header.search.error
Insurance
We raise our 2030E Oasis insurance OPAT pool to US$160bn (from US$140bn). Insurers' evolution to healthcare partners will be a key driver.
Insurers are evolving into health partners
We believe that insurers' business models could evolve into health management partners for policyholders. Following our previous Q-Series, we collaborated with 15 analysts globally to study overseas health integration models and assess the long-term potential for China's insurance industry. We lift our 2030E 'Oasis scenario' (healthcare integration and limited protection unbundling) profit pool to US$160bn (US$140bn previously), mainly on healthcare integration. Our proprietary market-sizing and affordability analysis suggests middle-class expansion (underpinned by 'common prosperity' efforts) could support demand for protection insurance . Despite near-term growth pressure, we are constructive on the long-term potential as commercial insurance only accounts for 7% of system medical expenditure (versus 10-38% in many developed markets).
Integration and inclusion the new ESG themes for the insurance industry
We believe healthcare integration and inclusive insurance are likely to become key ESG themes for China's insurance industry. While protection insurance traditionally is only involved in medical expense payments, we think there is significant room for insurers to become more involved in prevention, treatment and recovery, helping potentially to generate client interaction, and support cross-selling and client retention. More importantly, this business model provides incentives to drive lifestyle and health improvements, in our view. From an ESG perspective, product innovation and unbundling, while negative for margin, could help improve the affordability of protection products, enabling a wider group population range access insurance while expanding the addressable market. We think these should help ensure a benign regulatory environment and address investor concerns over regulatory risks.
Health services could help secure insurance profit pool of US$160bn by 2030E
Our Oasis scenario assumes pricing discipline and effective health integration for China's life insurers. We forecast a 14% industry profit CAGR by 2030E (to US$160bn), of which 15% (US$23bn) is directly from health services (newly factored into our forecast). We also believe health integration is strategically important for insurers to achieve Oasis, with positive implications on underwriting, cross-selling and persistency. In our 'Health Partner' scenario, which has similar assumptions to Oasis but with product unbundling, we think healthcare integration should provide room for unbundled-product upgrade so that overall profit still reaches US$115bn. Long term, we expect private-healthcare development to help drive insurance demand and relieve pressure from crowding out.