Problem of Life Insurance Industry in China

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Problems of Life Insurance Industry in China

Life insurance is an agreement signed by an insurance policy holder and an insurer, where the insurer promises to pay a sum of compensation upon the occurrence of the insured individual's death. It not only gives ordinary people peace of mind and helps supplement retirement benefits, but raises capital for large infrastructure projects (Perkowski, 2011). The domestic China life insurance market, after 20 years of spectacular growth in the insurance industry, has ranked as the sixth-largest in the world, with a high insurance premium growth rate of 26.5 percent (“China knowledge”, 2012). Even so, the life insurance industry in China is still in its infancy. The overall size is relatively small, and the annual life insurance premium is less than 20 percent of the $1.2 trillion of premiums collected by the United States (“Planning reports”, 2012). In this essay, I first examine the existing dilemmas in the China life insurance industry, and then move on to propose some possible solutions to identify the problems.

The most notable problem of the life insurance industry in China is the limited diversity of insurance products. In the insurance market, as the overall increase of income level and awareness for life insurance, people have expanded demand for life insurance for the safeguarding function. However, the life insurance industry in China has formed a tendency of “focusing on investment, neglecting guarantee” (“Planning report”, 2012), which means that the life industry has excessive focused on the investment-featured life insurance, instead of the basic function of safeguard provided for the aged. The lack of diversity also results from the poor innovation in the industry. Since the start of life insurance industry in China is late and its market power is still weak, there is a shortage of professional actuary and empirical date, which are the necessary factors of product innovation.

An additional concern...
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