—— Excerpted from McKinsey & Company's research report "Actively developing life insurance industry to promote sustained economic growth and social harmony and stability in China"
China government should define the development goals of life insurance industry in the next10 ~15 years, including giving full play to the social protection function of life insurance industry from a macro perspective; Insurance depth and insurance density reach the level of moderately developed countries; Life insurance companies and pension insurance companies have become the main institutional investors in the capital market; The structure of the whole financial system is more reasonable. Specific targets can be set as per capita net premium, the proportion of insurance products in total household assets, the life insurance coverage rate of urban and rural population, and the relative proportion of assets held by life insurance companies to those held by other financial institutions.
On the premise of defining the development goal of the industry, the government should also consider taking the following five measures to promote the healthy development of the life insurance industry.
Education market
In order to fully tap the potential of the life insurance industry, the China government should first consider popularizing education for consumers, so that people can understand the value and function of life insurance products and how to use them. Undoubtedly, the mass media, including TV and newspapers, play a vital role in this process, and the China government has a unique advantage in guiding and utilizing mass media to educate consumers. The government's social security agencies should also try to communicate directly with individuals. The specific way can be to send an annual personal social security status notice to individuals, which should explain the personal social security welfare status and possible funding gap, and tell life insurance products how to solve the funding gap problem in a clear and definite way.
China is a country with a large population, and the needs of different consumer groups are quite different. Therefore, the methods of educating consumers in China should be targeted and differentiated from person to person. In urban areas, the focus of China government should be to communicate the value and use of life insurance to consumers with purchasing power. Within the mass consumers, it should be further targeted, such as focusing on the needs of middle-aged and elderly consumers in medical care and retirement, the needs of young people for security, the needs of migrant workers for accident protection and work-related injury protection. In rural areas, because of the low penetration rate of life insurance, people often don't even understand the basic functions of life insurance, so compared with urban areas, the government needs to spend more effort to carry out publicity work. The government can consider promoting the rural cooperative medical system and educating consumers who are most likely to buy life insurance products, including those rural consumers with relatively good economic conditions, landless farmers and farmers in township enterprises. In addition, the government can also consider incorporating insurance education into the syllabus of primary and secondary schools to help primary and secondary school students establish a correct insurance concept through formal education.
Expand the coverage of life insurance in rural and backward areas
China government should find effective ways to encourage life insurance companies to expand their business to rural areas and backward areas. Expanding the coverage of life insurance in rural areas and backward areas does not mean serving the poor in rural areas. In fact, looking at the history of commercial life insurance in the world for more than 0/00 years, no matter in urban or rural areas, commercial life insurance companies have never had a successful record in serving the people with the lowest income of10% ~ 20%. Therefore, expanding the coverage of life insurance in rural and backward areas mainly refers to tapping the potential of consumers who can buy commercial life insurance in this unique market.
Traditional commercial life insurance distribution channels face many challenges in expanding business in rural areas and backward areas. The cost of agent distribution channels, policy maintenance and service is too high, and it is difficult for insurance companies to make profits, which restricts the enthusiasm of insurance companies to expand business in rural areas. The development of rural business needs to be more innovative, and the effective promotion of the government is also one of the key success factors.
Judging from foreign cases, the mode of developing life insurance business in rural areas can take many forms, including forcing insurance companies to carry out rural business through regulatory policies, using non-governmental organizations to cover the rural life insurance market, and establishing innovative enterprise cooperation business models. In this regard, the practice of India and the Philippines can give us a lot of inspiration.
It takes a cost to effectively develop the rural market. On the one hand, the service cost of insurance companies in rural areas will increase, on the other hand, the compliance monitoring cost will increase for insurance companies and regulators. From the perspective of ensuring the healthy development of life insurance industry and the efficiency of insurance companies, these extra costs should not be imposed on insurance companies. Moreover, it is far from enough and difficult to sustain the development of rural life insurance market only by the single commercial operation of insurance companies. The development of rural life insurance business urgently needs the promotion of the government and more innovative models. The government can promote the development of rural life insurance business by using the existing rural institutions and personnel at all levels to help promote life insurance products, reduce the channel cost of life insurance sales in rural areas, reduce the tax burden of rural insurance business, and help farmers share some premiums. Commercial insurance companies should also actively innovate, develop insurance products suitable for rural areas, determine appropriate target customer groups and value positioning, and try to establish an effective and profitable rural business model, so as to change the ideological concept of life insurance companies from simply fulfilling their life insurance obligations in rural areas to treating rural areas as a profitable market. In addition, the government can also consider using the professional skills of commercial insurance companies to help the government manage some social security projects more effectively, such as participating in the management of rural cooperative medical security system.
Strengthen the power of regulators
The experience of developed countries shows that a strong regulatory authority is essential for the healthy and rapid development of life insurance industry. Through careful and effective supervision, the insurance regulatory authorities will be able to ensure that all insurance service providers have strong strength and reduce the possibility and cost of bankruptcy of insurance companies to a minimum. The bankruptcy of insurance companies will not only make the public lose confidence in the industry, but also increase the burden on society and the government due to the impairment of individual retirement funds reserves. Similarly, strengthening supervision is also conducive to cracking down on unreasonable and illegal insurance sales activities, which have seriously affected consumers' confidence. Effective supervision is of great benefit to well-run insurance companies, because it can help maintain the overall image of the insurance industry and help create a good environment suitable for the full development of excellent insurance companies.
As an important institution of China government, the first task of CIRC is to supervise the financial health and risk management system of life insurance companies, so as to "isolate" the insurance companies with the weakest financial resources and the highest risks. Secondly, the CIRC needs to strengthen the supervision of product design, put an end to excessive income commitments, unreasonable pricing and unfulfilled expected return commitments, and eliminate insurance contracts that are confusing or unfavorable to customers. Third, the CIRC should improve the quality of distribution and encourage diversification of channels. Facts have proved that independent agents and insurance intermediaries can often provide better services, thus improving the service level of the industry. Fourth, the CIRC should also effectively supervise the types of products authorized for sale by certain channels. In addition, we should vigorously advocate the best model of the industry and promote the competition between domestic insurance companies and foreign insurance companies, which often have solid skills in product development, risk management, asset management, sales and marketing, underwriting and so on. In addition, with the improvement of supervision level, the CIRC can adopt a more flexible supervision method based on risk and ability according to the skill level of different insurance companies.
China's financial service enterprises (such as CITIC and Ping An) are gradually expanding their business fields, and their financial products are gradually integrating. To manage the constantly integrated financial market and large-scale financial enterprises, it is necessary for the regulators of various financial industries to better coordinate their work. With the continuous expansion of these financial businesses and the similar risks faced by various financial industries, the China Municipal Government should encourage the regulators of the securities, banking and insurance industries to coordinate with each other and implement cross-industry supervision measures when necessary. Fortunately, the China Municipal Government has begun to realize the coordination among CIRC, CSRC and CBRC through the mechanism of "joint meeting". With the strengthening of financial supervision, similar cooperation will become closer and closer.
The communication and cooperation between insurance regulators and other government departments is also an important factor to promote the development of life insurance industry. In order to give full play to the supplementary and strengthening role of commercial insurance in social security, it is far from enough to rely solely on the promotion of the CIRC, and it also needs the coordination and promotion of the Ministry of Finance, the Ministry of Civil Affairs, the Ministry of Health, the Ministry of Labor and Social Security, State Taxation Administration of The People's Republic of China and other departments. For example, at present, the insurance law stipulates that commercial insurance companies cannot intervene in social insurance, so even the pilot of commercial insurance companies intervening in rural cooperative medical care lacks legal basis. In addition, the government's provision of financial assistance to the low-income people to buy commercial insurance violates the state's requirement that the relief funds need not be taxed and cannot be profitable. Therefore, only when the government and relevant state departments have reached a consensus on the role of commercial insurance can it be possible to improve the corresponding laws and regulations, establish a new model, and promote commercial life insurance to give full play to its social benefits.
Create business opportunities and relax investment restrictions.
China government should create more business and investment opportunities for domestic life insurance industry. For example, China can start with social endowment insurance, relax relevant regulations, and allow the public to buy annuity products with the funds for social endowment insurance, thus creating greater market opportunities for the life insurance industry.
At the same time, with the permission of the government, insurance companies should carry out investment activities in a wider field, so as to achieve more generous returns. In this way, insurance companies can provide policyholders with higher returns and better retirement fund accumulation, thus better filling the funding gap of the government social security system.
In order to stimulate insurance companies to invest in China, China government must consider relaxing the restrictions on insurance companies' investment fields and products. First of all, the China government should encourage life insurance companies to invest in the most urgently needed infrastructure projects in China. This kind of project fully meets the requirements of insurance funds to make long-term investment and pursue the safety and stability of funds. In addition, the government should also issue medium-and long-term bonds, because medium-and long-term government bonds are quite good investment products for insurance companies, which will help insurance companies effectively manage long-term asset-liability matching and in turn promote insurance companies to further develop long-term business.
In addition, the China government should further liberalize relevant regulations and allow insurance companies to invest abroad. China can consider a "two-step" approach: first, domestic insurance companies are allowed to use their foreign exchange funds to buy shares of other companies listed overseas, and then these companies are allowed to make targeted overseas investments. However, before liberalization, China government should ensure that the investment skills and risk management level of domestic insurance companies reach international standards.
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