The outlook of China’s insurance industry remains very bright. While some may be watching the country’s slowing economy and the recent stock market volatility with caution, Mr Yao said that China’s insurance industry is in fact in a “golden period”.
Strong govt support
There is tremendous government support for the industry. Insurance has become one of the top government agendas. This can be seen in the “Opinions of the State Council on Accelerating the Development of Modern Insurance Industry”, which is often called “The New State Council’s Ten Opinions”, a development blueprint of China’s
The State Council is promoting the modernisation and development of the industry, and has high hopes and expectations of insurance industry’s role in the country, said Mr Yao.
In the past, the government took on the whole financial burden and handled everything. But as the economy develops, moving forward, this will not be possible anymore. Hence, the government is looking for greater private-sector participation to share the burden – in areas such as retirement and medical needs as the society develops,
Just scratching the surface
In the past years, the insurance industry underwent a very rapid development in line with the economy. As the economy now understandably faces some pressures in its transition, coupled with the global market uncertainties, there is bound to be some impact.
“However, I firmly believe that the industry is still in the ‘golden period’. There are some sectors which are not affected by the economy where insurance has a key role to play, such as medical and retirement needs. Moreover, we are just scratching the surface. There are a lot of areas where insurance is still underdeveloped in China. And when you look at the large protection gaps still in other more developed markets, the opportunities and potential in China are huge,” he said.
While some see the impact of the recent stock market volatility – especially in the months of June and July – in China as a negative, Mr Yao said there is a positive side to it.
He said that this can be an important process in the financial education of the public. Investing in the stock market cannot be viewed as a “sure-win”. There needs to be a greater understanding of risk and returns in financial instruments. This will further contribute to the maturing of the Chinese consumers’ financial intelligence.
Growing importance of ISC
The role of Insurance Society of China (ISC) is expected to be of even greater importance moving forward as the government places a greater emphasis on insurance.
“The Society brings together academics, researchers and industry players, providing thought leadership. We help to shape the development of the industry through research and facilitating discussions on the key issues. We also help to enhance standards and professionalism in the industry through our publications and research papers, and talent development in partnership with leading education institutes,” he said.
ISC also works closely with international and domestic research institutes on modelling risks and risk management to continuously gain a deeper understating on the risks the country faces. He added: “The industry does not have to undertake research on its own for every topic. There are already various institutes conducting researches. We hope to facilitate a platform where the industry and research institutes can complement each other and work together even more closely for better direction and avoidance of duplication.”
One of ISC’s immediate priorities is to galvanise the support of, and provide the direction for, the industry in supporting the objectives of “The New State Council’s Ten Opinions”. This will be done through on-going discussion and forums on how the industry can best serve the needs of the society.
Other than the “The New State Council’s Ten Opinions”, the industry will also support the government’s “One Belt, One Road” development strategy to improve trade and transport links. This was announced by the Chinese government and refers to the “New Silk Road Economic Belt”, which will link China with Europe through Central and West Asia; and the “21st Century Maritime Silk Road”, which will link China with Southeast Asian countries, Africa and Europe.
At its core, “One Belt, One Road”, and even the China-initiated Asian Infrastructure Investment Bank (AIIB), is about risk management. And insurance is always needed in risk management, said Mr Yao.
Looking back to look forward
A longer-term priority is the setting up of a risk management and insurance museum – “the first of its kind in the world” – in China. It is working on this with the support of the government of China.
Risk management is in everyday life. China is susceptible to Nat CATs and since historical times, dynasties and governments have sought to mitigate Nat CAT risks and its impact on the people, said Mr Yao.
Much can be learnt from the history and the development of risk management over time. Once established, the museum can be a key institution in housing historical records of the industry’s development, as an introduction and knowledge centre on the role of insurance to the different stakeholders, and more importantly, in the further development of the insurance industry based on an understanding of the data and history of the industry’s development, he added.
Continuing support for the industry
As for day-to-day and the ongoing work of ISC, it will continue its work to promote the insurance industry and make the industry attractive to talent, encourage innovation in products and services through scientific research and data, promoting new areas of growth sustainably such as on the internet, and mitigating risks from Nat CATs.
“We will continue to work hard to support and lead the industry, and for the industry to support the development needs of the country,” said Mr Yao.