Bonds Jun 10

Insurers tipped to benefit from China govt bond issuance

Citigroup says industry investment bonds can help increase the yield of insurers' products, and it believes that China Life could be the biggest beneficiary

Insurers tipped to benefit from China govt bond issuance
China Life Insurance Company's office in Shenzhen city in southern China's Guangdong province. One of the country's biggest insurers, it saw steady growth in the first seven months of 2019. Citigroup believes China Life could benefit greatly from being able to invest in government bonds. Photo: Duan Bayi / Imaginechina via AFP

(ATF) Citigroup has released a research report that says mainland insurance companies will benefit from the surge in government bond issuance. This is because industry investment bonds can help increase the yield of their products. The bank believes that China Life (02628) could be the biggest beneficiary.

Citi said that insurance companies can invest in more transparent and tightly regulated local government bonds to replace some of their investment in non-standardised debt assets. This increase in the issuance of bonds with considerable yields would help alleviate the pressure on corporate interest rates and attract more consumers to buy long-term and low-risk insurance products, it said.

And on the consumers' side things are also changing. According to Netease news, China’s insurance industry is accelerating the construction of a digital service ecosystem.

It said the coronavirus has played a role for the insurance industry as a social “stabiliser,” as well as bringing new development opportunities and challenges. The outbreak not only stimulated the public's awareness of risk protection, it also brought about an online migration of consumers and their behavioural habits. In the future, insurance companies need to continue to accelerate the pace of digital transformation.

In the "post-epidemic era", the comprehensive development of digital and remote "zero-touch" services may become the new normal of the insurance industry, and technological empowerment will also become the new key to success for insurance companies, the report said.

In recent years, with the rapid development of insurance technology, insurers have made great progress in optimising and enriching online service channels, and the epidemic has further accelerated the speed of online service. In the early stage of the spread of the epidemic, various insurance companies vigorously promoted online claims services – via service hotlines, WeChat and other platforms.

As the domestic epidemic gradually subsides, the Chinese public's demand for online insurance purchases continues to grow. According to a survey by Swiss Re entitled “Research on Consumers of the novel coronavirus epidemic”, 77% of Chinese respondents believed that the ability to process their policies online would be their primary consideration when choosing an insurance company. So, this has prompted the insurance industry to increase investment in online services.

'Global trend'

As the first Chinese-foreign joint-venture life insurance company in China, Zhonghong Insurance, for instance, has and upgraded multiple online customer services, and continued to build a more efficient and convenient integrated digital operation. 

With the help of service upgrades and digital marketing, from January to April this year, Zhonghong Insurance's WeChat “Nethong Store” and MOVE platform health management service visits increased significantly, according to Netease. Today, the rise of insurance technology is a global trend which is seen as likely to transform the industry.

The China Banking Regulatory Commission has issued a number of documents this year to try to regulate the operation and development of the insurance industry. It hopes the insurance industry can improve its image and says grading and compliance will be a key factor in that development.

On June 8, Jiang Bo, director of the Intermediary Department of China Banking and Insurance Regulatory Commission, said the commission will pay close attention to any illegal fundraising, such as illegal sales of non-insurance financial products and other major risks to eliminate potential problems that may occur in sector.