SME insurance in China

Small and medium enterprises (SMEs) are an integral and vital part of China's economy. They provide opportunities for entrepreneurs, create jobs, and foster economic prosperity. The SME sector has boomed in recent years, with a rise of 12.8% in the number of SMEs and growth of 16.5% in their revenue between 2015 and 2020. However, SMEs can be more vulnerable to risks such as economic downturns than their larger-sized corporate counterparts, reflecting SMEs' smaller size, lower diversification and often weaker funding positions. 

This report, in Chinese only, analyses the SME commercial insurance market in China and compares the trends with those in other major economies worldwide, to offer recommendations for the growth and development of this dynamic market.

China's insurance industry knows this segment well and offers a range of property and casualty (P&C) insurance products as financial instruments to mitigate the risks SMEs face. For example, property insurance can reimburse SMEs in cases of catastrophic property damage, important for small businesses in sectors such as groceries or wholesale that hold high amounts of inventory. However, the commercial insurance market focused on SMEs is under-developed in China, reflecting both constraints on demand, such as low awareness of risk and the benefit that insurance protection can offer, and on supply, such as high loss ratios for insurers serving this segment.

We conducted research into five international SME insurance markets including the US and France. We find that distribution channels including agents, banks, and industrial associations play a key role in increasing SME insurance penetration. SMEs have a close relationship with these intermediaries and are especially closely bonded with industry associations. In addition, customised insurance products such as insurance packages including industry-related endorsements have bolstered the advantages and attractiveness of being insured. For insurance companies in these countries, comprehensive risk precautions have improved the loss experience.

Based on the findings of both domestic and international markets, the report identifies four essential distribution channels through which SMEs in China can access tailored commercial insurance: core corporations, tech/service providers, commercial real-estate services firms, and banks. They possess fast-growing risk awareness and a close-knit connection with the SME community and can act as a catalyst for further developing SME insurance in China. Through these distribution channels, insurers have greater ability to design customised insurance products and services based on specific features and demands of industries and SMEs, while risk-control can be applied by accessing more data on multiple dimensions.