With China set to vastly increase its investment in rural infrastructure over the coming years, this section of the population presents a “Blue Ocean” opportunity for re/insurers to capitalise on untapped demand and still limited competition.
This is according to Swiss Re Institute, which noted in a new report that the size of the rural population in China represents large consumption and overall economic growth potential, and a source of increased demand for insurance.
The government has not set an explicit growth target for 2020, but is pursuing a broader set of socio-economic goals, including achieving a 0% poverty rate under existing standards and also increased investment in rural infrastructure.
Swiss Re believes these objectives will help China offset a slowing global growth environment, one that had already weakened due mainly to trade tensions with the US before the onset of this year’s COVID-19 crisis.
It forecasts that total rural premiums written will grow by 11.1 % annually from 2020 to reach CNY 1 trillion (USD 141 billion) in 2025, a notable uptick from 3% annual growth in agro premiums in the last five years.
Rural China accounts for around 40% of the country’s total population, and its disposable income is growing rapidly year on year.
New business areas such as facility agriculture, e-commerce and tourism have also helped to create more wealth in the rural economy in recent years.
“With continued government support and late-mover advantage, we believe ongoing development of the rural economy will present many opportunities for insurers, especially in health, agriculture and motor,” Swiss Re reported.
The reinsurer estimates that rural L&H premiums will reach CNY 480 billion (USD 68 billion) by 2025, accounting for 8.7% of the national total, while rural P&C premiums could reach CNY 529 billion (USD 75 billion), or 23.2% of China’s total P&C market.