旷创投

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Shedding its reliance on auto insurance, Zijin Property & Casualty Insurance is 'marching forward under heavy burdens'

Since the end of May, Zijin Property & Casualty Insurance has repeatedly seen its branches penalized. First, its Bengbu Central Sub-branch in Anhui was fined RMB 110,000 for inaccurate financial data. Shortly afterward, within a single week, its Lüliang Central Sub-branch in Shanxi and its Shenzhen branch received regulatory fines of RMB 110,000 and RMB 350,000, respectively.

Source: Shanxi Financial Regulatory Bureau

The insurance industry is now progressively deepening the 'consistency between filed products and actual operations' policy, and regulators are intensifying their scrutiny of compliance management. At this critical juncture, Zijin Property & Casualty Insurance’s repeated penalties indicate that problems exist not only in frontline business execution but also in head office-level compliance oversight. During this period of business transformation, the company must not only strengthen its compliance culture but also address its declining profitability.

Compliance Failures: Systemic Weaknesses in Frontline Oversight

Over the past two years, Zijin Property & Casualty Insurance has faced severe challenges in managing compliance across its branches.

Let’s examine the specific reasons cited by financial regulators for penalizing these Zijin branches: the Lüliang Central Sub-branch in Shanxi was found to have fabricated expenses—a common violation in the insurance sector—while both the Shenzhen branch and the Bengbu Central Sub-branch in Anhui were fined for submitting inaccurate financial data. In addition, responsible personnel at these branches received regulatory warnings and monetary penalties.

Source: Shenzhen Financial Regulatory Bureau

Looking further back, it becomes evident that compliance issues at Zijin’s subsidiaries are not new or isolated incidents but have occurred frequently. Based on data from 2025 alone, the author has identified at least ten separate penalty notices, with branches in Shaanxi, Shanxi, Henan, Jiangsu, and other regions all having been sanctioned.

Cross-regional violations, high penalty frequency, and concentrated types of misconduct clearly illustrate the company's core compliance vulnerabilities.

First, compliance awareness has failed to permeate down to the frontline level.

The high volume of penalties and the striking similarity in violation reasons indicate that Zijin Property & Casualty Insurance’s compliance framework has not fully permeated down to the grassroots level.

Under the traditional inertia of prioritizing scale, what headquarters transmits to local branches is primarily performance pressure rather than a strong emphasis on compliance. In order to meet targets, frontline staff often neglect compliance requirements. During this process, Zijin Property & Casualty Insurance may have failed to establish a positive compliance incentive mechanism, resulting in weak compliance awareness at the grassroots level.

Second is external skepticism regarding the company’s internal oversight mechanisms.

Notably, the company completed a board reshuffle last year and simultaneously announced the abolition of its supervisory board, assigning all supervisory responsibilities to the board’s audit committee.

Although this move aligns with unified industry regulations for insurers, given Zijin Property & Casualty Insurance’s recurring compliance issues, external observers inevitably question whether its new oversight structure leaves gaps—specifically, whether internal controls and audit penetration at the grassroots level remain inadequately enforced, thereby creating room for branch-level violations.

As industry competition intensifies, achieving premium growth is becoming increasingly difficult, and every insurer now faces significant performance pressure. Precisely in such times, companies must avoid taking excessive risks or crossing regulatory red lines.

Profitability Under Pressure: The 'Mismatch' Dilemma in Business Transformation

Behind these compliance issues lies Zijin Property & Casualty Insurance’s ongoing business transformation.

Zijin Property & Casualty Insurance is a locally state-owned property insurer. In its early years, to gain a foothold in the market, it focused on auto insurance—a broadly accessible product—to rapidly expand premium volume. Bolstered by ready-made customer acquisition channels from its state-owned shareholders across the province, the company quickly rolled out offline policies, and auto insurance premiums indeed became the backbone of its revenue.

Following comprehensive reforms in the auto insurance sector, the market shifted into a phase of zero-sum competition, making it far harder for Zijin Property & Casualty Insurance to generate profits from auto insurance. Consequently, the company began proactively reducing its reliance on auto insurance and pivoting toward non-auto lines such as health insurance, agricultural insurance, and liability insurance.

The effects of the transformation are quite evident. According to data from the company's Q1 solvency report this year, by the end of March, non-auto insurance premiums accounted for 66.90% of total premiums, while auto insurance premiums had dropped to just 33.10%.

Source: Zijin Property & Casualty Insurance official website

Even though Zijin Property & Casualty Insurance has reduced its reliance on auto insurance, it now faces new challenges in its non-auto insurance business and profitability.

First, business transformation demands stronger risk management capabilities.

Although the non-auto insurance market offers significant growth potential, it entails greater difficulty in diversifying risks and higher uncertainty in claims settlement compared to auto insurance. This means the company must demonstrate superior underwriting risk control, claims assessment, and actuarial pricing capabilities—areas where traditional property and casualty insurers commonly face capability gaps.

Although Zijin Property & Casualty Insurance has transformed its business mix, it continues to apply the operational model and standards typical of the auto insurance industry—relying heavily on high channel expenses to drive premium volume. This explains why, despite a decline in its combined loss ratio in Q1 this year, its combined expense ratio rose to 33.35%.

Source: Zijin Property & Casualty Insurance official website

Second, profitability is declining, with losses occurring on both underwriting and investment fronts.

Zijin Property & Casualty Insurance reported a net profit of RMB 57.44 million in Q1 this year, down 30.06% year-over-year. This sharp decline highlights the fragility of the company’s profit model, which relies on investment income to offset underwriting losses.

On the underwriting side, the company’s combined ratio stood at 99.42%, already very close to the breakeven point, leaving minimal room for underwriting profit. Meanwhile, on the investment side, its overall investment yield fell to just 0.19%, not only failing to cover the underwriting shortfall but also dragging down overall profitability.

Source: Zijin Property & Casualty Insurance Company official website

Bogged down by litigation: A flood of disputes erodes brand trust

Under dual pressures of compliance and profitability, the strain has become acutely evident in customer service and experience.

According to data from Qichacha, as of the date of writing (July 9), Zijin Property & Casualty Insurance Company is involved in more than 48,000 judicial cases. Additionally, the company disclosed three major litigation matters in the first quarter of this year, with total claimed amounts nearing RMB 9.12 million. As indicated in the disclosures, these three cases remain unresolved and are currently at the first-instance or second-instance stage.

Source: Zijin Property & Casualty Insurance Company official website

Nearly 50,000 judicial cases and frequent claims disputes are not merely a reflection of 'industry norms'—they represent a concentrated outbreak of weaknesses in Zijin’s risk control systems during its business expansion and transformation.

One issue lies in front-end laxity and mid-process rigidity.

During the rapid expansion of Zijin’s non-motor insurance business, front-end underwriting risk controls failed to keep pace, potentially allowing high-risk policies or those with flawed terms to enter the market. When policyholders encounter issues and reach the mid-process claims assessment stage, the company’s claims evaluation criteria lack sufficient granularity. This often leads to disputes with customers over loss assessment and exclusion clauses, pushing many conflicts—initially resolvable through negotiation—into courtrooms.

Another issue is the absence of an effective dispute resolution mechanism.

The author notes that among these nearly 50,000 cases, property insurance contract disputes and subrogation claims by insurers constitute a significant proportion, indicating deficiencies in the company’s back-end dispute mediation processes.

In the insurance industry, disputes over claims are extremely common. However, if China Insurance Property & Casualty Company could mediate promptly and effectively—minimizing conflicts and disagreements—there likely wouldn’t be so many judicial litigation cases. In other words, the company’s current pre-litigation mediation mechanism remains insufficiently developed or effective. This not only heavily drains its legal and management resources but also invisibly increases operational costs.

Moreover, brand trust continues to erode.

Insurance is fundamentally a 'trust-based contract' delivered to customers, and the multitude of lawsuits acts like sharp engraving knives, gradually thinning the substance of this contract and depleting China Insurance Property & Casualty Company’s brand reputation.

Non-auto insurance covers a broader range of scenarios, and clients consequently demand higher responsiveness, better claims experiences, and greater service transparency from insurers. Therefore, China Insurance Property & Casualty Company must provide more refined claims standards and more efficient services to meet these expectations.

Conclusion

For China Insurance Property & Casualty Company, current compliance and operational challenges represent a hurdle it must overcome. The company’s immediate priority is embedding compliance into every aspect of its business operations. Only by addressing weaknesses in frontline controls and delivering more meticulous claims handling can it uphold the baseline of its trust-based contract with customers.

Under today’s stringent industry regulation and the principle of ‘quoted rates matching actual practices,’ the issues facing China Insurance Property & Casualty Company reflect common growing pains across the sector’s transformation. To navigate successfully through this critical transition phase, the company must abandon its previous extensive growth model—relying on high expenses to chase scale—and instead build a new, high-quality growth model grounded firmly in compliance.

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