Asian News - China: Commercial motor pricing trial could hamper underwriting gains
Source: Asia Insurance Review | Jan 2016
Chinese motor insurers’ capability to improve their underwriting margin could be hampered by a commercial motor pricing deregulation trial, according to Fitch Ratings.
In its report, “2016 Outlook: China Non-Life Insurance”, Fitch said the inclusion of 12 new regions in the deregulation trial could further suppress insurers’ capability to sustain or improve their margin in 2016. The trial deregulation could moderately spur market competition although insurers with better pricing sophistication could have larger flexibility to align their commercial motor insurance prices with the risks they underwrite.
Fitch expects the underwriting margin of mid- to small-sized motor insurers to remain weak in 2016 although the trial deregulation of commercial motor insurance pricing is unlikely to lead to a cut-throat price war.
Fitch also expects insurers to continue to incur underwriting loss in the compulsory third-party liability (CTPL) motor insurance line, given the tightly controlled pricing mechanism. The sector reported an underwriting loss of CNY4.7 billion (US$728 million) in 2014 but investment gains of CNY6.3 billion, resulting in net gains of CNY1.6 billion, reported the local media. CTPL business collected total premiums of CNY141.8 billion in 2014, according to official data.