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Pricing deregulation in the mainland's insurance sector is set to force industry players to diversify from simple savings-type products to protection-oriented policies, AIA China chief executive John Cai says.
The insurance penetration rate on the mainland was very low, at 2 per cent, but the figure would keep rising, he said, driven by an increase in protection-type products.
AIA China, the largest foreign life insurer in the country, is pinning its hope on the medical and pension businesses.
"Pricing deregulation will force insurers to return to the core focus of insurance policies - that is protection," Cai said. "Without changes, it's difficult for insurance companies to maintain their position amid intensified competition."
Growth in premium income had slowed since 2009, when the fundamental need of customers began to change, he said.
From 2002 to 2009, as mainlanders started to accumulate wealth, they wanted to save more money when buying insurance policies.
"Today, when their wealth has already expanded many times, with an increase in debts and risks, their need has shifted from savings to protection," Cai said.
Focusing only on savings-type products would be a dead end in the face of fierce competition from wealth management products, funds, stocks and properties, he said.
Pricing deregulation has stirred up competition in the industry and made it more important for insurers to diversify from simple savings-type products.
"We see strong demand in medical insurance products, in particular those covering serious illness," Cai said.
Mainland insurers were more focused on savings-type products in the past, but selling protection-oriented policies had been AIA's strategy, he said, with such products accounting for 70 to 80 per cent of the company's insurance products on the mainland.
Protection-type products with decent profitability had seen the value of AIA's new business - a measure of the future profitability of new policies - grow 30 per cent a year over the past three years, Cai said.
"The savings element will still be important, but we see more potential in long-term savings products that target the pension insurance needs in the market," he said.
The communique issued at the end of the third plenum of the Communist Party's 18th Central Committee last month highlighted the importance of social security and suggested increasing the retirement age.
Cai sees huge potential for the pension insurance business, saying people had become more aware of private pension insurance as a supplement to social welfare.
"In the past, the concept of housing endowment was deep-rooted, but they are looking for other alternatives due to the lack of confidence in the property market," he said, with some capital preservation policies likely to fit their needs.
As the first wholly owned foreign insurer on the mainland, Cai said AIA China was looking forward to the further liberalisation of the insurance sector to foreign players after the third plenum.
The insurer has operations in Guangdong and Jiangsu provinces, and the municipalities of Beijing and Shanghai. Cai said it wanted to expand to more cities.


Protection policies back in mainstream

John Cai says protection-oriented policies account for 70 to 80 per cent of AIA's insurance products on the mainland. Photo: Simon Song

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Insurers on the mainland face a growing need to diversify from simple savings-type products to fight competition amid pricing deregulation


Pricing deregulation in the mainland's insurance sector is set to force industry players to diversify from simple savings-type products to protection-oriented policies, AIA China chief executive John Cai says.


Protection policies back in mainstream

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Insurers on the mainland face a growing need to diversify from simple savings-type products to fight competition amid pricing deregulation

Insurers on the mainland face a growing need to diversify from simple savings-type products to fight competition amid pricing deregulation