Looking back at the life insurance industry in 2021, on the whole, the total premium is still growing positively, but the decline in growth rate is an indisputable fact, and even underperformed the GDP growth rate of that year.
The changes in the channel pattern are the most direct and profound: the decline in personal insurance manpower, the decline in new policy premiums, and the decline in the value of new businesses; bancassurance returns to the strategic vision, with high premium growth, frequent new policies, and the market pattern is also surging undercurrents; under the ebb tide of the platform economy, Internet insurance policies have been repeatedly tightened; the premium growth rate of professional intermediary channels is high, but the variables still exist...
In addition, there are various factors such as the upgrading of insurance products, the evolution of asset allocation trends, and the introduction of regulatory policies, all of which together shape the current life insurance industry.
In the long run, the development of the industry is still in an important period of strategic opportunities, but in the short term, the development situation of the industry is still grim;
On the demand side, the long-term potential is huge, but the short-term consumption slowdown trend is difficult to understand;
On the supply side, the traditional model is difficult to sustain, and the new model is still groping...
How do you define where the life insurance industry is now? This article from the Strategic Planning Department of Chinese Life Insurance Co., Ltd. uses a large number of detailed data to analyze the current market, rationally analyze the reasons behind the phenomenon and the future direction of various trends, which can be said to be the most comprehensive summary of the life insurance industry in 2021.
Article data show that the original premium income of the annual premium income was 3.1 trillion yuan, an increase of 5.0% year-on-year, lower than the average annual compound growth rate of the past decade (11.9%); at the same time, the total profit of the industry contracted by 47.4%; specific to the individual insurance channel, the manpower estimate was reduced by more than 3 million, the new policy premium fell by about 5.7% year-on-year, and the silver mail channel maintained a high growth rate of 20.3% ...
01
Industry as a whole: the scale and profit growth rate have declined, and the market competition has become more intense
1. The annual premium income growth rate dropped to 5.0%, and the single month premium income fluctuated significantly
In 2021, the growth rate of the accumulated original premium income of life insurance will further slow down, and the overall trend will show a high and low trend. As of the end of December, life insurance companies had achieved a cumulative original premium income of 3.1 trillion yuan, an increase of 5.0% year-on-year, lower than the average annual compound growth rate of 11.9% in the past decade.
Single-month premium income fluctuates significantly. Among them, in January and February, affected by the switch between new and old serious illness insurance and the early sprint of business in the first quarter, the single month premium income achieved rapid growth; in March, there was a cliff-like decline, and the growth rate of premium income turned negative, and then returned to positive and maintained positive growth in April; at the end of the year, affected by factors such as the end of the Internet insurance consolidation period, the growth rate of single-month premium income increased.
Figure 1: The cumulative growth rate of original premiums of life insurance and the compound annual growth rate in the past decade
Figure 2: Growth rate of cumulative life insurance and original premium income in a single month in 2021
2. The total profit of the industry shrank by 47.4%, and the profitability of large insurance companies was stronger
Affected by multiple factors, the total profit of the life insurance industry will show negative growth in 2021. Life insurance companies achieved a total profit of 157 billion yuan for the whole year, down 47.4% year-on-year, down 63 percentage points from the same period in 2020. The main reasons are:
First, the growth rate of the industry's overall premium income and investment income has slowed down;
Second, the industry's surrender payment and compensation expenditure increased rapidly (the surrender payment expenditure in the income statement increased by 20.1% year-on-year, and the compensation expenditure increased by 15.0% year-on-year);
Third, the basis for the measurement of insurance contract reserves (750-day moving average ten-year treasury bond maturity yield) has changed, and life insurance companies continue to increase reserves. Overall, the profitability of large insurance companies is stronger, and the data of the first half of the year shows that the life insurance business of the five listed insurance companies contributes more than half of the industry's profits.
3. The market concentration has further declined, and the premium growth rate of silver and postal companies has been higher
As the head insurance companies continue to deepen their transformation and continue to increase the clearance of agent channels, the competition pattern of the life insurance market has accelerated and the market share of large insurance companies has declined for three consecutive years. As of the end of December, the premium income of large life insurance companies totaled about 1.9 trillion yuan, an increase of 0.5% year-on-year, 4.5 percentage points lower than the industry average growth rate, and the total market share was 59.3%, down 2.7 percentage points from the end of the previous year.
At the same time, relying on the high-quality resources of shareholder banks, the growth rate of premium income of silver and postal life insurance companies is significantly higher than that of non-silver and postal companies. The total premium income of silver-mail life insurance companies increased by 10.5% year-on-year, 6.1 percentage points higher than that of non-silver-mail life insurance companies, and the market share was about 10.1%, further increasing by about 0.5 percentage points over 2020.
Figure 3: Market share of large and medium-sized life insurance companies in the past three years
Figure 4: The market share of silver mail and non-silver mail life insurance companies in the past three years
4. Overseas capital investment continues to increase, and the market share of foreign insurance is basically stable
As the process of opening up to the outside world of the mainland continues to accelerate, the investment of overseas capital in China's insurance market has further increased. In 2021, the first wholly foreign-owned life insurance company "AIA Life", the first wholly foreign-owned insurance holding "Allianz Holdings", and the first life insurance company "Allianz" from a joint venture to a wholly foreign-owned company were established.
At the same time, the growth rate of premium income of foreign-funded life insurance companies is slightly ahead of That of Chinese companies, and its market share is basically stable. As of the end of December 2021, the premium income of foreign-funded life insurance companies reached 335.1 billion yuan, an increase of 5.5% year-on-year, 0.6 percentage points higher than that of Chinese capital, and the market share was 10.6%, which remained basically stable. In Beijing, Shanghai, Guangdong and other areas where foreign insurance companies are relatively concentrated, the market share of foreign insurance companies is higher.
Figure 5: Market share of foreign and Chinese life insurance companies in the past three years
prospect
In the long run, the development of the industry is still in a period of important strategic opportunities. However, in the short term, the development situation of the industry is still grim, and the pressure from both the demand and supply sides is still obvious.
From the demand side, the impact of the new crown epidemic is still continuing, the growth of residents' income has slowed down, they are more cautious about long-term large expenditures and non-essential consumption, and their willingness to spend on commercial insurance, especially long-term savings business, has declined.
From the perspective of the supply side, the population dividend has faded, the scale of agents has continued to decline, the traditional business model of driving business development with the scale of the team has been challenged, and the market players have focused on improving production capacity but it is difficult to have a significant improvement; the homogenization of products is serious, the supply coverage is not wide enough, the risk protection function is not fully played; the quality of services such as sales and claims needs to be improved urgently.
Overall, long-term potential demand is difficult to transform into a real market in the short term, and the short-term development of the industry is still facing greater pressure.
02
Product structure: Continued to return to protection and long-term, but the growth rate of health insurance further slowed down
1. The proportion of ordinary life insurance premium income continues to increase, and the growth rate of health insurance continues to decline to 4.6%
Although health insurance is still the fastest growing type of life insurance, the overall growth rate has slowed down further from 2020 to the lowest level in nearly a decade. In 2021, life insurance companies achieved health insurance premium income of 706.9 billion yuan, an increase of 4.6% year-on-year, and the growth rate was 8.7 percentage points lower than that of 2020, accounting for about 22.6% of the overall premium income.
The life insurance business grew steadily, with the proportion of ordinary life insurance premium income continuing to increase. The original premium income of life insurance companies in the whole year was 2.4 trillion yuan, an increase of 5.5% year-on-year. Among them, ordinary life insurance premium income grew the fastest, up 21.7% year-on-year; participating life insurance, investment-linked insurance and universal insurance fell by 10.6%, 14.1% and 8.3% respectively year-on-year.
The decline in accident insurance premium income widened further. The original premium income of the accident insurance business of life insurance companies in the whole year was about 58.3 billion yuan, down 6.8% year-on-year, and further down 4.4 percentage points from 2021.
Figure 6: The growth rate of life insurance companies' premiums by insurance type in the past three years
Figure 7: The growth rate of health insurance premium income in the industry in the past three years
2. The development of serious illness insurance is facing bottlenecks, and medical insurance innovations are emerging one after another
The highest proportion of serious illness insurance in health insurance is facing a bottleneck in development, and the "scissor difference" in the growth rate of premium income and compensation expenditure has further expanded.
On the one hand, due to the vigorous development of new short-term medical insurance products, which has reduced residents' demand for payment-type products and the continuous decline in the scale of agents, the growth rate of premium income of major illness insurance has slowed down significantly.
On the other hand, at present, there are still problems such as weak product pricing foundation and risk screening capabilities to be improved, and the growth rate of compensation expenditure continues to increase. According to the data, by the end of 2021, the year-on-year growth rate of long-term health insurance claims expenditure of life insurance companies was 71.7 percentage points higher than the growth rate of premium income.
In addition, product design and innovation present certain homogeneous characteristics. After the new definition of severe illness was switched, as a whole, companies still used the previous main product series, in addition to a slight decline in product prices, generally added moderate illness liability, additional payment liability, etc., product differences are small.
Figure 8: Growth rate of long-term and short-term health insurance premium income and the growth rate of claims expenditure in the past three years
Medical insurance continues to innovate and develop, further returning to the source of protection. First, long-term medical insurance has further developed. Under the impetus of supervision, a large number of short-term medical insurance with irregular design and operation have been removed from the shelves, and companies with good operating capabilities have further developed long-term medical insurance business. As of October 2021, 25 types of long-term medical insurance products with adjustable rates for insured ages over 70 have been launched.
Second, the "benefiting the people" continues to develop rapidly, and the inclusiveness is further improved after upgrading and iteration. In terms of overall scale, as of mid-October 2021, the total number of insured people in the project exceeded 70 million, and the coverage was further expanded. In terms of product design, after the product update iteration in many places, it shows the characteristics of lower claim threshold, increased compensation rate, and increased service content.
Third, a new type of medical insurance product for subdivided customer groups is budding. Under the fierce competition, market players have increased their attention to segments of customers such as chronic disease patients and the elderly, and sought business growth points by providing innovative products and services.
Overall, medical insurance has further become an important area for the business development and innovation of life insurance companies.
3. Long-term savings business has attracted attention and transformed into standardization and long-term operation
From the demand side, the attention of insurance products with savings functions has increased. With the weakening of real estate investment attributes, household asset allocation has gradually tilted towards financial assets. At the same time, affected by the new asset management regulations issued in 2018, the attractiveness of bank wealth management has declined, and insurance products with savings functions with "just exchange" and long-term attributes have received more attention.
From the supply side, the limited pricing interest rate makes the increased lifetime life stand out. Beginning in 2019, regulations imposed strict limits on products with a pricing interest rate of 4.025%. The pricing interest rate of annuity insurance products after 2020 is basically lower than 4%. Starting in 2021, regulations will further limit the settlement rate of universal insurance, up to a maximum of 5%, and the attractiveness of the product will decline. A number of insurance companies began to promote incremental whole life insurance products that also have savings functions and compound interest appreciation.
Figure 9: 2021 Whole Life Insurance Baidu Search Index
Savings products are further transformed into normative and long-term products. In the second half of 2021, many savings products such as increased whole life insurance will have a downward trend in pricing interest rates, and product design will be more transformed into long-term. On the one hand, the downward trend of long-end interest rates has become a general consensus, and it is difficult to support products with excessively high pricing interest rates; on the other hand, since the end of 2020, the regulator has repeatedly criticized issues such as "long-term insurance and short-term work" and "flexible insurance reduction and no proportional restrictions", promoting the further transformation of savings-based products to standardized operation.
It is expected that in the future, market players will further focus on long-term and guarantee-type business, and the development space of health insurance and pension insurance will be further opened.
On the one hand, the second phase of the compensation second generation project will be implemented from January 1, 2022. Since the solvency adequacy ratio is greatly affected by the product structure, the implementation of the second phase of the second generation project will force insurance companies to further return to insurance protection, and the business focus may accelerate the transformation to high-value protection business and long-term business.
On the other hand, the demand for health insurance and endowment insurance for mainland residents continues to increase. At present, the average life expectancy of urban and rural residents on the mainland has reached 77 years, and the proportion of people over 60 years old accounts for about 18.7% of the total population. The problem of homogenization of guarantee-type products is still relatively serious, the supply coverage is not wide enough, and the risk protection function has not been fully utilized. There is a large gap between the supply and demand of health and old-age security. It is expected that efforts will be made to build a well-structured, functional and comprehensive insurance product supply system, and actively promote national strategies such as market entities to participate in healthy China and cope with the aging of the population, which will further become the focus of attention of regulators and market entities.
03
Channel development: Agent channels continue to be cleared, and the standardized operation of channels such as bancassurance and the Internet has been further strengthened
1. The scale of agents has dropped sharply, and it is still difficult to make up for the quantity
The industry is generally facing the problem of difficulty in increasing personnel and retaining staff, and the quality improvement of the team is limited. Since 2021, insurance companies have continued to improve their assessment efforts, increased personnel clearance, a large number of low-capacity agents have withdrawn from the industry, and the scale of sales personnel has continued to decline, and there is no sign of stopping the decline and rebounding.
Although the per capita production capacity of agents has increased under the background of the withdrawal of a large number of low-capacity manpower, under multiple resistances, the qualitative improvement of the team is difficult to compensate for the impact of the decline in scale. According to the data, from 2018 to 2020, the average annual premium income of new policies in the personal insurance channels of large insurance companies fell by about 9.2%; the decline in the premium income of new individual insurance policies in 2021 continued, with a year-on-year decline of 5.7% as of the end of December.
Figure 10: The scale and growth rate of industry agents in the past decade
(Note: The estimation of the size of agents in 2021 is that the total size of agents of large life insurance companies at the end of 2021 is divided by the average of the total size of large life insurance companies in the past three years as the proportion of the total number of agents in the industry.) ）
2. Independent agents test the waters for one year, and opportunities and challenges coexist
In 2021, We Insurance took the lead in testing the independent agent model. Judging from its disclosure data, the per capita production capacity of the independent agent team has been significantly improved, with a monthly per capita production capacity of 27,000 yuan (the current monthly per capita production capacity of large insurance companies is about 3,000-9,000 yuan). However, it should be noted that some agents already have certain insurance sales experience and customer resources before becoming independent agents, so the current capacity increase is still difficult to fully explain that this system is superior.
At the same time, there are still obvious differences between the current domestic independent agent and the successful independent agent model abroad, and the domestic independent agent can only represent the products of one insurance company, which means that the product selection of the agent is still limited by the unity when making policy planning for consumers. The future development trend of the independent agent model remains to be seen.
3. The quantity and quality of bancassurance channels have risen, and more attention has been paid to long-term and value
The premium income of the bancassurance channel continued to grow rapidly. The development of personal agency channels has been blocked, and many insurance companies have turned their attention to the bancassurance channel, promoting the continuous improvement of the premium income of the bancassurance channel. In 2021, the insurance company's silver mail channel agency premium income increased by 20.3% year-on-year, higher than the premium income of the individual insurance agency channel by 23.2 percentage points, and its proportion in the premium income of each channel was further increased.
It is worth noting that while the industry is refocusing on and vigorously promoting the development of bancassurance channels, it has focused on adjusting the business structure of bancassurance channels, actively reducing the scale of single premium payments, expanding the volume of futures delivery business, and promoting the transformation of bancassurance channel business from heavy scale to scale and value. As of the end of October 2021, the premium income of new policies in the bancassurance channel of life insurance companies fell by about 2.9% year-on-year, but the premium income of futures premiums increased by 10.9% year-on-year, and the proportion of futures payments increased significantly.
Table 1: Changes in the growth rate and proportion of life insurance premium income by channel
4. Internet insurance ushered in comprehensive supervision and moved towards the era of "exclusive"
Supervision has promoted the transformation of Internet channels into "exclusive" operations. In 2021, the CBRC will further increase its attention to the Internet insurance business and basically establish a relatively complete Internet insurance regulatory system.
On the one hand, the operating qualifications of market entities are strictly restricted, emphasizing "licensed operation", and insurance companies that do not meet the operating conditions need to complete the rectification of existing businesses by December 31, 2021.
On the other hand, the product categories are classified and managed exclusively, and the online operation of guaranteed products and savings businesses are encouraged, and the products must have the word "Internet". By the end of 2021, dozens of domestic network mutual aid platforms have been shut down, nearly 30 insurance companies have suspended Internet insurance business, and Internet insurance business has ushered in a comprehensive and standardized development.
It is expected that the transformation and upgrading of domestic agent channels will still take time, and the standardized operation of other major channels will be further promoted.
In terms of agent channels, from the perspective of other market development experience, Japan, South Korea, Taiwan, etc. have experienced decades of agent marketing system reform to achieve a steady and qualitative increase in the quantity of the industry agent team. It may be difficult to achieve a comprehensive transformation of the mainland insurance market agent team in the short term, and each business entity may continue to enhance the professionalism of the team through strict personnel recruitment, extending the training cycle, strengthening training and assessment, and classification and grading management.
In terms of other major channels, in 2021, the regulator issued a number of policy documents to strictly regulate the business qualifications and sales behavior in the fields of bancassurance business and Internet insurance. At present, the Internet channel has basically established a regulatory system based on the Insurance Law, with the Internet Insurance Supervision Measures as the core, and a series of normative documents such as the Notice on Further Regulating the Internet Life Insurance Business of Insurance Institutions as supporting the Notice; the Measures for the Administration of Life Insurance Sales may be implemented in the near future, and the on-site sales model of the bancassurance channel is expected to be restarted.
It is expected that under the impetus of a series of policies, market players will continue to increase the capacity building of bancassurance, Internet and other channel operations, continue to improve the standardization of operations, and large insurance companies may have more advantages.
04
Asset allocation: The total amount of assets has grown steadily, and the quality and efficiency of serving the real economy have continued to improve
1. The total assets of the insurance industry have increased steadily, and the allocation structure is basically stable
By the end of 2021, the total assets of the insurance industry were nearly 2.3 trillion yuan, an increase of 7.1% year-on-year. From the perspective of asset allocation structure, due to the large fluctuations in equity assets since the beginning of this year, the overall performance is not good, the industry has generally compressed the proportion of equity asset allocation, and the allocation ratio of fixed yield assets (bank deposits + bonds) has been further improved.
Specifically, stocks and securities investment funds accounted for 11.5%, down 0.5 percentage points year-on-year; fixed income assets accounted for 51.3%, an increase of 2.7 percentage points year-on-year.
Figure 11: Asset allocation structure of the insurance industry in the past three years
2. Continue to give full play to long-term capital advantages and improve the quality and efficiency of serving the real economy
In 2021, the insurance industry will continue to give full play to the advantages of insurance protection function and long-term stability of insurance funds, and actively participate in the construction of major national strategic projects such as the construction of the Yangtze River Economic Belt, the construction of the Guangdong-Hong Kong-Macao Greater Bay Area, and the coordinated development of Beijing-Tianjin-Hebei. From January to August 2021, the China Insurance Asset Management Association registered (registered) 332 debt investment plans, equity investment plans and insurance private equity funds, an increase of 46.9% year-on-year.
Among them, the debt investment plan was 626.9 billion yuan, an increase of 72.0% year-on-year; the equity investment plan was 27.67 billion yuan, an increase of 213.7% year-on-year; and the insurance private equity fund was 57.00 billion yuan, a year-on-year decrease of 49.7%.
At present, the global economic situation is still complex and severe, and the domestic economic development is facing the triple pressure of demand contraction, supply shock and expected weakening. It is expected that insurance funds will continue to face risks such as rising reinvestment pressure for some time to come. There is still great uncertainty in the equity market, and market entities may continue to improve their risk prevention capabilities and further tap structural investment opportunities; in the fixed income market, it is expected that there is still room for downward interest rates, the supply of high-quality assets needs to be improved, and credit risk management capabilities need to be continuously strengthened; alternative assets may receive more attention.
At the same time, with the relaxation of the scope of investment of insurance funds by supervision, the underlying asset allocation structure of insurance funds may be further enriched in the future.
05
Market supervision: Territorial supervision continued to strengthen, and chaos rectification efforts were intensified
1. The number of fines and the amount of fines have increased, and the proportion of fines at the bureau and sub-bureau levels has increased
The number of fines and the amount of fines have continued to increase, on the one hand, indicating that the regulator's policy idea of "strict supervision" has continued to strengthen; on the other hand, it also reflects that during the period of deep adjustment of the industry, market competition has become more intense, and vicious competition and other market violations have increased.
According to statistics, as of the end of November 2021, the insurance industry of the banking and insurance regulatory system issued a total of about 2,000 fines, an increase of 22.5% year-on-year; the amount of fines was about 300 million yuan, an increase of 26.7% year-on-year.
At the same time, the territorial supervision of the insurance industry has been further strengthened, the efficiency and quality of supervision at the bureau and sub-bureau levels have been improved, the intensity of fines has been increased, and the proportion of fines has been further increased. As of the end of November 2021, the total amount of penalties at the bureau level and sub-bureau level accounted for 97.0%, an increase of about 6.2 percentage points year-on-year.
Table 2: Statistics on the amount of fines issued by the Banking and Insurance Regulatory Commission in the past two years
2. The special rectification of market chaos continues to increase, and the problems of "self-insured parts" and "agent surrender" have attracted attention
In 2021, the image of the industry is still plagued by market chaos. Acts such as inflating expenses and short-term insurance have aroused great concern from the Banking and Insurance Regulatory Commission and have become the matters with the largest fines in the whole year. At the same time, problems such as agent surrender and "captive insurance pieces" have also become the focus of the regulator's rectification, and the Banking and Insurance Regulatory Commission has repeatedly issued documents to remind the potential harm of agent surrender, and focused on strengthening the traceability system for insurance sales behavior. Up to now, the regulatory departments in Henan, Xiamen, Jiangxi and other places have successively upgraded the "double record", and the new rules for insurance "double record" nationwide are also in the making.
It is expected that the CBRC will adhere to the policy idea of "strict supervision", unremittingly prevent and resolve financial risks, formulate a series of policies around enriching product supply, standardizing channel development, improving corporate governance level, expanding opening up, etc., further improve the regulatory policies and institutional mechanisms to promote the high-quality development of the industry, and create a good regulatory environment for the high-quality development of the mainland life insurance industry.
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