Great news for Chinese insurance industry is from CIRC’s Chairman Mr. Wu Dingfu. In a recent press conference in January 2011, Mr Wu introduced the situation of the development of the Chinese insurance market, during his speech he said, in the last 5 years, the insurance premium income of the country has increased 24.2% per year on average and has reached 720.12 billion yuan, the income from investment has been over 6% per year on average. China has become the most important newly developing country for the insurance industry where the number of insurance companies had increased by 53 since 2005 and there are now a total of 146 insurance companies in China.


 On the back of the glorious Chinese insurance market, for most of the foreign insurance companies, 2010 had still been a difficult year. In 2010, the market share for foreign life insurance companies is only around 5% and the market share for foreign property insurance companies is only around 1%. Apparently, foreign insurance companies in China did not share the benefits of the fast developing Chinese insurance market.

Foreign insurance companies are facing various problems in China. Stagnant market share, heavy pressure on premium income and difficulties on attracting and retaining employees are the three most common problems. Firstly, due to the unwritten rule of CIRC, CIRC only approve opening of one branch for each foreign insurance company per year. So foreign insurance companies cannot open multiple branches in a short term and then cannot have more market shares as they wished. For example, AXA-Minmetals Assurance Co., Ltd. a joint-venture established in 1999, only opened 7 branches during past 10 years. Secondly, most of the foreign insurance companies face great premium pressure because they cannot use the most efficient way, such as bank-insurance link, to sell their products. The main reason may be because most of the foreign insurance companies do not have close relationships with Chinese banks. If foreign insurance companies can solve this problem, then the premium income will rapidly increase. For example, the major shareholder of AXA-Minmetals Assurance Co., Ltd. has changed to ICBC, a giant bank in China, at the end of 2010. That means this company may sell its products through its shareholder ICBC’s branch network and can develop market rapidly in 2011. Thirdly, personnel in foreign insurance companies are very unstable. Most of the sales persons in foreign insurance companies have low level of education or have no insurance related experiences. They choose foreign insurance company as the first step to gain working experiences and as a springboard to a better job. Furthermore, some foreign insurance companies put too much focus on the short-term premium income. So the short-term premium income takes a big part of KPI of sales persons. Many excellent sales persons cannot work under such heavy pressure and finally choose leave.

To have a better 2011, foreign insurance companies shall take its own advantages such as differentiation of competitive advantage. Compare to domestic insurance companies, they have more diversified products and can provide more specialized services to customers. For example, some foreign life insurance companies are prompting high-level medical insurance products which target towards foreigners in China and the high income class Chinese. Those products are selling very well in China and gain good reputation in aforesaid classes.

For those foreign insurance companies which are still out of China and want to enter into the Chinese insurance market, the best advice from us is doing more investigations on the Chinese insurance market, think about how to solve those common problems, consider your advantages and your expansion plan.