China will probably surpass Japan as the world's second-largest insurance market this year, boosted by surging demand from the nation's ever-growing middle class, the industry regulator said on Thursday.
The country's premium income reached 1.9 trillion yuan ($287.9 billion) in the first six months, a jump of 37.3 percent year-on-year. The growth rate has accelerated from 17.5 percent in the first half of 2014 and 20 percent in the first half of 2015, according to the China Insurance Regulatory Commission.
"A healthy society should not be full of stock investors but policyholders," said Jack Ma, founder and executive chairman of Alibaba Group Holding Ltd.
Currently, there are 330 million policyholders in China, triple the number of stock investors.
"In terms of serving the country's 1.3 billion population, we have too few insurance companies and products right now, which means there is still huge potential in the sector," Ma added.
With a stake of 19.9 percent, Alibaba is the largest shareholder in ZhongAn Online P&C Insurance Co, the country's first online insurance company, which was set up in 2013. Other major shareholders in the company include Tencent Holdings Ltd and Ping An Insurance (Group) Co of China Ltd.
Liang Xinjun, deputy chairman and CEO of Fosun Group, is also very optimistic about the prospects for China's insurance sector.
"The country's ballooning middle class, with its ever-growing consumption power, will be the main client of insurance companies," said Liang.
Fosun has been increasing its stakes in a number of insurers.
With the growing interest in the rapidly developing insurance sector, Xiang Junbo, chairman of the CIRC, emphasized that insurers should be risk managers rather than risk makers.
"For those shareholders who just want to take advantage of insurance as a financing channel, we will seriously punish such shareholders based on laws and regulations," said Xiang.
Statistics from the CIRC showed that the premium income of foreign insurers in China in the first half of the year totaled 95.9 billion yuan, accounting for 5.1 percent of the total market, up from 4.38 percent during the same period of last year.
Steven Lam, life insurance analyst at Bloomberg Intelligence, said Chinese insurance market is open, but the competition is also fierce.
"Foreign insurance companies should either have strong financial strength or innovative capabilities to stand out in the Chinese market," said Lam, adding that expanding channels is a very costly exercise.
