The insurance industry can play a bigger role in serving China’s new growth pattern through the dual circulation strategy, says Mr Xing Wei, president of the Insurance Association of China.
In the dual-circulation strategy, put forward at the Fifth Plenary Session of the 19th Central Committee of the Communist Party of China, which was held in Beijing from 26 to 29 October 2020, the domestic market is the mainstay of the economy while foreign business reinforces the domestic sector.
In a commentary in China Daily, Mr Xing says that one area to which insurance can contribute is in building a multi-pillar pension insurance system in China. Currently, there are three major pillars of the insurance system: the state-run basic pension, enterprise annuity provided by employers and commercial pension insurance.
China’s elderly population is estimated to surpass 300m during the 2021-25 period, and the pension shortfall will likely reach CNY8tn ($1.22tn) to CNY10tn in the next five to 10 years. The 14th Five-Year Plan, for 2021-25, is likely to propose steadily building a long-term nursing insurance system, which will provide an opportunity for commercial pension insurance to help put together a retirement security system.
In addition, some insurance companies have explored business in building communities for the elderly, where old people are taken care of, receive medical services and stay active. So the insurers’ functions have expanded from the financial sector to diverse elderly services.
Insurance can also contribute to the country’s rural revitalisation strategy. During the 13th Five-Year Plan period (2016-20), agricultural insurance played an important role in serving poverty reduction, but its development is still at the initial stage.
Agricultural insurance needs to be expanded. During the 14th Five-Year Plan period, the insurance industry can help in loss compensation and risk management.
Inclusive finance is another segment where insurance can play a role. Currently, advanced technologies such as big data, cloud computing, blockchain and AI are accelerating transformation of the insurance industry. The insurance industry will provide more personalised, differentiated and cheap insurance products.
In addition, insurance can serve in funding or covering the country’s major projects. As China’s per capita GDP surpassed $10,000, demand for insurance has entered the stage of rapid growth.