Market and regulatory risks have risen alongside the growth of China's online insurance market, said Liang Tao, vice chairman of the China Insurance Regulatory Commission.
The CIRC will consequently need to strengthen supervision and expand regulations on large internet companies, especially those holding dominant market share and those who have tied up with financial institutions such as insurers.
"By using their advantages over customers and [internet] traffic, some large internet platforms dominate their cooperation with financial institutions and have greater say in financial service content and models," Liang said at a Dec. 3 forum in Beijing.
"Financial institutions have become [financial] license providers and that will cause spillover risks out of the sight of regulators."
He noted too that insurance technology, or insurtech, will reshape insurance product design, pricing, sales and claims, resulting in a need for the CIRC to respond by revising its current regulatory framework.
The growth of insurtech has been significant between 2000 and 2017, the vice chairman added, bringing with it benefits including risk coverage expansion and increased reach to minority groups.
Ke Yan, a Singapore-based strategist at independent research platform Smartkarma, told S&P Global Market Intelligence that this was the first time the watchdog has publicly stressed the risks and challenges brought about by insurtech.
"Previously, the CIRC mostly talked about [insurtech] benefits," Ke noted. "This means it will not allow online insurance business to grow freely without proper supervision."
Liang's speech followed moves by the Chinese government to tighten financial sector scrutiny to stem rising debt and systemic risks, including a cleanup of the microlending sector and the setting up of a financial stability committee. Earlier in the year, the country's president Xi Jinping called for increased financial supervision to ensure economic stability.
As of end-2016, 60 property and casualty insurers, and 61 life insurers had carried out online business, according to Insurance Association of China statistics.
In September, China's first online-only insurer ZhongAn Online P & C Insurance Co. Ltd. was listed on Hong Kong's stock exchange, raising US$1.5 billion. ZhongAn's major shareholders include tech giants Ant Financial Services Group and Tencent Holdings Ltd. as well as insurer Ping An Insurance (Group) Co. of China Ltd. Other Chinese online-only insurers include Tk.cn Insurance Co. Ltd. and Answern Property & Casualty Insurance Co. Ltd.
