Analysis of the Current Situation and Development Prospects of China's Insurance Industry Analysis of the Current Situation and Development Prospects of China's Insurance Industry This article has been submitted to the instructor as an international economics assignment. Author's address: 2004 Economics, School of Economics and Trade, Henan University of Technology Class Postal Code: 450001 Abstract Looking at the development of my country's insurance industry over the past 20 years, although China's insurance market has made great achievements, there is still a big gap compared with developed countries. After joining the WTO, China's insurance industry faces rare opportunities and unprecedented challenges. This article analyzes the current situation, development trends and prospects of China's insurance industry, and also proposes countermeasures that should be taken after joining the WTO. Keywords: Insurance industry status quo, development trends, challenges, potential, countermeasures 1. Development status and development trends of China’s insurance industry Since the reform and opening up, the development of China’s insurance industry has achieved a series of results. A new insurance market pattern with state-owned insurance companies as the main body, Chinese and foreign insurance companies coexisting, foreign insurance companies vying to enter the market, and multiple insurance companies competing for development has initially taken shape. However, compared with developed countries, there is a huge gap in China's insurance industry. (1) China’s insurance industry continues to grow and develop during the process of opening up, and has achieved a series of results: 1. Rapid business development. Since the resumption of domestic insurance business in 1980, China's insurance industry has maintained a good momentum of sustained, rapid and healthy development. In 2003, the total premium income reached 388.04 billion yuan, an increase of 27.1% over the previous year, equivalent to 2.8 times that of 1999; the total assets of the insurance industry reached 912.28 billion yuan, an increase of 41.5% over the previous year; the balance of insurance fund utilization reached 873.9 billion yuan, an increase of 2.8 times over the previous year. The annual growth rate is 51.4. In 2003, the insurance density was 287.44 yuan (that is, the average premium per citizen), and the insurance depth was 3.33. China's insurance industry showed a good situation of vigorous development. 2. The market system is gradually improving. As of the end of 2003, there were 61 insurance companies in the country, including 24 Chinese-funded insurance companies and 37 foreign-funded insurance companies. According to the nature of business, there are 25 property insurance companies, 30 personal insurance companies, 5 reinsurance companies and 1 policy insurance company. In addition, there are 6 insurance group (holding) companies and 2 insurance asset management companies. There are 705 professional insurance intermediaries, including 507 insurance agencies, 115 insurance brokers, and 83 insurance adjusters, with 1.5 million insurance practitioners. 3. Structural reform is progressing smoothly. The joint-stock reform of state-owned insurance companies such as the People's Insurance Company of China, China Life Insurance Company and China Reinsurance Company has made significant progress. By absorbing foreign capital and private capital, some joint-stock insurance companies have optimized their equity structures, gradually improved their governance structures, and further improved their operational and management levels. Breakthroughs were made in the reform of the insurance fund utilization management system. With the approval of the State Council, PICC Holding Company and China Life Insurance Group Company respectively established insurance asset management companies to implement professional management and centralized and unified use of insurance funds. Important steps have been taken in exploring the reform of insurance fund management. 4. Laws and regulations have been initially improved. The promulgation and implementation of the Insurance Law of the People's Republic of China in 1995 marked that China's insurance industry has entered a stage of legal compliance and legal management. In order to meet the needs of China's accession to the WTO, the State Council promulgated the "Regulations on the Administration of Foreign-Invested Insurance Companies" in 2001, and the China Insurance Regulatory Commission actively cleaned up laws, regulations and rules that were inconsistent with WTO rules. In 2002, the new Insurance Law was promulgated and implemented. At the same time, the China Insurance Regulatory Commission successively formulated and revised a series of supporting regulations and systems such as insurance company management regulations in accordance with the relevant provisions of the new Insurance Law. A system of laws and regulations suitable for the development of China's insurance market has gradually taken shape. 5. Insurance supervision is gradually in line with international standards. Solvency supervision has taken substantial steps, with the promulgation of the "Regulations on the Management of Solvency Limits and Supervisory Indicators of Insurance Companies", the establishment of a solvency early warning indicator system, and the initial establishment of a solvency supervision system framework that is in line with China's national conditions. At the same time, a series of regulatory regulations such as the "Supervision Indicators for Branches of Property and Casualty Insurance Companies", "Supervision Reports of Sub-risk Types of Property and Casualty Insurance Companies" and "Actuarial Regulations for New Personal Insurance Products" were implemented. The system construction of insurance industry supervision has been strengthened.

(2) Compared with developed countries, there is a huge gap in my country's insurance industry in the following aspects: 1. From the perspective of the scale of insurance industry development, the number of insurance companies, total premium income and total assets in my country are Relatively few. Scale is a basic indicator of the development level of an industry and an enterprise. It should be seen from various statistical data that my country's insurance industry is still in its infancy. 2. From the perspective of insurance depth and insurance density, my country is at a very low level in both aspects, far behind developed countries. Insurance penetration is the ratio of a country and region’s annual premium income to its gross domestic product over the same period. At present, the insurance penetration of the insurance market in developed countries has reached about 10%. The insurance penetration in my country in 2000 was 1.8. The insurance density indicator refers to premiums per capita. It has reached 2,000---3,000 US dollars in developed countries, and as high as 4,600 US dollars in Japan. The per capita premium in my country is only 127.7 yuan, about 15 US dollars, compared with 1,600 US dollars in the United States. The per capita premium is 107 times that of China, and that of Japan is 307 times that of China. Insurance depth and insurance density are important indicators to measure the development level of the insurance industry. 3. Judging from the level of awareness of the insurance industry among Chinese people, the concept of insurance is still poor. People do not know enough about the role of insurance in stabilizing the social economy and safeguarding personal interests. There are very few individuals who take the initiative to buy insurance. The entire insurance industry, especially personal insurance, is a buyer's market, forcing an army of millions of insurance salesmen to rush around to sell insurance products. Insurance, as a product of the market economy and a stabilizer of society, must allow people to understand its role from the perspective of their own interests. (3) According to the general laws of market economic development and the actual development of my country’s insurance industry over the past 20 years, it is expected that in a long period of time in the future, my country’s insurance industry will have the following development trends: 1. Systematization of the insurance market. Judging from the promulgation and implementation of the Insurance Law in 1995, especially since the establishment of the China Insurance Regulatory Commission in November 1998, the pace of building and improving the Chinese insurance market system is accelerating. A Chinese insurance market system with a complete system, complete categories, and sound laws and regulations is developing. Establish. 2. Professionalize business operations. With the deepening of the reform of my country's insurance system, policy insurance businesses such as export credit insurance and agricultural insurance will be separated from commercial insurance companies, and special policy insurance companies will be established by the state. At the same time, specialized insurance companies specializing in business such as fire insurance or motor vehicle insurance will also be established in the next few years. 3. Orderly market competition. Starting from 1997, the People's Bank of China adjusted the refunds and handling fees of aviation insurance and motor vehicle insurance, starting with rectifying agents, and vigorously rectified the insurance market. Many violations were stopped. After the establishment of the China Insurance Regulatory Commission, it further emphasized the need to gradually standardize market order. , intensified the crackdown and punishment on illegal institutions and violations, and achieved remarkable results. 4. Quality insurance products. In an increasingly mature market, products can only rely on brand + price + service to occupy the market. This is characterization. As far as the quality of insurance products is concerned, it includes not only the interest protection function or investment function, savings function or product combination function, but more importantly, its price level and service level. 5. Innovation in the insurance system. According to my country's specific conditions, my country's insurance innovation content mainly includes innovation in product development, marketing methods, business management, organizational structure, electronic technology, service content, employment system, distribution system, incentive mechanism and other aspects. Through the innovation of the above contents, we will promote the development of my country's national insurance industry and make domestic insurance companies in an invincible position in the competition with foreign insurance companies. 6. Intensification of operation and management. In the context of increasingly fierce market competition, domestic insurance companies have realized the shortcomings of focusing solely on expanding scale and seizing the market, and are seeking to take a benefit-oriented path, move toward connotative and intensive development, and pursue maximization of economic benefits. 7. Internationalization of industry development. Under the general trend of global economic integration, my country's insurance industry is the only way to integrate with international standards. Chinese insurance companies will also set up branches abroad to strengthen technical and business cooperation with the international insurance (reinsurance) market and actively develop international insurance business. 8. Professionalization of practitioners.

In the context of competition between domestic and foreign peers, objectively higher requirements have been put forward for insurance practitioners. Commercial insurance companies will pay more attention to the cultivation of talents, including cultivating underwriters and claims underwriters who meet the needs of domestic insurance business development. , actuaries, professional talents, and more importantly, it is necessary to cultivate export-oriented talents who are proficient in international insurance practices and participate in competition in the international insurance market. 2. The development of China's insurance industry is facing unprecedented challenges, and at the same time it has huge potential. After joining the WTO, China's insurance industry is facing unprecedented challenges, and at the same time, China's insurance industry itself has huge potential. (1) The development of China’s insurance industry faces unprecedented challenges. 1. The entry of foreign insurance companies has intensified competition in the insurance market, leading to a rapid decline in insurance companies’ premium profit margins. 2. Cause part of the premium to flow out. Although Article 102 of the Insurance Law implemented in 1995 stipulates that "if an insurance company needs to handle reinsurance ceding business, it should give priority to insurance companies in China." However, in actual operation, it is relatively difficult. At present, the insurance regulatory authorities require foreign-funded insurance companies to retain no less than 30% of their own premiums. In addition to the 20% of statutory reinsurance, there is still 50% of the premiums that can be reinsured by foreign-funded insurance companies. 3. Compete with domestic insurance companies for a certain market share. Objectively speaking, foreign-funded insurance companies have the advantages of strong financial strength, advanced management, and high technical service levels. Although they are still subject to certain restrictions in their business scope, their development momentum is still relatively good. Looking at the national market structure, the proportion of foreign-funded insurance companies is less than 1% this year, but the market share of foreign-funded insurance companies in open areas is close to 10, and there is a trend of continuing to expand. 4. Foreign-funded insurance companies have more favorable conditions than domestic insurance companies in terms of remuneration, which will cause the loss of some outstanding talents from domestic insurance companies. (2) From the perspective of various factors affecting the development of the insurance industry, there is huge potential for the development of China's insurance industry. 1. With the increase in the income of urban and rural residents in my country and the continuous reduction of the Engel coefficient, insurance products, as a special financial consumer product, are bound to It will gradually increase with the increase in income. 2. With the continuous adjustment of my country's economic structure, the insurance industry will continue to increase as the proportion of the financial industry in the national economy increases. In contemporary world economic activities, the insurance industry plays an increasingly important role, and its proportion in the economic structure will increase day by day. Insurance institutions should fully realize the huge market potential and living space of my country's insurance industry and realize the transformation of the insurance industry from a buyer's market to a seller's market. 3. During the period of major social and economic changes and transformation in our country, the scope of policyholders and insured persons has shown an increasing and expanding trend. Various accidents occur frequently, and natural and man-made disasters come unexpectedly. This provides sufficient basis for the development of the insurance industry, creates favorable objective conditions for insurance personnel to promote insurance and develop business activities, and further develops the insurance industry. Provides wider space. 3. Countermeasures for the insurance industry after China joins the WTO. Faced with the huge gap between China’s insurance industry and developed countries and the challenges it faces after joining the WTO, we should consider the following countermeasures: (1) Accelerate the pace of opening up the insurance market internally and improve national insurance The competitiveness of the industry At this stage, my country's insurance market has two major characteristics: one is closedness, and the other is monopoly. In view of the development of my country's insurance market, we should accelerate the pace of opening up the domestic insurance market, establish an insurance mechanism that adapts to the market economy as soon as possible, break the closed and monopolized market structure, liberalize the domestic insurance market, and boldly allow existing insurance companies to join Competition ranks to achieve full and orderly competition and full development in the insurance market. (2) The state should implement a low-tax policy for the insurance industry to further strengthen the national insurance industry. Our country's current tax standards for insurance companies are based on premium income and pay an annual business tax of 8%, an income tax of 33% and an adjustment tax of 15%. Our country's finance imposes bottom-line taxes on insurance companies, which affects the accumulation of liability reserves of insurance companies to a certain extent, thereby affecting the improvement of insurance solvency. In addition, certain policies that grant foreign-funded insurance companies more than national treatment will also put Chinese and foreign insurance companies in an unequal competitive position. All of the above need to be discussed and studied by the state from a policy perspective.