Unfolding potential
Population size and income level are the two most important elements of any market. With a population of over 1.3 billion, China offers the world's largest insurance market. At present, most of this market is concentrated in the cities where there is a population of 460 million, particularly the coastal areas. An overview of China's insurance market reveals that a large potential market remains untapped. In 1999, only a fifth of the total population had purchased life insurance and as few as 3 per cent of the labour force is covered under a retirement insurance scheme. With regard to property insurance, 93 per cent of individuals and 85 per cent of businesses remain uncovered.
Depth and density are the two most popular indices to measure the sophistication of a country's effective insurance market demand and the status of insurance in the country's economy. Depth refers to the ratio of total premium revenue over GDP while density refers to per capita expenditure on insurance. Measured in this way, in 2000 China was ranked 61st and 73rd in the world. Its insurance depth was 1.8 per cent and its insurance density US$15.2. This was far below the global average of 7.84 per cent and US$385.4. While the total premium revenue was 2.2 per cent of the 2001 GDP, it still falls far below the world average.
Early in 2002, a Beijing-based firm “ Chinese Mainland Marketing Research Co “ conducted a survey among the residents of Beijing, Shanghai and 20 other cities across China in connection with insurance. This revealed that only 3 per cent held policies to protect their personal property, and only 1.7 per cent held car insurance policies. However, the survey also showed an encouraging increase in the number of families in the low and average income brackets who hold insurance policies. 38 per cent of families with a monthly income below US$120.77 and 40 per cent of families with monthly incomes from US$120.89 to US$241.55 bought insurance in 2000. 43 per cent of families with monthly incomes between US$241.67 and US$362.32 bought insurance, and the figure for families with monthly incomes above US$362.32 was 44 per cent.
According to Sigma, a reputable Swiss insurance source, China ranked 16th in the world in terms of insurance revenue in 1999. Although accounting only for 0.72 per cent of the world market share, its growth rate was highly promising and second only to Italy (see Table 6.6.4).
| Rank Country | Revenue (US$ million) | Actual growth rate (%) | World market share (%) |
|---|---|---|---|
| 1 USA | 795,188 | 5.1 | 34.22 |
| 2 Japan | 494,885 | “4.9 | 21.29 |
| 3 UK | 204,893 | 12.9 | 8.82 |
| 4 Germany | 138,829 | 5.3 | 5.97 |
| 5 France | 123,113 | 9.6 | 5.30 |
| 6 Italy | 66,649 | 18.5 | 2.87 |
| 7 South Korea | 47,929 | “8.4 | 2.06 |
| 8 Canada | 41,882 | 5.3 | 1.80 |
| 9 Australia | 38,712 | 5.9 | 1.67 |
| 10 Holland | 37,985 | 4.1 | 1.63 |
| 16 China | 16,830 | 13.3 | 0.72 |
| World total | 2,324,025 | 4.5 | 100.00 |
According to Mr Mingzhe Ma, Chairman and CEO of China Ping An Insurance Company, insurance will see the highest growth within the Chinese financial sector. The growth rate over the next five years will remain at between 20 and 30 per cent. Other experts believe that by 2005, the total value of insurance premium will reach US$33.82 billion, constituting 2.3 per cent of the total GDP. The average premium per person will increase to US$27.78. Currently, China's insurance industry constitutes only a small fraction of the entire economy (2.2 per cent), but by 2025 the aggregate premium revenue will reach 5 trillion RMB, equivalent to US$610 billion. This figure will place China among the top five largest insurance markets in the world.
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