Property and Casualty Insurance Industry’s 2026 “No Red at the Door”: It’s Time to Bid Farewell to “False Prosperity”—These Six Delusions Must Be Shattered

Source: Hui Bao Tian Xia

Note: The original title of this article is “Farewell to False Prosperity”

The disappearing “Good Start” in the property and casualty insurance industry is painful yet intuitive, breaking the iron law that “the first quarter determines the whole year.” Large sectors like auto insurance and agricultural insurance are all showing negative growth, so betting and supervision are played out in turn. Head offices versus branches, products versus channels, scale versus efficiency—everyone is striving to find balance amid various contradictions. Under internal and external pressures, the industry’s refined management level continues to improve, filled with complex and intricate data and reports. Yet, faintly sensing that amidst the thick fog, the industry is heading toward a feast of confusion, I am more eager to see the industry step out of the illusion in the new year, bid farewell to false prosperity.

What is false prosperity? — Superficial prosperity, hollow core. It appears to be thriving at least outwardly, but the most dangerous deep layer is that these illusions are all real, and the industry has quietly become accustomed to these lively scenes, delaying and avoiding strategic laziness and crisis fears.

Illusion 1

Scale exists as a false growth

By 2025, the industry’s overall growth rate of 4.0%, twice the GDP growth rate, is a thing of the past; in some years, it has even fallen below GDP growth. Only short-term health insurance and accident insurance maintain double-digit growth; other types of insurance grow slowly, especially the nearly trillion-yuan auto insurance, where slight market growth has become the norm. Compared to life insurance, property and casualty development has been quite vigorous, but these growths also contain bubbles, yet everyone tacitly maintains the illusion.

Several rounds of auto insurance comprehensive reform have indeed reduced industry costs, but some regions still face issues of “high discounts and high fees.” By fictitiously listing expenses and shifting around, they fatten reports, sustain third-party companies, and everyone happily cycles through this game.

Some “low-claims, high-fee” non-auto insurance businesses see severe mismatches between claims costs and expense costs. Is the industry a pawn in capital games? Or a tool for channel arbitrage?

Some farm insurance policies, under information asymmetry, undertake special missions—paying the price for mechanisms walking on a wire?

Some policy-based health insurance types, which do not bear actual insurance risk but only perform operational duties, where is the risk management function that corresponds to the premiums?

Among these, there are industry conventions and deep-rooted mechanism issues that are considered reasonable simply because they exist. But fundamentally, it’s inertia. No one dares to bear the weight of a bubble burst; rational people tend to respond passively. Therefore, the industry needs the courage to cut to the bone, to shatter illusions, to let the divine be divine, and insurance be insurance.

Illusion 2

Obsession with symbols

Having long immersed in the insurance industry, what I hear most are assessments, incentives, and pressure transmission. The industry is like a high-speed arena or a battlefield revolving around evaluation and benchmarking. Assessment indicators are becoming more detailed, from development to efficiency, from process to compliance, advancing in steps toward refined management.

Under the drive of benchmarking assessments, no one dares to stop or admit defeat. The essence of benchmarking is an external incentive system—through comparison, ranking, and evaluation—to boost performance. This stimulation is necessary, but when it becomes the only and overwhelming driver, hidden problems may arise.

The most obvious is the suffocation of innovation. All companies demand the “Three Looks”—look at regulation, look at the industry, look at competitors. While focusing on competitors, they suppress original thinking. The entire industry seems stable and orderly, but in fact, innovation is stagnating. It’s gradually retreating from a vibrant rainforest into a soil-locked desert or a quagmire of internal competition.

Second is value deviation. The industry’s persistent mantra is “customer-centric,” but under heavy assessment pressure—especially profit-centered systems—where is the reflection of customer value? If this is the core value, why are there difficulties in insuring trucks, high premiums for new energy vehicles, and low acceptance of inclusive business?

Third is ongoing fatigue. The flood of benchmarking reports—“real-time alerts, daily monitoring, weekly tracking, monthly review, quarterly recap, annual retrospection, high-frequency supervision…”—this “Seven Wounds” set, admired by MBAs as “closed-loop management,” leaves everyone under the anxiety of being chased, exhausted physically and mentally.

I believe true professional growth often occurs outside benchmarking. When the entire industry runs in the same direction, the greatest opportunities are precisely on those overlooked small paths. Not every pursuit is worth full effort, nor does every pause mean falling behind or losing. Proactively creating partial, deliberate pauses may not be a wrong choice for individual companies. The industry needs to re-examine this “must-run” predicament.

Illusion 3

Significant cost reduction and efficiency gains, obsession with technology application

In the era of digital transformation, AI large models, and intelligent applications, our industry is no exception. It seems we are riding the trend, riding the wave. After all, servers don’t need wages, social security, have no emotions, and can work 24/7. Replacing expensive carbon-based labor with cheap silicon-based computing power looks very cost-effective.

What surprises me is that we measure the success of digital transformation by whether labor costs decline, whether fixed expense ratios decrease, and whether the ratio of salary to premiums improves. These are stark, shocking goals.

I understand that the purpose of technological application is not AI completely replacing carbon-based biologicals, but rather enhancing and coexisting with them. We should see whether this organization, under AI’s support, has achieved what it always dreamed of but couldn’t before—whether its development boundaries have been expanded, whether creativity has been fully unleashed, whether it can enter previously restricted new fields, rather than just symbols and operational metrics.

Just like calculators can’t replace mathematicians but can give them greater imagination and breakthroughs.

Technology has always created an illusion—especially for the insurance industry, which follows the law of large numbers. It seems that as long as data is sufficient, algorithms are strong, and computing power is large enough, all uncertainties can be turned into certainty. As a result, customers become cold classifications, probabilities, and labels. The industry indulges in efficiency gains and cost reductions brought by technology but gradually forgets the core of insurance—the warmth inherent in the industry’s essence, the trust and commitment between people. It always feels like there’s less of that lively, fiery human touch.

Illusion 4

Proliferation of entities, severe ecosystem stagnation

In recent years, the most heard phrase is the intensification of the “Matthew Effect.” Morton probably never imagined that the “Matthew Effect” he first proposed and applied in science would become so widespread in the Eastern insurance industry. Simply put, “the rich get richer, the poor get poorer; the strong get stronger, the weak get weaker.”

The property and casualty industry has 89 companies, seemingly numerous, highly competitive, and ecologically prosperous. But aside from scale, the differentiation among companies is not obvious. In organizational structure, product mix, channel composition, and competitive tactics, they are basically identical—only different models: L/M/S/Mini, but no version differences.

By 2025, the combined share of the top three is 63%, roughly flat year-on-year. Internally, Ping An has swallowed the shares previously held by PICC and Taibao; traditional mid-sized companies are mostly losing market share, with growth rates below industry average; the top three’s underwriting profit is 1.2 times the industry average. So, the industry is in an oligopoly state—most companies are subordinate within this oligarchic ecosystem. The oligarchs eat the meat, others gnaw the bones; the bones are gnawed, and the rest lick the dust.

Under oligarchic characteristics, the industry is like compacted soil. The core issue is that the leading entities monopolize the “good” definition. Their strategic choices, pricing models, and channel strategies are regarded as industry benchmarks and truths. Their massive scale “locks in” the development path, making it difficult for any new, deviating initiatives to gain necessary resources and space to grow. Diversified attempts, disruptive innovations, and keen sensing of new demands struggle to break through.

The “siphon effect” under oligarchic traits is even more concerning than the Matthew Effect. It prevents resources and opportunities from normal penetration and healthy circulation. Capital, talent, traffic, data—key elements—are siphoned by the oligarchs, making it hard for new life to take root. The system gradually loses vitality. When external expansion and upward breakthroughs are impossible, many companies can only copy the oligarchs’ operational models within the limited existing space, engaging in increasingly refined and ruthless self-competition. The return on resource input keeps declining—probably the epitome of a no-choice, no-way-out internal spiral.

Illusion 5

Group blindness under collective rationality

The industry always cycles in a strange loop: everyone tends to form highly aligned optimistic expectations about a certain business area or operating model, adopting similar aggressive strategies. When supply far exceeds demand or risks accumulate beyond capacity, the entire industry falls into trouble. It’s like “forming consensus → collective influx → price wars → risk accumulation → crisis eruption → collective pressure.” Examples include pre-70th document auto insurance, auto loan insurance, financing guarantees, some liability insurances, etc.

When collective rationality overly concentrates on a single track, it creates a powerful inertia and resonance. Everyone is eager to deepen internal competition in that track. When many ingrained judgments are overturned by environmental changes, the collective rationality still relies on old paradigms, which can ultimately backfire on the entire industry.

From the auto insurance perspective, the industry currently seems obsessed with “household vehicle” policies. Many companies strictly assess the number of household vehicle users, the proportion of household vehicle business, the growth rate of household vehicle premiums, and market share, believing that only household vehicle customers are stable and cost-controllable. They equate the development of household vehicles with the management capability of auto insurance. Is this conclusion really valid?

Household vehicles are heading toward a homogenized red ocean, with some regions even experiencing temporary cost mismatches between household and commercial vehicles. Under strict self-discipline, they can only maintain market share through price wars and internal competition, which inevitably leads to profit decline. “The industry all chooses to do household vehicles” is a rational market choice and a conclusion based on a large amount of static data, but once this collective rationality goes to extremes, it will inevitably pay a price.

We spend too much effort and cost on market selection, using big data analysis across various dimensions to identify a batch of bad businesses, deciding “what not to do,” and adjusting expenses accordingly. Few consider how to improve the quality of these businesses through models and cooperation, using the high costs of front-end and back-end to think about quality improvement. Probably because “selection” is short-term, measurable, and responsibility is clear—removing bad businesses yields positive feedback in loss ratios. But “change” is long-term, uncertain, and requires investment and risk-taking to build new cooperation models.

We are too impatient. No one wants to be a shaper, preferring to be a selector. But the dividends of selection fade quickly, while shaping has no ceiling.

Sometimes, true wisdom lies in daring to deny group consensus and explore exceptions. The industry needs some sincere, brave, and even irrational players to focus on niche, uncertain, and overlooked areas. Perhaps these paths are the key for small and medium companies to survive cycles. Fortunately, some small and medium companies have already started doing this—for example, a company focusing on commercial vehicles, perfectly avoiding the red ocean of household cars, yet also creating its own特色 through backend claims innovation, demonstrating the warmth of insurance.

Illusion 6

Constraints under regulated operation

A major difference between property and casualty insurance and life insurance is that life insurance is strictly separated between regulation and operation—headquarters develops products and manages systematically, while grassroots agencies focus on sales. P&C, on the other hand, is quite different. Grassroots agencies not only develop business but also undertake full-process management. Managers at the grassroots are clear about costs and policies, and can eloquently discuss product innovation and pricing policies. This vitality and enthusiasm are what keep the P&C industry vibrant and passionate.

Under the norm of regulated operation, the “strong headquarters” management approach is prevalent, with rules and frameworks becoming increasingly detailed. Admittedly, headquarters has stronger information access, strategic thinking, and data analysis capabilities, making decisions more scientific and comprehensive; also, systemically copying standardized experience can improve organizational efficiency.

Everything has a dose; management is no exception. I understand that excessive control is actually a form of the greatest loss of control.

First, it causes decision delays. Headquarters is farthest from frontline markets, customers, and specific issues but holds the final decision-making power. Business opportunities may be missed in layers of reporting, and specific problems may worsen while waiting for approval. A scientific and reasonable authorization system is key to balance.

Second, it leads to talent mediocrity. When the entire organization only retains “execution” functions, it becomes a machine rather than a living, organic entity. Employees with ideas and passion are worn down and go with the flow. The organization values strong execution and obedience, which systematically stifles innovation.

The biggest problem is systemic sensory paralysis—frontline nerve endings have already atrophied. Although headquarters has a well-developed brain, it cannot receive the latest market signals. Especially when environments change dramatically, the whole system may quickly collapse due to lack of grassroots adaptability.

Farewell to false prosperity is not a strategic adjustment or technical repair, but a profound reshaping and rebirth of industry cognition and values—what kind of property and casualty insurance industry do we really need?

What is the essence of the industry? Is it water? Is it fire? Is it Apollon? The core of insurance is the mutual aid mechanism of risk aggregation, dispersion, and management. Its fundamental value lies in providing certainty and security for the economy and society. If false prosperity deviates from this essence, the foundation of the industry will be shaken.

I understand that the core of “prosperity” is, in a more lofty sense, sustainable and reasonable profit margins, solid and prudent risk management, and a healthy, orderly market ecology. A lower version might be protecting diverse industry entities, even if weak; listening to marginalized customer needs, even if niche; encouraging unconventional innovation, even if irrational; redefining industry health standards—from financial reports back to broader social value and risk protection.

This year’s New Year greetings are everywhere, but I particularly like Li Dan’s “Year of Disenchantment.” The industry also goes through “enchantment—disenchantment—enchantment.” We are that group of industry people who feel stuck yet full of warmth, seeing through industry shortcomings yet still deeply committed, from the disillusionment of “not seeing the mountain as mountain” to the return of “seeing the mountain as mountain.”