On July 24, Shang Jingguo, Secretary-General of the Insurance Industry Association of China, stated at the “2021 Qingdao • China Wealth Forum”: “Insurance can also be used as asset allocation for wealth management for low- and middle-income groups.”
Shang Jingguo, Secretary General of China Insurance Association
He analyzed the importance of insurance as asset allocation from four aspects:
First of all, insurance is actually the economic compensation for the entire life cycle, birth, old age, sickness and death, etc., in addition to the government’s basic welfare guarantee, so it is also the allocation of personal wealth; second, insurance is a financial asset that can hedge risks more effectively; At the same time, it is also a heritage asset, and insurance benefits are not affected by other claims and debts. Finally, insurance is a long-term asset that can provide a stable cash flow for the future.
At present, in China, insurance products are still in the sales stage, so the role of insurance in personal wealth allocation is not ideal. However, from the perspective of asset allocation in the future, there is still more room for China’s insurance market.
The following is a partial record of the speech:
host:Discussing this topic today is of practical significance, because Qingdao has reached its second take-off period. Of course, as China’s wealth management industry, it has also reached this moment. China’s wealth management has evolved from facing perceived customers to facing knowledge customers, and then facing smart customers, and the power of digitalization to empower wealth management has also become a major trend. From another perspective, in addition to wealth management for families and high-net-worth individuals, enterprises as a social form and an economic organization also need the allocation of resources in this area. The content in this area is very rich and the space is very great. Big. Leaders and experts are all veterans in the industry with in-depth views and observations. Now we will invite them to express their opinions. First of all, I invite Mr. Shang Jingguo, Secretary-General of the Insurance Industry Association of China, to speak. He is a senior supervisor. We listened to him.
Shang Jingguo:I have been in the insurance industry for a long time. In the morning, I heard that wealth management and asset allocation are not only the privileges of high-income groups, but also low- and middle-income groups. An important aspect. In fact, insurance should be used in the management of low- and middle-income wealth It can play a bigger role. Let me just talk about it and say that insurance is not only for wealthy people, but also for middle and low incomes that can be used as wealth management assets. Talking about the position of insurance in asset allocation, insurance has said a lot, but the concept of insurance as asset allocation may be more surprising to everyone. It just feels that when I buy insurance, it is naturally the relationship between asset allocation. I will analyze it from four aspects:
One is that personal insurance assets are actually the ballast of a person’s wealth, and are the most basic of a person’s assets at the bottom. Why do you say that? Because insurance covers the entire life cycle, all kinds of accidents of birth, old age, sickness and death are economically compensated. In addition to some basic welfare protection, the government has a different supplement, so it is also the allocation of personal wealth. We know that developed countries in Europe and the United States will be very insecure if they do not have insurance. Because products like personal insurance have the characteristics of underlying assets. Insurance is a small probability and large risk event, which will enable personal wealth to release more funds for investment in some relatively high-risk assets. There is no need to have as much money in the bank. It is not necessary for future pensions and health. The smallest money releases the most funds, creates more high-risk, high-income opportunities, and shares the dividends of economic growth to the greatest extent. Therefore, the function of insurance, I think, may be the most important aspect of its competitiveness.
Second, insurance is actually a quasi-financial asset, which can more effectively diversify the risks of investment activities. We often only see the return, but not the negative return. Insurance is the most effective hedging risk in the portfolio. Because of the stable nature of insurance, which is different from banks, securities, funds, etc., it is the best tool, because personal assets have a good correlation, so as to achieve the purpose of diversifying risks. This is especially among some high-net-worth individuals. It is quite recognized, because your asset is expected to have a better correlation with other assets.
The third is to pass on assets. We know how to pass on wealth from generation to generation? In fact, insurance is a very important tool. The insurance benefits enjoyed by the beneficiaries of insurance products are not affected by other claims and debts, and your insurance benefits are not affected, and the inheritance of family assets can be carried out relatively smoothly. Insurance also greatly reduces the cost of family inheritance. In the future, insurance will be a very effective tool for inheriting family wealth.
Fourth, insurance is a long-term asset that can provide a stable cash flow for pensions in the future. Because there is no asset that can be compared with insurance, pension insurance is a very important asset for an individual in the future. We are not only talking about high returns on investment, but also the greatest wealth that an individual has accumulated during work. Because we are now living longer and longer, the arrival of the era of longevity makes us need more money to prepare in the future. Therefore, in an effective pension insurance system, you can fully enjoy the economic growth dividend. Because it is an effective institutional arrangement that enables our dispersed personal pension funds to obtain higher returns through the effective management and investment of pension funds.
In fact, in our country, like insurance companies, we are still in a stage of selling insurance products. Therefore, the role of insurance assets in the allocation of personal wealth is not ideal. People buy insurance not for asset allocation, and may be driven by sales staff. Current insurance products are biased towards investment characteristics and more profitable. And our current customers do not have the concept of asset allocation, and they value investment income. So in this respect, the future space of China’s insurance market is still quite large. So from the perspective of asset allocation, there is still more room.
How to configure future insurance? Insurance is not an individual’s homework. It is not like this. It requires some institutional arrangements. We know that a multi-level medical security system and a multi-pillar pension system can achieve the best way to allocate insurance assets at low cost and high efficiency. It is through the arrangement of the system, so that your insurance can be automatically configured to some places needed in the future. Therefore, the role of insurance risk protection and long-term savings will gradually dominate the role of insurance in personal wealth asset allocation in the future. We are developing very fast now, and the amount of money is huge, but the most important role has not been played out. Therefore, banks and securities complement each other to reduce the risk of personal wealth fluctuations. Because we can’t think day by day that the rate of return must maintain double-digit growth, which is impossible. Therefore, to improve the efficiency of the entire wealth allocation, it really plays the role of the ballast stone and underlying assets of personal wealth management, so that the insurance industry can really return to the goal of protection and long-term savings.
This is a positioning of insurance in asset allocation. From this perspective, we are still at a very early stage. What role insurance should play and what risks should be diversified will play a role that other financial instruments cannot replace in the future. This requires a long time. stage. Let me stop here first, thank you.
(Edit: Wen Jing)
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