Car sales in China remain robust, but this has failed to boost the auto insurance business as it did in 2009. Many players in the sector are set to record operating losses this year amid mounting costs and intensifying competition.
Earnings in the sector have been on the downtrend since reaching their peak in 2012. The pan-industry’s combined ratio, a key indicator of underwriting profit, hit 100.2 percent in the first 10 months this year, The Economic Observer quoted a senior executive in Ping An Insurance (02318.HK) as saying, suggesting that sector-wide claims plus expenses actually ran larger than premium incomes during the period.
The sector has fallen into a vicious cycle as keener competition compels insurers to offer more discount on the policy which in turn will lead to slimmer profit, the daily noted. Meanwhile, frequent typhoons earlier this year and rising repair and medical costs make the situation even worse.
Two thirds of the country’s auto insurers will record operating losses this year, an industry insider told the newspaper. And the gloomy environment is likely to get even worse next year as Ping An, one of the key players in the market, is reportedly set to extend its telemarketing and internet marketing channels into 4S stores in 2014.
Full-service car dealers will establish customer-friendly direct telephone lines and internet connection to Ping An. This will enable Ping An to outflank rivals like PICC Property & Casualty Co. Ltd. (02328.HK), which corners about 70 percent of the market, to have faster access to new car buyers.
Other players may have no choice but to fasten their seatbelts for a bumpier ride next year.
– Contact the writer at [email protected]