Rural Revitalization: extending the reach of insurance across China's rural areas

"Rural Revitalization Strategy" set to boost China's economy

China's rural economy has undergone rapid development and change since opening up in 1978. A main change in rural areas has been the move from an agricultural-based economy to one where output comes mostly from the secondary and tertiary sectors. In 2019, the share of per capita income from agricultural production in China stood at 36%, down from 66% in 1990. While absolute incomes in urban areas are higher than in rural, in 2019 the rate of growth of disposable incomes in rural areas was higher (9.6%, compared with 7.9% for urban incomes). At the same time, consumption in rural areas grew by 9.9% last year, compared with 8.6% in urban areas.To further boost rural development and also accelerate poverty reduction, at the Nineteenth National Congress in 2018 the central government put forward the "Rural Revitalization Strategy". This sets out the future direction for the rural economy, and also the key role that insurance will play.

Broadening the concept of rural insurance to cover more exposures

To date the main channel of insurance sector involvement in rural areas has been through the provision of agricultural risk protection solutions. Government policy targeted at achieving national food security has supported the growth of these solutions, but low risk awareness and income levels have held back expansion of insurance coverage across other exposure areas. To make cover more broad-based, the Rural Revitalization Strategy promotes: 1) property insurance, with more all-encompassing risk covers for agricultural production and enterprise operations, and also for motor, different types of property, environmental pollution liability and guarantee insurance; 2) life insurance for farmers and migrant workers, including covers for personal accident, health and mortality risks, and life, private health and endowment insurance; and 3) inclusive insurance, with the provision of microinsurance products to low-income households in rural society.

Structure of the report

Our report starts with an overview of socio-economic conditions in rural China. The second and third chapters cover existing rural market insurance products, the government's supportive policies, the risk landscape and potential size of rural the property and life insurance markets over the next five years. We forecast that rural non-life premiums will total CNY 283.5 trillion in 2020, and that there will be an additional CNY 2.4 trillion in premiums over the period 2020-2025. Motor will be the biggest line of business, followed by agricultural insurance.  On the life side, we forecast additional total rural premiums of CNY 2.3 trillion during the same period (from CNY 313.6 trillion in 2020), accounting for 9% of life insurance premiums nationwide. The fourth chapter discusses the development of microinsurance and inclusive finance in rural areas. To conclude, we provide an assessment of the overall opportunity for the insurance industry in China, and the implications for different business models.

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