China, the second largest insurance market worldwide after the United States, is experiencing growth, at an expected compound annual growth rate of 9.5%, from USD 196.8 billion in 2020 to USD 313.0 billion in 2025, in terms of direct written premiums (DWPs).

However, the Covid-19 pandemic and the tightened regulatory restrictions have contributed to the rapidly changing insurance industry in China. Therefore, policyholders should understand that regular asset valuation –  the process of determining the value of an asset according to the changing market, can benefit them from lower policy prices, more options, and improved protection.

Regular asset valuation can help policyholders in China pay lower prices

Regular asset valuation may allow policyholders to pay lower prices. In other words, they do not need to pay more than the benefits they obtain. Making financial estimates may lead to over valuation of companies’ assets, which may in turn lead to higher insurance premiums. As a result, regular asset valuation can help companies measure the value of insurances more accurately and not overcharge their policyholders.

Regular asset valuation offers better protection for policyholders in China

Policyholders can be better protected with their insurance products with regular asset valuation. Policyholders may enjoy greater benefits, such as greater security and price comparisons, with the growth of insurance tech (insurtech) companies. Insurtech companies are leveraging their technologies including big data, Internet of things (IoT), and block chain to lower their costs and raise their efficiency levels. In China, there are over 140 insurance tech companies as of 2021, where 74 are property and 72 are life insurance companies. The annual premium of the online products was about USD 46.7 billion dollars. Among them, online health insurance premium grew the fastest by 58.8% to about USD 5.9 billion dollars.

Despite the rising insurance premiums, policyholders in China may receive greater benefits with regular asset valuation with the tightening malpractice regulations. The China Banking and Insurance Regulatory Commission stated that it will end bad insurance practices of the insurtech companies to minimize unethical behaviors like inflated fees, misleading market practices, and forced sales. This may ensure that policyholders get the benefits or even more than they pay for under minimal regular asset valuation.

Regular asset valuation provides more choices for policyholders in China

Policyholders can choose from a wider range of insurance options with regular asset valuation because costs are further divided with the Chinese government. Rather than companies and policyholders taking responsibility of the risks from the rapidly changing market, the government is taking initiatives to cover some of the costs. This allows consumers to have a wider range of insurance options.

In 2019, the China Banking and Insurance Regulatory Commission, or CBIRC, issued the “Guiding Opinions on Implementing Comprehensive Reform of Auto Insurance”. The motor insurance, the largest sector in the industry, makes up 60.7% of shares in the general DWPs in 2020. The guide encourages the development of new commercial auto insurance products and lowers the premium prices. The lower premium price has concerned companies, leading them to withdraw their products. However, with regular market valuation, companies can have better understanding of the asset value and minimize costs and still offer more insurance products. As a result, policyholders can have access to more insurance products.

Also, with the surging growth of insurtech companies, policyholders – especially those in the rural areas – have greater access to insurance products. They can also find more niche products, such as those involving e-commerce returns and flight delays.

Key takeaways of the benefits of regular asset valuation for policyholders in China

Regular asset valuation can benefit policyholders because:  

1. They can pay lower prices since prices are less likely to be overvalued and they are regularly adjusted to the rapidly changing market;
2. They can receive better protection, with the support digital technologies and tightening malpractice regulations; and
3. They can access a wider range of insurance products, supported by government initiatives and insurtech companies.

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