In a recent interaction with the media, Swiss Re China CEO John Chen shared how China domestic insurers should catch up with the rest of the world in the post-pandemic era.
“Chinese insurance companies should launch products and services with targeted and customised features to increase the insurance coverage rate during post-pandemic,” he said.
According to Mr Chen, the current challenges facing the Chinese insurance market include – economic recovery after the pandemic, changes in the underwriting cycle, the catastrophe protection gap under climate change, comprehensive reform of auto insurance, the sustainable development of health insurance and digitalisation.
He mentioned that the lockdown of cities in response to the pandemic control has brought economic activities and business operations to a halt. This has led to economic growth falling into a gradual recession and global supply chains being hit.
In terms of life insurance, he noted that the pandemic has led to the shrinking of the traditional channel of sales.
For the P&C sector, claims for travel and trade-related insurance increased significantly due to the disruption of flights and the decline in trade. At the same time, the risk of corporate debt defaults increased and credit insurance claims increased significantly.
He said, “In the short to medium term, the downturn in economic activity has reduced the demand for property insurance in the coming period, new premiums are expected to decline.”
He added that on the asset side, the investment of insurance companies was impacted by the turmoil in the global capital market, investment income was damaged and financial indicators such as solvency and liquidity were under pressure.
Mr Chen stated that the next step is how to manage market risk and gave suggestions from both the government and insurance companies:
The government should consider setting up a national-level security mechanism to fully utilise the leverage effect of the capital market and insurance protection capabilities through market-oriented means to improve the level of social security.
For the insurance market, the industry can give full play to its core values in policy distribution, risk management and claims processing. After the pandemic, the situation in which credit insurance claims and payment rates have risen sharply also reveals that insurance companies have significantly underestimated market risks and have much space to improve on product pricing.
He said that Chinese insurers need to have a deep understanding of consumer needs, preferences and behavioural characteristics. In response to consumers’ main concerns in the process of purchasing insurance, they can launch products and services with targeted and customised characteristics by adjusting product design and sales methods in order to increase insurance sales – thereby accelerating the development of China’s insurance market.
According to the latest sigma report from the Swiss Re Institute, China is expected to lead emerging markets to become the backbone of the global insurance market from 2021.
Emerging markets will maintain a positive growth trend in premiums this year and next, with growth rates of 1% in 2020 and 7% in 2021.