World Insurance in 2016: The China Growth Engine Steams Ahead
The global primary insurance market grew solidly in the past year and China made the most significant contribution. Nevertheless, advanced markets remain the biggest in premium volume terms.
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A feature of the growth of China and other selected markets has been a strong increase in the share of online purchases of insurance. More broadly, however, the pace of development of digital distribution in insurance has varied across different markets and in some, agents and brokers remain dominant, the latest sigma says.
Emerging markets, particularly China, drive global insurance sector growth
Global direct insurance premiums totalled USD 4.6 trillion in 2016, which was 6.3% of global gross domestic product. On average, in 2016 every person in the world spent USD 638 on life and non-life insurance combined. In terms of market growth, total premiums written grew by 3.1% in real terms in 2016, down from 4.3% growth in 2015. The increase in 2016 came despite global economic growth – a key driver of insurance demand – of just 2.5%. Emerging markets – primarily China – were the main source of global growth.
Global direct life insurance premiums were up 2.5% in real terms in 2016. In non-life, global premiums increased by 3.7% in 2016, down from a 4.2% gain in 2015 but more than the 10-year average of 2.0%. Once again, premium growth in the emerging markets was solid at 9.6%, with the outcome heavily skewed by China where non-life premiums were up 20%. Profitability in the life and non-life insurance sectors weakened amid low interest rates and robust competition.
Emerging markets will likely continue to drive global premium growth. In non-life, stronger activity in advanced economies is expected to boost sector growth. Noteworthy too is that irrespective of their weaker growth rates, advanced countries are still the biggest markets. Of total global direct premium volumes of around USD 4.7 trillion in 2016, USD 3.8 trillion came from the advanced markets. The US remains the largest market by far, followed by Japan. One cannot ignore the growing significance of China, however, now the third largest insurance market in the world.
Digital distribution continues to grow, but agents and brokers are here to stay
A special feature of the sigma is devoted to digital distribution in insurance. There has been a proliferation of direct digital distribution channels in recent years in some markets such as China. At the same time, the share of traditionally intermediated insurance business remains dominant globally. The digitalisation of insurance distribution is set to continue, but the pace of change will vary across markets. Digital channels will ultimately be used throughout the distribution process, from information gathering to purchase completion to after-sales service. But not all insurance transactions will migrate to online, and intermediaries will continue to play an important role.