China's Anbang Insurance has been the subject of many headlines recently. Claiming that it conducted illegal business operations, the China Insurance Regulatory Commission (CIRC) announced it would take over control of the company. 

However, this incident should not be interpreted as a headwind for the whole industry. On the contrary, the insurance industry is still one of the most promising industries in China. Here are the four reasons why you should contemplate before being scared by Anbang’s shocking news. 

This is not a universal phenomenon. Unlike most insurance companies in China, Anbang grew rapidly in the past few years, a period which led to the claims of “illegal business conduct.” 

However, the majority of China’s insurance companies were not involved in such actions, which can be clearly seen by the astonished faces of the chief officers of other insurance agencies, when Anbang’s pace of growth was frequently reported by the media and gossiped about on the streets. 

There is no derivative to worry about. Unlike what happened in the 2008 global financial crisis that brought down many large insurance companies, China’s financial regulators have done a marvelous job in clearing out the derivatives and the accompanying over-leveraging in the past decade, partly thanks to the fearful lesson taught by 2008. 

As a result it is very hard to find anything like or close to the horrendous tools that caused the meltdown in 2008, including zero down payments, CDO, CDS, among others. Therefore this glitch of the insurance industry is almost impossible to evolve into a snow crash. 

China’s insurance industry has huge potential. According to data gathered by Swiss Reinsurance Company in 2015, the per capita insurance premium for the Chinese mainland was merely 280 US dollars. The premium in the US was 4,095 US dollars, 3,553 US dollars in Japan and 3,034 US dollars in S. Korea.  

There is still a huge gap between China’s insurance industry and its global peers. On the contrary, nowadays it is very hard to find an industry in China that has a per capita level less than 10 percent of the global leading economies. 

China’s steel and cement industries are far more developed than the global average level. Its automobile ownership rate is around one-third to one-fourth of the leading economies. Its ownership rate for air conditioners or mobile phones is either close to, or higher than the level of mature Western economies.

The insurance industry is now at its fastest developing period. Looking at the history of economies in other places, the insurance industry usually enters its fastest period of development after the manufacturing industry and property markets have matured. Th‍is is quite easily understandable that people only start to insure their lives after they have accumulated enough wealth through manufacturing and building homes.

In the two books written by Mr. Bangyan Feng – “The History of Hong Kong’s Property Market in the Past 100 Years” and “The History of Hong Kong’s Financial Industries in the Past 100 Years” – this social-economic evolutionary path has been clearly found in Hong Kong’s economic history.

During the 1950s and 1960s, manufacturing played a major role in Hong Kong’s economic development. Later on during the 1970s and 1980s, the property market came into the spotlight. It was only in the 1980s that Hong Kong’s insurance industry entered its golden period, after people had created and accumulated enough jobs, money and property. 

The insurance industry on the Chinese mainland has also just entered its highest growing period. The economy built its manufacturing base in the 1980s and 1990s, and its property market in the 1990s and the first decade of the 21st century. Between 2014 and 2017, China’s total insurance premium growth rates were 17 percent, 20 percent, 27 percent and 18 percent respectively – much faster than the growth rates of nominal GDP and monetary base. 

Therefore it is easy to find that this is now a golden period for the development of China’s insurance industry. The value of such a period should not be overlooked by a glitch that has already been taken care of. 

(Jiahe Chen is the Chief Strategist at Cinda Securities. The article reflects the author's opinion, and not necessarily the view of CGTN.)