subcategories.

For loss caused by external factors, there are two insurances. Export credit insurance targets international trade loss caused by political (war, foreign exchange control) and commercial (bankruptcy, the default of payment) risks. Similarly, domestic credit insurance minimizes the loss of accounts receivable due to commercial risks (bankruptcy, default) of the buyer.

For loss caused by the internal operations, there are two options. Product guarantee insurance softens the financial burden when the economic loss was caused by the failure to reach a certain level of quality of the products manufactured. Fidelity bond insurance can fill the loss, when dishonest behavior of employees, such as theft and corruption, leads to financial loss

Also, contract guarantee or performance bond insurance is useful when the economic loss happens due to the other party’s failure to perform its obligations under a contract.

Company employees insurance

company employee insurance in China
Source: Asian-Risks and daxue consulting, Business insurance in China official report, company employee insurance in China

Employee insurance is a social and economic system that provides income or compensation to a population that is incapacitated, temporarily unemployed or suffering loss due to health reasons. Company employee insurance bears the employee-related expenses in situations like retirement, maternity or work-related accidents.

Endowment insurance provides retired workers with an income source to make a living.

Medical insurance guarantees an indemnification of medical expenses due to the illness or other medical issues of employees. Similarly, Group accident insurance covers the high medical costs for accidents when accident-related injuries, death or permanent disabilities occur.

Maternity insurance bears employers’ liability to pay employee’s income during pregnancy, childbirth and breastfeeding.

Three main players in the Chinese business insurance market

There are 3 main players on the Chinese insurance market, namely PingAn, PICC, and CPIC. All these three insurers together occupy a large market share and provide insurance products with special selling points.

PingAn (中国平安): Diverse and detailed insurance product assortment

PingAn is the largest insurance company in China, providing more than 15 kinds of corporate insurance services. PingAn’s business insurance products widely cover types of company risks with a large span of guarantee amount. For example, the coverage of corporate group comprehensive accident insurance is 0.005 – 8 million RMB.

PICC (中国人保): Building targeted insurance solutions for clients

Instead of individual insurance products, PICC tends to sell business insurance in a package that targets specific types of businesses such as PMEs, restaurants and more.

For example, Wanchuang insurance combines various insurance products and is specifically designed for Small and medium enterprises in 5 industries (accommodation, retail, wholesale, catering, and business service). It covers business property, employers and employees, also the multiple legal liability risks of employers.

Plus, PICC provides Jinfu insurance, which is a comprehensive insurance solution that launched for catering services. It covers 3 aspects (property, employee and consumer safety) in a restaurant. With Jinfu insurance, restaurants owners are allowed to claim for coverage of property damage, cash loss, food safety liability, etc.

CPIC (太平洋保险): Focusing on enterprise credit insurance

With 6 kinds of enterprise insurance in total, CPIC mainly focuses on company credit insurance, whether it is domestic or international trade. CPIC provides bespoke products based on the company’s specific situation. It also launched medical insurance specialized in breast cancer.

Considering some short-term business contracts, CPIC offers short-term export credit insurance for trade companies targeting the risks of bad debt or delinquency to the buyers.

Comparing insurance company’s market strategies in China

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From a comparison of three insurer giants, it can be concluded that the main model is to tailor the insurance package according to each company’s needs (personalized packages) including different coverage and products.

COVID-19 impact on China’s business insurance market

COVID-19 boosted sales of health insurance packages, but the high volume of claims put pressure on insurance companies. However, with the government intervention and providing financial assistance, the negative impact was managed.

After COVID-19, three obvious changes can be observed on China’s insurance market

Firstly, employee’s health insurance boomed. There was an increased willingness from the businesses’ side to purchase health insurance for employees. Meanwhile, insurers seized the opportunity to launch products in response to COVID-19, leading to a significant increase in employee health insurance sales.

Secondly, the sales of accident and transport insurance decreased. COVID-19 caused many companies to suspend work and production, most of the business travel or transportation plans have been delayed or canceled. Accordingly, the consumption of related insurance products has fallen. However, the reduction in consumption of accident and transport-related insurance is relatively small, the overall impact was negligible.

The third change is that expenditures on claims increased. There was a big increase in the claims of life insurance, medical insurance and critical illness insurance. The government has been providing financial assistance to insurance companies to cover the costs of these claims, helping to relieve the pressure on insurers.

Case study: PICC’s key COVID-19 response strategies

Under uncertainty caused by COVID-19, PICC responded in time to reduce the negative impact of COVID-19 for its business and for its clients. The measures used to adapt the COVID-19 situation include: a free extension of infectious disease liability, appropriate deferment of insurance premiums, a free extension of the insurance period, expanded online sales channels, simplifying the processes of claim payment and providing financial services to ease the financial pressure on enterprises.

Insurance brokers’ unique selling point is to offer richer services and solutions

An insurance broker is an independent professional advisor providing intermediary service in risk and insurance. Based on applicant’s interests, it serves to help entering into an insurance contract between applicant and insurer.

The most important insurance types for brokers are personal insurance, such as life insurance, health insurance and supplementary insurance.

Insurance brokers take around 19% share of the insurance intermediary market in China.

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Data source: China securities, PwC, designed by daxue consulting, insurance intermediary market in China

How are insurance brokers different from professional insurance agencies?

  • Insurance brokers accept the entrustment of individual consumers or other companies. They represent the interests of consumers, in contrast to agencies who represent the interests of a company.
  • Insurance brokers analyze the advantages and disadvantages, and applicability of insurance products, then provide clients with insurance solutions that match their needs. Whereas insurance agencies only consider at a fixed set of products at a company.
  • Selling products from multiple insurance companies, but agencies only can sell options from contracted companies.