China to dethrone US as largest market for life insurance

Life insurance premiums in China will reach $7.12t by 2050.

China is set to take the top spot as the largest market for life insurance, surpassing even the US market in terms of premiums, by 2030 according to a report by management consulting firm Oliver Wyman.

The firm predicts that China’s life insurance market will grow by 13% per annum after the country’s disposable income per capita hits $7,000 - $10,000 tipping point and reaching an 11% to 13 % penetration rate by 2040. By 2050, the market size is expected to reach $7.12t in premiums.

The report revealed that the Chinese population faces life-related risk exposures totaling $253t. The greatest financial needs for Chinese households lie in healthcare expenditure (about $166.03t) and pension support $58.51t.

China’s social health insurance is also under pressure. Its commercial medical insurance, with high on-paper coverage yet insufficient payouts, covered only 7% of the country’s healthcare expenditure in 2019, resulting in 35% being paid out-of-pocket by patients.

In 2020, China’s social security pension scheme (the first pillar) plugged less than 50% of the population’s pension needs. The deterioration in the first pillar’s replacement ratio has compelled the Chinese government to accelerate the development of third-pillar commercial pension schemes. However, annuity and endowment products today can only cover about $4.74t, much lower than the population’s expected pension needs, highlighting the gap and opportunities for insurers.

Digital penetration remains low

According to Hang Qian, a partner at Oliver Wyman and lead author of the report, with technology disrupting most consumer sectors in China, many believe digital enablement can be the silver bullet for the industry, and the traditional headcount-based agency model will no longer work. However, the survey showed a different yet nuanced conclusion.

The digital channel, albeit gaining traction, only accounts for 5% to 6% of the GWP. It is unlikely to challenge the leading status of the tied agency and bancassurance channels, accounting for approximately 60% and 30% of the total life GWP, respectively.

The reason? Consumers only go through digital channels for product research and simple product purchases. Many still prefer offline channels when it comes to complex long term products, confirming that a human-based approach is still vital to the life insurance industry.

You may also like:

Cyber threats to grow Hong Kong’s general insurance industry to $10b in 2026

APAC insurer earnings to fluctuate amidst Russia-Ukraine conflict

Bupa appoints new managing director