Q What market share will the foreign life companies represent by 2012?
The overall market share of the foreign life insurers in June 2009 was 4.7%. This is a national figure and understates the market share in the major markets where the foreign companies are more active.
Nevertheless, it provides evidence of the dynamic growth of the large life insurers such as Ping An and China Life alongside a range of medium-sized insurers.
Against this background, foreign life insurers were asked to predict market share by 2012. All but one company predicted it would be 5%
or greater.
Six companies predicted 6% share while a further nine companies predicted between 7% and 10%
One foreign insurer commented that all the companies want to grow and expand geographically.
However, regulatory and ownership restrictions were stressed as barriers to expansion.
As of June 2009, the market share of the property and casualty insurers is 1%. A common observation is that 70% of the property and casualty market is for auto insurance, a market which the foreign insurers are largely unable to enter.
The foreign property and casualty companies predict that their market share will reach 2% by 2012.
One European insurer noted that foreign companies will continue to target particular segments of the property and casualty market and therefore, the overall market share percentage is a less meaningful indicator. For example, some foreign companies may excel in particular segments such as export product
0
Based on responses from 20 Life companiesExpected market share percentage by 2012
0
Based on responses from 9 P&C companiesExpected market share percentage by 2012
Q What market share will the foreign property and casualty companies represent by 2012?
Q In your opinion, which category of institution represents the most significant competitive threat to your organisation over the next five years?
0 10 20 30 40 50
P&C companies Life companies
Niche players Other
Start-up institutions Bank subsidiaries Score
Based on responses from 29 companies insurance companies
Established domestic Foreign insur
ers alr eady
competing in your market Foreign insur ers entering/
the market for the first time
Both the foreign life and property and casualty insurers identified the same top three competitors that represent the greatest threat to them over the next five years.
In order of greatest threat they were:
• Established domestic insurers
• Foreign insurers, and
• Bank subsidiaries.
Q How many foreign insurance companies will be operating in the Chinese market in 2012?
80 or more 70 to 79
60 to 69 50 to 59 40 to 49
30 to 39 20 to 29
Based on responses from 29 companies in 2009, 26 companies in 2008 and 24 companies in 2007
2008
2007 2009
Based on responses from 29 companies in 2009, 23 companies in 2008 and 20 companies in 2007
76%
Yes 2007 2008 Another dimension of the question 2009
above asked about the possibility of consolidations.
Of the 29 companies that responded to this question, 76% suggested that consolidations is to be expected.
In both 2007 and 2008 around 65%
predicted consolidations.
There are currently around 50 foreign insurers. A higher proportion of respondents this year predicted that there would be over 60 insurance companies operating in China by 2012, an addition of more than 10 new companies in the next three years.
It is anticipated that Korea, Japan and Taiwan will provide many of the new entrants alongside several new health insurers.
Q Might there be consolidation?
Bank of China may enter insurance sector
Bank of China (BOC) will purchase a stake in Heng An Standard Life as it seeks to expand into the insurance industry, a source close to the lender told China Daily.
The source declined to disclose the amount of investment and said the plan has not been submitted to the State Council for approval.
Account update
China’s banking regulator has
reportedly given two lenders the green light to buy into insurance companies.
Bank of Communications will buy a 51 percent stake in China Life-CMG Insurance from China Life Insurance.
The foreign participant in that joint venture, Commonwealth Bank of Australia , will retain its 49 percent share of the venture. Bank of Beijing will buy into ING Capital Life Insurance, a 50-50 joint venture between Beijing 0
Based on responses from 28 companies, 19 Life companies and 9 P&C companies Number of
companies
10 9 8 3
increasing threat from banks
7 4
Q Can you rate the magnitude of the competitive threat of the banks entering the insurance market over the next three years?
Banks get OK for insurance arms
China’s big four State banks will be allowed to run their own insurance companies under a pilot program, an official from the country’s banking regulator said.
“We have reached an agreement with the insurance regulator on allowing banks to set up their own insurance companies, and the big four banks will be the first to run it on a pilot basis,”
Lai Xiufu, an official from the China Banking Regulatory Commission (CBRC), said at the weekend.
At a press conference in February, Li Kemu, vice-chairman of the China Insurance Regulatory Commission, indicated that there would be at least one approved insurance company floated by a bank this year.
“The two regulators have now reached a consensus on the
regulatory framework, and most of the preparatory work is ready,” said Li.
Besides the big four, a number of mid-sized banks, such as China Merchants Bank, have also submitted applications to the regulators, eyeing the business potential in the insurance sector - a sector growing at an annual average of 20 percent in the past decade.
As the adjacent news stories attest China’s banks are poised to enter the insurance market in a major way.
In addition to the Big Four banks, it is reported that mid-sized banks such as China Merchants Bank will also seek approval. Foreign insurers were asked to rate the magnitude of this perceived future threat to their business.
Nine foreign life companies assigned a score of 8/10 or greater, while six
of the nine property and casualty companies assigned a score of 7/10 or 8/10. The foreign insurers are taking the bank threat seriously although they anticipate that in the initial stages the banks will launch more “commodity-type” services.
With possible shareholder changes expected in the coming years, some foreign insurers may gain banks as their new domestic partners, this changing the competitive landscape dramatically.
Q How would you characterise the commitment of your foreign parent to the Chinese market in comparison to other markets around the world on a scale of 1 to 10 where 1 represents no commitment and 10 is an extremely aggressive commitment to the market.
0
Based on responses from 20 companies in 2009 19 companies commented in 2008
Number of companies
10 9 8 7 6 5
2009 2008
Life companies foreign partner’s commitment
Based on responses from 20 companies in 2009 19 companies commented in 2012, one company anticipates an ownership change by 2012 Number of
companies
10 9 8 7 6 5
2012 2009
Life companies foreign partner’s commitment in 2012 vs. 2009 The commitment of the foreign joint
venture partner’s parent to the China market remains extremely high.
Nine of the 20 life companies assigned the maximum score of 10/10. A further five companies assigned a score of 9/10. In
comparison to 2008 this represents a slight change when three more companies assigned the maximum score.
Examination of three companies that allocated a lower score in 2009 than last year, revealed that the three companies that reduced their 10/10 score from 2008 were identified as two large European life insurers and one large North American life insurer.
When asked to attribute further commitment scores for their foreign parent in 2012, the majority of respondents, 11 out of 20 allocated the maximum score. A further five companies assigned a score of 9/10.
At the “lower” end of the scale one company scored 7/10 and another 6/10. This suggests that despite the difficulties and challenges of the China life market, the companies interviewed remain firmly supported by their parent operations.
0 1 2 3 4 5 6
Based on responses from 18 companies in 2009 and 2008
Number of companies
10 9 8 7 6 5
2009 2008
4
Life companies domestic partner’s commitment 2009 vs. 2008
The commitment is more mixed in relation to the domestic partner(s).
Similar to 2008, respondents awarded six domestic partners the maximum score.
However, the number of 9/10 scores dropped from four to three while the 8/10 scores increased from three to five.
Four domestic partners were attributed scores in the 4/10 to 6/10 range.
Property and casualty companies commitment
On the property and casualty side the number of companies awarding the maximum score declined from three to one in 2009.
As recorded in 2008, two companies scored 9/10 and three companies 8/10. In contrast to 2008, two companies assigned a score of 7/10 and one company 6/10, suggesting a lowering in commitment relative to the previous year.
Similarly, property and casualty companies anticipate an increase in commitment as they go forward to 2012. The number of companies awarding 10/10 grows by one to three, while those awarding 9/10 moves from two to four companies.
By 2012, the lowest commitment score for the nine respondents was 8/10.
0 1 2 3
Based on responses from 9 companies in 2009 and 8 companies in 2008 Number of
companies
10 9 8 7 6 5
2009 2008
4
Q How would you characterise the commitment of your parent to the Chinese market in comparison to other markets around the world on a scale of 1 to 10?
Property and casualty companies foreign partner’s commitment in 2012 vs. 2009
0 1 2 3 4
Based on responses from 9 companies for 2009 and 2012
Number of companies
10 9 8 7 6 5
2012 2009
4
0
Based on responses from 29 companies Lack of expertise by staff in selling particular products
Score out of 10
Q In your opinion, how serious a problem on a scale of 1 to 10 where 10 represents the maximum are the following issues at the retail level?
To gauge the concerns that the foreign insurers have in the distribution and selling of insurance products, they were asked to consider the magnitude of problems associated with the following three issues:
Lack of expertise
The level of expertise demonstrated by sales staff appeared to be an issue in the agency, bank and telemarketing channels. Less evidence of this is seen in the broker channel, particularly on the property and casualty side.
Mis-selling of products
Agency and bank channels recorded scores above six on the index for mis-selling. The score approached eight for agents and property and casualty and banks for life products.
Distribution control
The enforcement of controls appears most challenging for life products in the bank channel. The more tightly managed telemarketing channel recorded a score below five. Overall, the telemarketing channel, perhaps because staff adhere to a right script and are supervised, recorded the lowest scores.
Based on responses from 29 companies Mis-selling of certain products Score out