By Rob Starr, Content Manager, Big4.com
“There’s no doubt foreign insurance companies would like a larger market share in China. It’s a hard market to crack. But it’s not impossible. Compared to the rest of Asia, China remains an underinsured market. Insurance penetration remains extremely low, at around 2%.” Peter Whalley, PwC Insurance Leader for Hong Kong is commenting on PwC’s Foreign Insurance Companies in China 2012 Survey Report.
Foreign life insurance companies in China expect to grow by up to 30% in the next three years. Low penetration (2%) in the insurance market, strong upside for premiums, and the relative strength of China’s economy is driving this sentiment.
The life industry is experiencing major realignments in its distribution channels. In 2012 more than half of respondents believe there is a continuing trend towards bancassurance. The recent “three company” rule imposed by the China Banking Regulation Commission has significantly impacted foreign life insurers. The rule places limits on the sale of insurance products in bank branches to just three insurers (which often includes the bank itself). Also, insurance companies are no longer allowed to station their own sales representatives in the banks, passing control of insurance product sales to bank employees.
The channel experiencing the most pronounced decline was identified as agents. Two-thirds of respondents believe the agency channel is losing traction after reaching its peak of 3 million agents in 2010. Nine of the 14 life respondents are planning to layoff between 20% and 40% of their agents this year. While three participants say they would dismiss up to nine in 10 of their agent network.