Insurance in China

Some interesting news snippets here from the English version of the People’s Daily Online about both the projected and actual growth of insurance in China and also the tougher steps being taken to regulate entrants to the market.

On the growth front

A Sigma report from Swiss Reinsurance suggests China’s premiums are likely to top 453.1 billion yuan (US$55.9 billion) in 2006. Boston Consulting Group (BCG) believes that this figure will reach 830 billion yuan (US$102 billion) in 2008.

I knew they were big, but I don’t think I had grasped just how big until reading that.  What is also interesting is that foreign insurers are already targeting the smaller (well, comparatively) Chinese cities and that the Chinese consumer has a very positive attitude towards non-domestic carriers:

A report from the Development Research Centre of the State Council says domestic customers place high expectations on foreign insurers.

It shows that 74.1 per cent of Chinese consumers surveyed think foreign insurers offer exceptional service, 82 per cent trust the employees of multinationals, and 77.9 per cent prefer foreign insurance products.

I suppose that could also speak volumes about the home perception of local carriers, and/or tell you something about a nation’s eagerness – after decades of being cut off – to embrace anything novel and exotic.

The other strand of the article deals with the stiffening of the regulatory regime for overseas insurers.  Until now, basically all you had to do was show that you hadn’t made any obvious cock-ups for the past 3 years and you were good to go – no need to show any particular experience in the business.  From now on (or at least once the new provisions come into force, some time after 9 March 2006) foreign insurers will have to demonstrate at least 20 years of continuous experience in the business to gain approval for a licence.

“Compared with the original rule which has no requirement for foreign insurers’ years of experience, the newly added threshold shows the regulatory authority’s commitment to prevent potential risks and strengthen management of foreign insurance institutions,” said Wang Guojun, an insurance professor at the University of International Business and Economics.

And they are also raising the hurdle for management by requiring better academic skills and greater experience in the business.

Of course, the established players say – probably rightly – that this will have little practical impact on them since they already have all the requirements in place anyway.  But it may at least serve to stop the worst excesses that one has seen in under-regulated environments around the world in the insurance field, and that can only be a good thing.