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China: 83% unlisted non-life insurers report premium growth, 90% record motor losses in 2014

Source: Asia Insurance Review | Jun 2015

Fifty-one out of the 61 unlisted non-life insurers in China saw premium revenue increases and 37 out of the 41 unlisted insurers with motor business posted losses in 2014. 
   Overall, for non-life insurers which recorded premium growth, the average increase in premium revenue among was 45.03%.
   Increasing premium revenue is seen as a vital operating target for most insurers. This is because with underwriting profit being eroded, the insurance companies rely on investment income. They need the cash received from premiums for their investment activities, reported the Securities Daily.
   The data also shows that six insurers reported a fall in fees and commissions in 2014 while the majority saw an increase. Among the 61 insurers, total fees and commissions rose by 110.74%, with the rate of increase outpacing the rate of increase in premium revenues.
   Of the unlisted non-life insurers, 39 were locally owned while 22 were foreign joint ventures.
High costs and keen competition plagued motor business
As for motor business, China Continent Property & Casualty Insurance, Yong An Property Insurance and Sinosafe General Insurance, and Sunlight Agricultural Insurance are the companies which reported profits in their auto insurance lines.
   Among the 37 loss-making auto insurers, 20 reported losses of at least CNY100 million (US$16.13 million) each, while six suffered losses of more than CNY200 million. Two insurers chalked up auto losses of more than CNY300 million, the highest among the group, reported China Business Journal.
   Increases in auto part prices, labour costs, medical costs incurred by those injured, as well as auto insurance distribution costs are to blame for the losses in auto insurance, a PICC executive said. Distribution costs are high because of commissions, and advertising and marketing expenses. Insurers are also plagued by inflated claims for personal injury compensation with touts helping policyholders to make the claims.
   Several insurance companies have built their own e-sales platforms to cut distribution costs. However, the popularity of telemarketing and Internet sales has forced down average auto insurance premiums.
   Motor insurance contributes around 70% of the total premiums in the non-life market.
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