? Reform-driven declines in auto insurance loss ratios are likely to taper off as premiums also fall.

? PICC P&C sees liability insurance as a promising growth area.

? The company has offerings to compete with upstart digital insurers, but needs a workflow shift to truly make them work.

China's and Asia's biggest nonlife insurer, state-owned PICC Property & Casualty Co. Ltd., still gets more than half its premium income from auto business, but the percentage is declining: It represented 59.7% of the company's 205 billion yuan of first-half 2018 gross written premium, down from a 65.6% share in the year-ago period. Shen Dong, vice president and general accountant at the People's Insurance Co. (Group) of China Ltd. unit, told S&P Global Market Intelligence that auto insurance growth is expected to be moderate in China, while there are better prospects for the company in nonauto lines, especially liability insurance.

Meanwhile, Chinese technology companies and digital insurers have been chipping into the Chinese P&C market through small-premium but high-frequency products such as shipping return insurance and flight delay insurance. PICC P&C had 13.5% of China's online insurance market as of June-end, ranking it third, according to the Insurance Association of China.

The following is an edited transcript of the conversation.

S&P Global Market Intelligence: Chinese P&C insurers generally saw loss ratios fall for auto insurance due to pricing reforms. Do you expect the ratio to continue to decline?

Shen Dong: Not necessarily. Instead, the loss ratio [for auto insurance] may rebound to some degree, because pricing reforms in commercial auto insurance result in lower premiums per vehicle. Meanwhile, repair costs, medical expenses for personal injuries and compensation standards for death and injuries are on the rise. So we expect loss ratios to slightly rebound in the short term. However, expense ratio is expected to drop, so large companies with good management can basically keep their combined ratios at a stable level. But that may not be the case for smaller companies.

Shen Dong, vice president and general accountant at PICC P&C Source: PICC Property & Casualty Co. Ltd.

PICC P&C had a first-half growth rate in nonauto insurance of 33.6%, compared to 3.9% in auto insurance. How do you evaluate the prospects of auto insurance versus nonauto insurance in China?

Although PICC P&C's auto insurance made up 59.7% of the company's gross written premium in the first half, we can't say that auto insurance will never be above a 60% share again in our business. In the second half, we have been doubling down on auto insurance business, especially for family cars, and we hope its growth to be over 5% for the whole year.

Nonauto insurance will be the next growth driver. I think over the long run, auto insurance and nonauto insurance will make up about 60% and 40% of PICC P&C's business, respectively. But for the industry, the proportion of auto insurance business will be higher because some companies don't have [policy-backed] critical illness or agriculture insurance businesses.

For what business lines outside of auto does PICC P&C see strong prospects?

For PICC P&C, liability insurance is sizable and profitable while growing fast. For the past several years, our liability insurance has grown at a compound annual growth rate of over 20% and had a combined ratio of 93.3% in the first half.

Technology companies like Ant Financial Services Group and digital insurers like ZhongAn Online P & C Insurance Co. Ltd. focus more on small-amount, high-frequency insurance products. As PICC Group carries out its digital transformation, what is PICC P&C's attitude toward this kind of insurance, which was often neglected by traditional companies?

We do take small-amount, high-frequency insurance business seriously, especially in areas like lifestyle and consumer finance. We sell flight delay insurance, flight accident insurance and shipping return insurance on proprietary and third-party platforms like Tongcheng Tourism, Ctrip, WeChat and Taobao Marketplace. Those are very fragmented businesses and premium per policy is probably only several yuan.

Traditional insurers [like PICC P&C] also need to change workstreams to sell online insurance. For example, in the past, we wouldn't set out claims until we received premiums. But now, policyholders, who purchased flight delay insurance [online], would need to receive claims as soon as they land, and we may only receive premiums from third-party platforms once a month.

Is there any preference between traditional and nontraditional insurance?

We don't play favorites. Our strategy is omni-products and omni-channels. Our technology-enabled insurance business is growing fast, and we are not falling behind pure digital insurers too much.

Traditional insurance businesses require lots of workforce. How many agents does PICC P&C have?

We have more than 400,000 exclusive sales agents, the biggest sales force among China's P&C insurers. Insurance agents are not only our biggest distribution channel, but they also cross-sell policies for PICC Life Insurance Co. Ltd. and PICC Health Insurance Co. Ltd. Meanwhile, PICC Group has been building up an integrated sales team in ... Shanghai, Guangzhou and Shenzhen to sell P&C, life and health products.