Personal cyber insurance in China

The COVID-19 crisis has had the effect of accelerating the development of the digital economy. At the same time, the scope of cyber vulnerabilities has broadened and become more complex. As a societal theme, cybersecurity is taking on ever-increasing importance. As a result, we expect that demand for related risk protection and mitigation solutions and services, in China and globally, to grow rapidly in the coming years.

This annual publication, available in Chinese only, focuses specifically on the personal cyber insurance market in China. Personal cyber insurance provides compensation for losses resulting from cyber events. Insurers can also offer expert guidance on how to mitigate cyber risks and attacks.

We expect rapid growth in this sector, based on improvements in regulation, growing risk awareness and the broadening scope of potential cyber vulnerabilities. We estimate that personal cyber insurance premiums in China were around CNY 320 million in 2021. Based on our projections for the number of internet users in China, take-up rates and per-unit price of personal cyber insurance policies, and assuming these factors continue their current development trajectory, as our baseline scenario we forecast that segment premiums will rise to CNY 700 million by 2025, representing a 21% compound annual increase. In a more positive scenario with higher-than-trend growth in any of key factors due to, for example, regulatory developments, a new insurance product proving very popular, or a catastrophe event further rising risk awareness, we forecast that premiums could increase to up to CNY 1.2 billion by 2025.        

Laws and regulations around cybersecurity have been rapidly improving since the beginning of this year. The Civil Code of the People’s Republic of China came into effect on 1 January 2021. The "Personal Information Protection Law" and the "Data Security Law" define the scope of what are considered personal information and data security, and lay the legal framework to deal with infringements thereof. In addition, the Ministry of Industry and Information Technology has issued the draft of "Three-year Action Plan for High Quality Development of Cybersecurity Industry (2021-2023)" for comments, actioning cyber insurance pilot programs in areas such as telecommunications, the internet, and Internet of Things in industrial sectors and Internet of Things on Vehicles.

Relative to advanced markets, the cyber risk products available in China are still in initial stages of development. For instance in advanced markets, personal cyber insurance typically provides comprehensive risk protection for types of cyber-related risks. However in China, personal cyber insurance products tend to cover risks in the context of specific scenarios, such as improving the security of individual bank accounts against the exposures that can arise in online transactions, or against risk of theft.

Insurers and major internet operators can use technology to better understand the full scope of cyber exposures, also with a view to improve their pricing and underwriting capabilities of the risks. This will increase the insurability of cyber threats and allow for broader reach of associated risk protection solutions. Consumers, meanwhile, need to better understand their own vulnerabilities and purchase services that can improve the security of their bank accounts and financial transactions made online.