HISTORY LESSON:
A couple of driving forces that will help accelerate
the growth of China’s insurance intermediaries:
1. Regulation. In recent years, the Chinese regulators have
been stepping up efforts in pushing the industry to
shift from quantity-oriented growth model to a quality
model. As part of this campaign, they imposed more
stringent capital requirements, solvency standards and
product portfolio requirements (long term protection
products must overweigh short term investment products
etc.), which in turn are forcing more carries to explore
cooperation with intermediaries to hedge the growing
cost in career agency channel.
2. Cost. As agency distribution started to mature and become
more expensive, some carriers especially the newly
established small ones, have decided not to build their
own agency force, but instead reach out to intermediaries
for sales partnership. These operational efficiencies are
certainly creating growth opportunities for insurance
intermediaries.
3. Consumers. As Chinese consumers become more
sophisticated, they are more likely to get the best products
suitable for them by comparing carriers and their products.
Young consumers are more likely to shop online directly
for insurance products. A few technology giants have
also entered the online brokerage space to compete with
traditional insurance agency and brokerage firms.
4. Sales Force. More experienced managers and agents
in China have seen the future of insurance sales lie in
helping customers decide on suitable financial products
by comparing multiple carriers. Most importantly, there is
no commission limit for producers working for insurance
intermediaries while commission payment to agents in
career companies is strictly regulated by the Chinese
government. This is a key reason for some executives
in career agency companies to jump to insurance
intermediaries.
1993: 1st local insurance brokerage business in
China — Hua Tai Insurance Consulting
1 st foreign brokerage and risk management firm
to receive licensing in China – British Sedgwick
2019: 1,790 insurance agency firms: 240 operating
nationally and 1,550 are operating regionally
500 brokerage firms, including major foreign
insurance brokerage firms — Aon, Marsh, Mercer,
and Willis
An invitation
The next round of competition in China’s insurance sector will
be centering on quality. To accelerate the industry transformation
towards quality growth, China needs more competition. This
is one of the reasons behind the Chinese government’s latest
commitments, one of which is to providing national treatment
to foreign insurance and financial services companies in terms
of equity ownership and business scope. With respect to foreign
insurance intermediaries, they are now allowed to conduct
business not only with multinational companies in China but also
small and mid-sized enterprises as well as Chinese individuals.
This move is seen as a warm invitation to any U.S. insurance
intermediaries that are eyeing expansion into China, the
world’s second largest insurance market now and most likely
the world’s largest insurance market by mid-2030s! Given the
Chinese brokerage sector is generally lacking experience in sales
management and there are very few big and experienced quality
players in the market, U.S. counterparts seem to have a big
advantage in China.
The train is coming, it’s up to you to decide
on whether to catch it or continue to wait.
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