Following a disappointing 2018, Allianz is predicting that Asia’s insurance market will rebound in 2019 and be a primary driver of global insurance growth over the next decade.
Industry projections have repeatedly forecast a strong improvement in Asia’s insurance industry given the strong growth rates of many of its economies and the relatively low level of insurance penetration to date.
However growth in 2018 was especially underwhelming. Premiums rose by just 2.3% in Asia (ex Japan) and it was just the second time that the region fell behind the global growth average since 2000. Overall, the region contributed just 16% of global insurance growth in 2018, a drastic decrease from the 81% contribution in 2017.
Growth was especially dismal in Korea and China which jointly account for 40% of the region’s premiums. In 2017 China accounted for 58% of global growth but this fell to just 4% last year. In contrast it was the most developed markets that led the way with the US and Japan boasting 42% and 11% premium growth respectively.
However Allianz Research is adamant that China and Asia’s insurance market will rebound from a disappointing year. It has projected premium growth of 11% for Asia in 2019, more than twice the 5% global premium growth it has forecast for the next decade.
The report forecasts that the region will contribute 60% of additional global premiums over the next decade.
One bright spot covered in the report was the growth of the Philippines insurance market in 2018 with life insurance growth of 20.4% and property/casualty growth of 11.1%. Although Allianz expects this growth to slow to 10%, this forecast still puts the Philippines well above the global average.
However, the main focus of the report is China and a predicted resurgence. “2018 does not mark the end of the Chinese growth story,” said Michaela Grimm, economist at Allianz Research.
The Chinese life market, which shrank by 3.4% in 2018, was responsible for much of the deceleration of growth while the property/casualty business actually grew by 10.3% in 2018. Consequently, Ms Grimm blames Chinese authorities’ crackdown on insurance intermediaries selling for the lack of growth.
However she also says that stricter oversight is “more than welcome” if it signals a phase of more balanced and sustainable development. Furthermore, Ms Grimm made it clear that she believes it will still be the most important market for the future of insurance.
“Coupled with breathtaking technological progress in the market – it is the clear frontrunner in the application of AI or innovative payment solutions – China is the market to watch. It’s the best place to learn about the future of our industry,” she added. “‘Sold in China’ is the new gold standard in insurance.”