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Fitch: New Relaxation in CN Bancassurance Regulations Favours Large Insurers
Fitch Ratings said that the removal of restriction that commercial bank branches and outlets can only represent the products of no more than 3 insurers in China will benefit new bu...
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Fitch: New Relaxation in CN Bancassurance Regulations Favours Large Insurers
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Fitch Ratings said that the removal of restriction that commercial bank branches and outlets can only represent the products of no more than 3 insurers in China will benefit new business sales in the bancassurance channel for life insurers, especially those with higher brand recognition.

Fitch believed that with the relaxation of the restrictive rules on bancassurance cooperation, large insurers with reputable brands and deeper relationships with bank branches and outlets will be in a better position to further expand their bancassurance business. However, as the regulator imposes restrictions on commission rates for the bancassurance business in August 2023, smaller insurers with less recognised brands and a heavy reliance on the bancassurance channel will be less competitive. Smaller insurers will no longer be able to generate business by paying high commissions to banks, which may limit their new business development and profit realisation.

According to Fitch, the bancassurance channel's contribution to the value of new business (VONB) is expected to continue to rise in the future as insurers' saving-type products remain attractive to customers compared to those offered by banks, given the low interest rate environment in China. Listed life insurers achieved strong VONB growth, driven by the expansion of business in the bancassurance channel in 2023. With bancassurance margins improving in 4Q23 and continuing to rise in 1Q24, insurers will continue to focus on higher-value business through the bank channel.

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