China plans to more tightly regulate booming digital insurance market

September 28, 2020.

A Chinese financial regulator on Monday released draft rules aimed at reining in its rapidly growing online insurance market in part by requiring operating licenses for digital insurers. 

The said its rules more clearly define an internet-based insurance business and restricts the space to insurance companies and agencies through licensing. Its proposal bans other institutions and individuals from conducting insurance-related business online, including advising on insurance sales or brokerage.

The agency said the rules would establish a well-regulated marketplace that is conducive to the growth of the developing online industry, while also curbing risks for consumers.

“The fast development in the online insurance sector has exposed certain problems,” the regulator said, as translated by Reuters. “The rules are to effectively defuse the risks and protect the interest of consumers.”

China’s insurance industry has been rapidly growing in recent years — the market doubled in size between 2010 and 2015 — as the country industrializes and insurers tackle historically low penetration rates.

The newly sprouting business of online insurance in China has expanded even more quickly, with premiums increasing by nearly 17 times between 2013 and 2017 to CNY 183.5 billion ($26.9 billion), according to a report by Chinese digital insurer ZhongAn and accounting firm KPMG. The firms said major insurance companies are stepping into the digital space alongside startups.

ZhongAn was the first fully digital Chinese insurer and was founded in 2013 by Chinese technology companies Alibaba and TenCent as well as Ping An, the country’s largest insurer by premiums. ZhongAn now has a market capitalization of HKD 64.82 billion ($8.3 billion) and is the 21st-largest Chinese insurer by assets as of 2017.

The regulator is seeking public comment on the draft rules until Oct. 28.