As economic uncertainties brought by the COVID-19 pandemic gradually ease, the Chinese insurance industry is expected to see a "significant recovery" next year with people's demand for insurance products rebounding, analysts said.

Consumption of necessities and high-end luxury products among Chinese people has already seen a recovery, but consumer discretionary products, a category that includes insurance, are still struggling, said Chen Fu, chief analyst for the non-banking financial sector at GF Securities.

Chen said the middle-income group is a major part of consumers of health and critical illness insurance products. They are also the group most affected by the public health crisis.

"The middle-income earners have been uncertain about their future income situation. Under such circumstances, they would choose to save money over discretionary consumption. And they would prefer to put their money in asset classes with high liquidity. That's why, we saw fund sales were so hot last year," he said.

For a 30-year-old professional to buy a critical illness insurance, he or she needs to pay around 15,000 yuan ($2,284) a year for the next 20 years for a sum assured of 500,000 yuan, Chen said by way of an example.

Such a consumer would have a conservative attitude toward the expenditure if he or she is uncertain about his or her future income, Chen said.

"However, the steady recovery of Chinese economy from the COVID-19 pandemic will lay a solid foundation for the rebound of Chinese insurance industry.

"The central authorities have set the target of this year's economic growth at above 6 percent. Research organizations, meanwhile, widely forecast the figure would be around 8 percent. The waning of uncertainties about Chinese economic recovery will unleash demand for insurance products. We expect the industry to see a significant year-on-year recovery in 2022."

Chen noted that the traditional model of relying heavily on the large number of insurance agents to increase the amount of premiums among insurers is not sustainable, as demographic dividend is gradually diminishing.

Insurance market players need to carry out reforms by turning their focus "from quantity to quality", which means making efforts to increase the productivity of each agent, he said.

Wang Weiyi, chief analyst of finance and fintech at the research department of Ping An Securities, said problems on both supply and demand sides are hampering the development of the insurance industry.

From the perspective of insurers, they are facing difficulties in satisfying diverse demands from customers. On top of that, insurance frauds are bringing high costs to them.

From the perspective of consumers, exaggerated and misleading marketing, complicated application procedure, low efficiency in claim settlements are discouraging them from buying insurance.

"These major problems can be solved with high-tech," Wang said. "The development of such advanced technologies as artificial intelligence, big data, the internet of things and blockchain is projected to fuel another round of growth for the insurance industry."