Underwriting risk control in life insurance in China

China's life insurance sector is putting increasing emphasis on risk control, particularly in underwriting. Effective underwriting risk control is about obtaining meaningful, valuable risk data and information with which to identify risks and inform risk-mitigation decisions. Life insurers are making significant advances in this area, benefiting from growth in digital adoption in wider society and more efficient data accumulation.  

Swiss Re Institute has partnered with Huize Insurance Brokerage Co. Ltd., one of the first online insurance platforms in China, to publish a new white paper on underwriting risk control. This is a deep-dive into risk control in underwriting practice from the different perspectives of the three key players in the value chain: insurers, reinsurers and brokers. This report is in Chinese.

For a direct insurance company, the underwriting process focuses on finding a balance between business development and risk control, which is principle-based and aims to write more good business. A reinsurer, as an insurer of an insurance company, adopts risk control measures that consider the nature of risk throughout the value chain, so would cooperate with direct insurers from product design onward. Insurance brokers act as "risk routers", matching consumers' varying needs with insurance companies' different risk appetites. Brokers prefer a more diversified approach to underwriting risk controls than re/insurers and attach great importance to the application of technology in this area.

Our research finds that underwriting risk control is becoming more digitalised and intelligent, enabled by the broad adoption of new online technologies and data applications in society. The entire insurance value chain is either already applying, or preparing to apply, data science technologies. We expect big data and data analysis to accelerate the design, development and implementation of innovative risk control solutions in underwriting. For example, predictive underwriting applies advanced analytics and more extensive data, such as federal learning and demographic data, into modelling.
 
Swiss Re Institute estimates that China will become the world’s largest insurance market in the mid-2030s. Solid economic growth, consumers' increasing risk awareness and the robust digital economy are all supportive for the insurance industry.  

We see four aspects of underwriting risk control driving development in this area:

  • Consumer-centricity: explore what consumers really need, offer multiple-layer products and coverage for both standard and non-standard risks (of the impaired population);
  • Integration of online and offline underwriting approaches: adopt both physical examinations (usually preferred by offline underwriters) and health questionnaires (mainly applied online) to enrich online products and improve the convenience of offline products through use of tech and digitalisation;
  • A complete and dynamic underwriting process: with risk management throughout whole value chain, including protecting data privacy as a prerequisite, and joint efforts on modelling driven by big data and advanced analytic methods;
  • Starting underwriting risk control earlier in the customer buying cycle: technological advances and stronger collaboration with re/insurers, are enabling brokers to utilise underwriting risk control tools from the start of customers' buying process, to better assess clients' risk and tailor insurance products to consumers in a dynamic market.

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