Insurance in China: the Wolf Does Come

With the date of China's entering the WTO approaches, the insurance industry of the country also steps up its opening to the outside. Recently China Insurance Regulatory Commission approved another eight foreign-funded insurance companies including Germany-based Gerling-Konzern Insurance Group to operate or expand their business in China. So far, 27 foreign-funded insurance companies have got approved to do insurance business in China. The country has got its insurance market further opened. Quite a few of Chinese people finally greet the "foreign insurance" they have long expected. Where do the advantages of "foreign insurance" and local insurance lie? Will the opening of China's insurance market strike its insurance industry? How will the civilians benefit from the competition?

First, it is undeniable that opening of the insurance market will somewhat strike the local insurance industry. PICC, the oldest insurance company of the PRC, is merely 50 years old, run with 7.7 billion yuan of registered assets. However, any one of the foreign-funded companies approved to enter China has a history more than several hundred years old with a hefty amount of capital, rich experiences, effective management system and high-quality staff trained. For domestic companies, their conditions turn out to be too inferior to bear comparison. All of these advantages of foreign-funded insurance companies will enable them to challenge Chinese insurance industry in product development, sales, client services and enlisting talents.

Comparing with the advantages of foreign insurance companies, domestic companies do need to improve their work in sort design, marketing concept, management system, etc. However, it doesn't mean they are too week to hit back. They should realize that domestic-funded companies have their own incomparable advantages in scale of service network, loyalty of clients and understanding of market situation. It will take certain amount of money and time for foreign companies to reach the same level with domestic companies dealing with these conditions. Thereupon, both "domestic" and "foreign" companies have vantages, and both have new tasks to do. The one that fulfills the task first will be the one to be able to grasp the opportunity in the market. In the author's view, domestic insurance does not really stand in an inferior position because it is easy to learn advanced experience and good methods while quite difficult to acquire local advantages. Just like what the negotiation officer for the WTO entry said, "there has to be a process for foreign-funded companies to adapt to the Chinese market, during which, Chinese companies may learn new things and come to master the conditions".

Where will be China's insurance market go after opening? Take Shanghai for example. Shanghai opened its insurance market in early times. Although foreign-funded insurance companies have exceeded Chinese counterparts in number, their revenue of insurance premium takes only 10 percent of the gross amount. Conversely, people in the insurance circle in Shanghai have good knowledge of the catalytic functions of foreign-funded companies. They believed that the individual seller system, which was first adopted by American International Assurance (AIA) in the United States, currently has become the principal system for expanding business in Shanghai's life insurance industry. Besides, as a result of participation of foreign-funded insurance companies in recent years, people come know the importance of commercial insurance. Thanks to convenient services provided by foreign companies, a great number of foreign-invested enterprises got proper insurance in running their business in Shanghai.

The key point here, on the one hand, is to keep full confidence in Chinese-funded insurance industry. Products that sell well in other countries do not necessarily suit China. Domestic insurance usually understands more about people's demand in home market. On the other hand, domestic insurance companies must improve their system, products and talents training so as to adapt to international standards, build new advantages as domestic insurance and meet the demand of Chinese people. No matter who will win the competition, "foreign" or "local", civilians, undoubtedly, will be the biggest beneficiaries.



By PD Online Staff Du Minghua


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