HONG KONG: Global life insurance companies predict their business in China will grow by between 20% and 30% over the next three years, according to a new report.
PwC's Foreign Insurance Companies in China 2012 Survey Report polled 27 foreign-owned life insurers and 21 foreign property and casualty (P&C) companies, finding the former at the high end of growth expectations and the latter at the low end.
Both sets of players – life and P&C – are focused on growing their business rather than market share, the report indicated. Foreign P&C insurers see their share remaining stable at 1.2%, while life insurers believe their share will ease upwards from 4.3% to 5%.
"There's no doubt foreign insurance companies would like a larger market share in China," said Peter Whalley, PwC Insurance Leader for Hong Kong. "It's a hard market to crack," he added, "but it's not impossible."
Factors driving this development include the low penetration rate for insurance in China, which stands at just 2%, strong real premium growth, and the strength of the nation's economy.
Whalley also noted the commitment of the companies surveyed. "China very much remains their hunting ground. In fact, their commitment level is at its highest since 2008," he said.
Regulatory issues will also play a role. The opening up of the mandatory third party liability sector, for example, is expected to create additional sources of revenues and could push the market share of two P&C respondents as high as 5.5%.
Regulation has already forced a reassessment of insurance distribution channels, with rules that limit the sale of insurance products in bank branches to just three insurers. Consequently, there is a growing trend towards bancassurance, although this limits direct contact with the consumer.
Direct marketing and telemarketing are important channels for insurance companies and likely to become more so, the report also indicated.
"A focus on ways to reach consumers directly will be a priority for foreign insurers, as will building the critical mass and expertise in their workforce to do so," said Shu-Yen Liu, PwC Actuarial Practice Leader for China.
Data sourced from PwC; additional content by Warc staff