Cars stand idle at the park of a BYD dealer in Beijing. The city's policy to require potential buyers to get a registration plate before purchasing a vehicle will not only hurt car dealers, but insurers. [Photo: China Daily]
The capital city's auto insurance premium income will probably see a slump in growth this year due to curbs on auto purchases by the local government, the city's insurance regulator said on Monday.
"This year will be a turning point for Beijing's auto insurance market. Even with an optimistic estimate, the city's premium income from motor insurance this year could be as much as that of last year, compared with more than 30 percent annual growth in the past few years," said Ma Ji, director of the property and casualty insurance division of Beijing Insurance Regulatory Bureau.
According to the bureau, Beijing's auto insurance premium income hit 15.28 billion yuan ($2.3 billion) in 2010, up 39.5 percent from the previous year. That of commercial auto insurance reached 11.97 billion yuan last year. That means the local government's restriction on auto purchases will probably result in a premium income loss of nearly 3.6 billion yuan this year based on average growth in the previous years.
Auto insurance currently accounts for 42 percent of Beijing's property and casualty insurance market.
To ease the worsening gridlock in the capital city, which boasts a population of about 20 million, municipal authorities now issues just 20,000 new vehicle license plates a month, meaning annual sales will plunge to 240,000 units in 2011 from 891,000 units in 2010.
Local large property and insurance companies will suffer the most from the plummeting auto sales this year, with most of them registering negative growth in January, according to industry insiders.
But as very few foreign insurance companies are running auto insurance in China right now, the impact on them will be quite limited.
"We still maintain a positive growth from the auto insurance sector in January, thanks to a big proportion of existing business and a much smaller part of new business," said Long Tong, marketing manager of Liberty Mutual Insurance Company (Beijing branch). It is the second-largest non-life-insurance company in the United States.
According to Jiang Caishi, vice president of the country's largest non-life insurer PICC Property & Casualty Company Ltd, the company will make more efforts in exploring existing business either through improving services or products to offset the loss from the premium income of new auto insurance in Beijing.