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Insurance Industry Reforms in First Half Hit Hard
The effects of reforms in China's insurance industry the first half of this year hit many people in the industry harder than before. These reforms not only made changes in the management of China's insurance industry, they also took the first steps in transforming China's insurance market from the insurance market with the world's largest potential into the world's largest insurance market.
For decades, organizational structure of the People's Insurance Company of China (PICC) and China Life Insurance Company bore the scars of the planned economy. Thus, it is especially important for them to engage in reforms following the rules of a market economy today.
The PICC has said that it would combine its provincial and county level offices located in the same city and downgrade or close down offices whose portfolio do not reach certain standards. By the end of this year, it will begin laying off workers throughout the company.
While PICC undergoes restructuring, New China Life Insurance Company Ltd., established only three years ago, is already starting to expand into a nationwide insurance company. After being battle-tested in Beijing's insurance market, New China Life has established branches in Tianjin, Nanjing and Chengdu.
To keep up with the reforms in the insurance industry, the China Insurance Supervisory and Administration Committee has set up offices in Shanghai, Guangzhou and Beijing.
After spending all spring to prepare, China's first insurance brokerage company - Jiangtai Insurance Company - opened an office in Beijing June 16, 2000.
The best thing about the changes in China's insurance industry has been that price competition has taken a back seat to service as the most effective weapon for insurance companies to grab market share. It is now commonly understood in China's insurance industry that insurance is a service industry and service is an insurance company's lifeline.
On June 28, PICC opened China's first nationwide insurance service phone number. It hopes that this "Insurance 110" number will facilitate communication between the company and its customers.
Pingan Insurance has set up a telephone hotline, Internet website, customer service stalls and direct sales for its customers.
And Jiangtai Insurance Company proudly proclaims that it has never been sued in its short history.
Although experts in the insurance industry say that it is still too early to say that price competition in China's insurance industry is a thing of the past, all insurance companies now realize that those without good customer service will not survive the competition.
The speed at which China's life insurance products have upgraded is faster than people thought. The products offered by China's insurance industry are now at the same level as those available in the world's most advanced countries.
Early this year, Ping An Insurance developed a product linking investments with its insurance products, which sold quite well in Shanghai and Beijing.
Around the same time, PICC developed a way to share profits from insurance policies with its customers.
In late May, New China Life revealed the second generation product of linking investments with insurance.
These new insurance products demand that China's insurance company management make adjustments and raise the level of its sales force, modernization and transparency.
But experts have also reminded us that the development of China's insurance industry has faced serious challenges the first half of 2000. The banks' interest rates have dropped and foreign-funded insurance companies have put a great deal of pressure on China's insurance companies. But, as long as the domestic insurance companies follow the market's rule when it carries out reforms, China will have the largest insurance market in the world.
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