Foreign insurance companies are relative small players in China’s insurance market, but they are cherry-picking the country’s wealthiest clients at the expense of China Life and smaller state-run foe Ping An Insurance, which still control a combined 76 percent of the country’s life underwriting market, according to a Reuters report.
China’s insurance market grew at eight percent in the first quarter of this year after surging 32 percent in 2003. The expectation of higher interest rates is leading many Chinese to delay buying new policies. Foreign firms control less than two percent of China’s nationwide life insurance market, but that percentage rises to more than 13 percent in big cities such as Shanghai and Guangzhou, says a research report from Goldman Sachs.
“The general perception is the joint venture companies are financially stronger, the selection of their sales force is more stringent and they can attract the higher end of the sales force … because of their branding,” Ho Ming Heng, deputy general manager of Shanghai-based Taiping Life Insurance Co, told Reuters.
Rules limiting foreign operations to only 15 cities and prohibiting group insurance sales will end in December. But like their domestic rivals, foreign insurers are still limited to investing premium income in local bank deposits, domestic bonds and some local stock funds — robbing them for now of the advantage of their access to more diverse foreign assets.
Foreigners such as AIG, which was founded in China in 1919, have gained particular traction in cities where they have spent several years building up a business, a factor that is fueling big investment by new entrants. Some joint ventures may get cash infusions of up to $100 million to grow their businesses, one market expert said.
For example, Taiping Life, which is 24.9-percent owned by Belgian-Dutch financial services group Fortis, will double its sales force by the end of 2004 to 12,000. That compares with 650,000 agents at China Life and more than 188,000 agents at Ping An.
China’s $1.2 trillion in savings, most of it locked up in deposits, is seen as a potential gold mine for sellers of insurance and other investment products.