Telematics Opportunities in China’s Insurance Market

by Wenli Yuan, September 25, 2013
Industry Trends
Asia-Pacific

Abstract

Telematics insurance products do not exist in China, but several factors will likely bring them to China over the next three to five years.

In Telematics Opportunities in China’s Insurance Market, Celent introduces the present situation in the application of telematics insurance products in the world, outlining some of the products that have appeared on the market and providing an analysis of the different business models. The report provides an analysis of the current development in the motor insurance market and of telematics in China, a description of the preconditions for the development of telematics products, and recommendations for insurance companies planning to enter this market.

There has been sustained growth in the number of civilian vehicles in China, with the number reaching 120 million by the end of 2012. Motor insurance occupies an important position in China’s property insurance market, with its premium income accounting for more than 70% of the total property insurance premium income in China.

Preconditions for the development of insurance telematics in China include:

  • Compliance with regulatory requirements. The China Insurance Regulatory Commission is gradually liberalizing motor insurance terms and rates.
  • Needs of insurers. The intense competitive environment and business losses have created a need for insurers to develop market segments, seek high-quality customers, and control claims risks.
  • Telematics development. At present, there are many telematics service providers in the market that have the technological means to collect vehicle data and are able to provide vehicle owners with rescue assistance services, remote diagnostics and proactive maintenance reminders, fuel management, one-key navigation, and other services. However, because they have not found value-obvious selling points and a suitable profit model, the number of users of personal telematics is limited.

“Insurance products can become an important application of telematics. On one hand, they can promote the development of telematics, and on the other hand, when telematics become developed to a certain level, they will facilitate the launch of insurance products,”says Wenli Yuan, Senior Analyst with Celent's Asian Financial Services Group and author of the report. “If the right business model and balance of interests can be found, telematics service providers and insurers can achieve mutual benefit.”

A Chinese version of the report is also available.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

The Development of Telematics

3

 

Development of Usage-Based Insurance

3

 

Examples of Usage-Based Insurance

5

 

Counting the Consumer Benefits

7

 

Stacking the Insurer Benefits

7

 

Driers in the Adoption of Telematics

8

Telematics Operation

10

 

The Insurance Value Chain

10

 

Telematics Value Chain

12

 

Options in the Operating Model

16

 

Issues that Remain Unresolved

16

 

Future Development

17

Current Status of China’s Motor Insurance Market

18

 

Sustained Growth in Vehicle Ownership

18

 

Growth in Motor Insurance Premium Income

18

 

Losses in the Motor Insurance Industry

19

 

Motor Insurance Business of Foreign Insurers

21

 

Marketization of Motor Insurance Premium Rates

21

China’s Development of Internet of Vehicle

24

 

Factors that Promote Internet of Vehicle

24

 

Development of Vehicle Telematics

25

The Future Development of Telematics Insurance Products in China

28

Conclusion

30

Leveraging Celent’s Expertise

33

 

Support for Financial Institutions

33

 

Support for Vendors

33

Related Celent Research

34

Sign in to download reports and access personalized information