Advances in Chinese Economic Studies series
Shuji Yao, Zhongwei Han and Dan Luo
RESEARCH QUESTIONS The rapid growth of the Chinese insurance industry has attracted serious attention from academic researchers, policymakers and investors. Its total premium income rose from RMB 1.6 billion in 1980 to RMB 978.4 billion ($143.88 billion) in 2008, or increased by 39 per cent from 2007, the highest annual growth since 2002. Total assets of the industry reached RMB 3.34 trillion in December 2008, an increase of more than eight times, from RMB 317.41 billion in 2000. Despite its fast growth, the insurance industry is still underdeveloped compared to other sectors of the economy. The latest statistics show that China accounted for less than 2.3 per cent of the world’s total insurance premiums in 2007 although it has 22 per cent of the world’s population. The insurance depth was 2.85 per cent and insurance density was RMB 533, again far below the international average (CIRC, 2008).1 China’s accession to the WTO has profound implications for the country’s insurance market. By the end of 2006, all the restrictions imposed on foreign insurers had been removed. Further deregulation has also been implemented. However, the domestic insurance market is still overwhelmingly dominated by a few large state-owned or state-controlled firms in terms of premium income. As the demand for insurance is rising exponentially, there exist huge potential opportunities as well as challenges for non-state, foreign and joint venture insurance companies. Efficiency is the key concern of the management of insurance companies in making the company competitive in the market. Measuring performance...