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Future directions for foreign insurance companies in China 2015

Contents1. Foreword ................................. 1

2. Keyfindings ............................. 3

3. Overviewofthecurrent situation .................................. 7

4. Regulatorydynamics .............. 29

5. Healthinsurance .................... 35

6. Digitalmarketing .................... 41

7. Performanceandgrowth ........ 55

8. Productandsegment developments ........................ 69

9. Humanresource developments ........................ 75

10.Researchmethodology ........... 78

11.Appendices ............................ 79

1Future directions for foreign insurance companies in China 2015 |

Chinaisalreadythefourthlargestinsurancemarketintheworld,withforecastssuggestingitwillmoveintosecondplacebehindtheUnitedStatesby2025.Yet,forforeigncompanies,ithasremainedastubbornlyhardnuttocrack.AftermanyyearsinmainlandChina,regulatoryhurdles–especiallystringentrestrictionsonforeignownershipandgeographicexpansion–China’sverydifferentculturalattitudestoinsurance,andtheeverpresent“distribution”challengehaskeptthetotalmarketshareofforeign-ownedinsurersinsingledigits.

However,asthiseditionofEY’sFuture directions for foreign insurers in Chinareports,wemaybeseeingthefirstpositivesignsthatforeignplayerswilleventuallycrackthistoughmarket.Inlifeinsurance,foreign-ownedmarketsharecontinuedtocreepupwardstojustunder6%.And,forthefirsttimesince2005,foreign-ownedmarketshareinpropertyandcasualtyhasjumped,almostdoublingthankstothemergerofAXAandTianping.

Forforeignlifecompaniesthistypeofjointventure(JV)structurelooksasthoughitmightbethewayofthefuture.Itgetsaroundboththeforeign-ownershiprestrictionsandthedistributionchallenge.Inaddition,thecombinationoflocalknowledge,anextensivefootprintandglobalexpertiseseemstobeawinner.In2014,premiumincomeofthetopforeignlifeinsurer,theJVICBC-AXA,grewbycloseto50%.

IfChina’songoingfinancialreformcontinuesinitscurrentdirection,foreigninsurerswillhavesignificantopportunitiestotakeamoresubstantialshareofthisliberalizingmarket.Importantly,thisreportindicatesthatamorerelaxedregulatoryenvironmentisindeedbeginningtoemerge,ascanbeseeninC-ROSS,theextensionoffreetradezonesandpriceliberalizationacrossthesector.

Inthisregard,theongoinginstabilityinthefinancialmarketsmayactuallyworkinthefavorofforeigninsurers.Ifacceleratedfinancialreformispartofthecountry’seconomictransformation,theforeigninsuranceplayersmaybenefitbyextension.Forexample,foreigninsurerswillbewell-positionedtomovefurtherintothehealthandautomotivemarketsinparticular.

TheriseofthemiddleclassisalreadyopeningupChina’shealthinsurancemarket.Historically,demandforsuchproductshasbeenlow,withpeoplerelyingonextendedfamilysavingstocoverthecostofhealthemergencies.Butnow,withtheaffluentmiddleclasswantingaccesstobetterhealthcare,segmentsofthemarketareshiftingtheirbehaviorandthisisevidentin

productareassuchascriticalillness.Governmenthealthsectorreformshavealreadyextendedsupplementaryhealthinsuranceandcreatedpersonaltaxdeductionsforhealthinsurancepremiums.

Untilnow,foreigninsurershaveonlybeenpermittedpartialinvolvementinautoinsurance,whichaccountsforalmost75%ofpropertyandcasualtypremiums.But,iftheregulatorstartstoapproveforeign-ownedacquisitionsandthesenewplayersharnessmobilechannels,foreignautoinsurerswillhaveaccesstotheworld’slargestcarmarketvia600millionmobilephoneusers.

Everythingpointstoburgeoningopportunitiesinthishigh-potentialgrowthmarketforinsurerspreparedtopartnerwithlocalcompaniesandwillingtodesignproducts,servicesandchannelsspecificallyforChina.

EYthankstheCEOsandseniorexecutivesofthe30foreigninsurersoperatinginChinawhocontributedtothisreport.Wealsothankthereport’sco-author,Dr.BrianMetcalfe.

Foreword:EY’sinsightsonthereportfindings

1

Shaun Crawford GlobalInsuranceLeader

Jonathan Zhao Asia-PacificInsuranceLeader

Andy Ng ChinaInsuranceLeader

2 | Future directions for foreign insurance companies in China 2015


Keyfindings

2

Key findings

Domestic insurers remain in control Theinsurancemarketcontinuestobedominatedbythebigdomesticplayers,whoforeigninsurersseeasformidablecompetitors.WiththenewriskmanagementandsolvencyrulesunderC-ROSS,incumbentsarelikelytobecomeevenmoreentrenched.

Thetopfivepropertyandcasualtyinsurersaccountfor74.7%ofpremiumincome.Thelargestcompany,PICC,hasathirdofthemarketshare.Inthelifesector,thetopfivecompaniesgenerate62.5%ofpremiumincome.ChinaLifeleadswithjustoveraquarterofmarketshare.

Acquisitive gains increasing foreign-owned market share Marketsharein2014movedupmarginallyforthelifeinsurersto5.8%,despitethenumberoneforeignlifeinsurer,ICBC-AXA,growingitspremiumincomeby49.7%.

However,inpropertyandcasualty,foreignmarketsharealmostdoubledto2.2%onthebackoftheAXATianpingmerger.AXATianping,whichgrewby32.6%in2014,isfourtimeslargerthanthenumbertwocompany,GroupamaAVIC.Theleaderrepresents39.4%ofalltheforeignpropertyandcasualtyinsurers’premiumincome.

Restricted footprint holds back foreign insurers Forthefirsttime,thisreportmapsthegeographicdistributionofinsurancedemandinmainlandChina,whichshowsaheavyemphasisontheEasternseaboard.AlthoughforeigninsurersarerepresentedfromGuangzhoutoDalian,thetightregulatoryframeworkhaslimitedtheirdistributionfootprint,whichiseventhinnerintheWesternprovinces.Thislegacyisahugebarrierincertainbusinesslines,suchasauto,andwillcontinuetohampertheprogressofforeigninsurers.

TheICBC-AXAmodelisoneexampleofhowforeignplayerscanbreakthisbindbypartneringwithadomesticfinancialinstitutionwithasizeablegeographicfootprint.

Background ThisreportexaminestheopportunitiesandchallengesforforeigninsurancecompaniesinChina.Itisbasedonasurveyof30companies,includingpersonalinterviewswiththeCEOsandseniorexecutivesof14foreignpropertyandcasualtycompaniesand16foreignlifecompanies.

Thisyear’sreportseesmainlandChina’sinsuranceindustrycontinuingtogrowatasteadypace,asthenationmovesfurtherdownthepathtofinancialreform.Attheendof2014,premiumincomesurpassedRMB2trillion,anincreaseof17.5%.ProfitabilityreachedRMB193billion,anannualincreaseof91.4%.Ifthismomentumcontinues,Chinaisontracktobetheworld’ssecondlargestinsurancemarketwithinadecade.

The2014reportconcludedthatnewmarketopeningsforforeigninsurerswoulddependverymuchonregulatoryaction.Ayearlater,itishardtofaulttheregulator.

Importantdevelopmentsinclude:

• ChinaRisk-OrientedSolvencySystem(C-ROSS)–ParticipantsbelievethatC-ROSSwillbeapositiveforceintheindustry.Theyareconfidentthattheirparentcompany’sriskmanagementexperienceinothermarketsmeanstheyarewell-preparedtohandleC-ROSS.Theyalsocontendthatthenewsolvencyruleswillplaytotheiradvantage.

• ExtendingtheFreeTradeZones(FTZs)–ForeigninsurerscontinuetowatchthedevelopmentofFTZscarefully.Theyarecurrentlyunconvincedbyhowtheycancapitalizeonthenewstructures,butamodelthatallowsthoseinsideaFTZtorolloutbusinesstoanotherFTZwouldbeamajorstepforward.

• Internetfinanceand“InternetPlus”initiatives–Thesereformscouldcreateaparadigmshiftbyallowingnon-insurers,withcomprehensivemobilenetworksandlargecustomerbases,toenterthearena.

Inthisliberalizingmarket,thepotentialforforeigninsurersisconsiderableiftheycanfindawaytoovercomethedominanceofdomesticplayers.

Wide disparities in premium income growth and profit performance Premiumincomegrewsignificantlyformostforeignlifeinsurancecompaniesduring2014.Thelargestforeignlifeinsurer,ICBC-AXA,increaseditspremiumincomeby49.7%.However,premiumincomedeclinedforsixotherforeigncompanies.

Sixteenofthe28foreignlifeinsurancecompaniesgeneratedaprofitbeforetaxin2014.Thiswasanimprovementover2013,when19companiesrecordedaloss.Individuallifecompaniesreportedsuccessesintraditionalproducts,assetmanagementproducts,internetproducts,bancassurance,internetsalesoftravelproducts,mid-markethealthproducts,endowmentproductsandinvestment-linkedproducts.

MuchofthegrowthinpremiumincomeforforeignpropertyandcasualtycompanieswasaccountedforbyAXATianping.Withinthetop10foreigncompanies,threedisplayedverystronggrowth:Allianz,SamsungandFubon,whileStarrdeclinedbyover20%.

Onlyeightofthe22foreignpropertyandcasualtycompaniesmadeaprofitin2014.Withinthetopfive,threecompanieswereJapanese.TokyoMarinewasthemostprofitableforeignpropertyandcasualtycompanyinboth2013and2014.

Individualforeignpropertyandcasualtyinsurersrecordedsuccesslastyearinthefollowingsegments:travelinsurance,auto,health,agriculture,propertyandmarine.

Strong premium growth forecasts highlight opportunities in auto and health Foreignlifecompaniesprojectstrongerpremiumgrowthoverthenextthreeyears,predictingannualgrowthof20-30%between2015and2018.Propertyandcasualtycompanieshavelowerexpectations,withaclusterpredictinggrowthofaround10%andasecondgrouparound25%.

Key strategic growth potential insurance products over the next three years

Findingsataglance


Life Property and casualty

Individual Annuity

Retirementproducts

Criticalillness

Auto

Health

Personalaccident

Criticalillness

Wholesale Grouphealth

Annuity

Retirementproducts

Generalliability

Enterpriseproperty

Marine

Commercialauto

Opportunity to increase foreign share of auto Despitenewcarsalesslowing,autoinsurancecontinuestooffergrowthopportunitiesinthepropertyandcasualtysector,representing73.1%ofthetotalpropertyandcasualtymarketand56.6%oftheforeigncompanies’businessmix.Overthenextthreeyears,foreigninsurersanticipatemotorinsurancewillgrowinthe10-15%range.

However,tomakefurtherheadwayinthismarket,foreigninsurerswillneedtogaincriticalmassandamoregeographicallyspreadfootprint.Distributioniskeytosuccessinthismarket,andmanyparticipantsarestrugglingwiththeirlimitedandrestrictednetworks.Growthwillonlybepossiblethroughacquisitionsoramoreliberaltreatmentofgeographicexpansion.

Health insurance is growing rapidly Healthinsurancepremiumscontinuetogrowrapidly,risingbymorethan40%in2014,drivenbyincreasedaffluenceandgrowinghealthawareness.Participantsrecognizegrouphealthandcriticalillnessinsuranceaskeygrowthproductsoverthenextthreeyears,drivenbyGovernmenthealthsectorreformsextendingsupplementaryhealthinsuranceandcreatingpersonaltaxdeductionsforhealthinsurancepremiums.

Inapioneeringmove,AllianzhasrecentlysetupaJVwithCPIC(ChinaPacificInsuranceCompany)intheShanghaiFreeTradeZonetodevelopandmarkethealthinsurance.Onceotherforeigninsurersseehowinnovativemodelssuchasthiswork,andhowtheyareregulated,thenotherswillfollowsuit.

Findingsataglance


As digital becomes increasingly important, foreign insurers plan to build on their existing capability Digitalmarketingremainsatthetopoftheforeigninsurers’growthagenda,yet74%ofrespondentssaidtheywerenotconfidentthattheycoulddeliverondigitaltransformation.

Fivepropertyandcasualtycompaniesandsixlifecompaniesbelievethatdigitalmarketingwillhaveasignificantimpactontheirbusinessmodelsoverthenextthreeyears.ParticipantsconsideredPingAn,TaikangandSunshineLifetohavethemosteffectivedigitalstrategies.Amongtheforeigninsurerstheycitedare:AXATianping,SamsungPropertyandCasualty,AIG,AIA,CIGNACMBandManulife.

Participantsarguethatlegacysystems,regulatoryconstraintsandsmallcustomerbasesholdbacktheirtransitiontodigitalmarketing.However,somehaveassignedsizeablebudgetsofuptoUS$10millionthisyear,toaidtheirtransformation.Theyexpectdigitalchannelswillplayamoreimportantroleinsalesandafter-salessupportby2018.

Talent shortages are expected to impact growth TheforeigninsurersareconfidentthattheycanhandletheskillsandresourcesassociatedwiththeimplementationofC-ROSS,incontrasttotheirdomesticcounterparts.

However,73%saidtalentshortageswouldimpactonsalesgrowth.Propertyandcasualtycompaniesidentifiedunderwriting,salesforcemanagersandactuariesasthetopthreepositionsthatweremostdifficulttofill.Lifecompaniescitedproductdesign,salesforcemanagersandactuaries.Asaresult,despitetheslowingeconomy,salariesareexpectedtoincreasebyanaverageof6.9%.Fourteencompaniessuggesttheincreasein2015willbe8%.

Staffturnoverisexpectedtodeclineslightlyfrom15%in2014to14.2%in2015.Companieswithcallcenteroperationstendtohavehigherturnoverrates.Overall,participantsexpectlessturnoverinseniormanagement,despiteanumberofCEOdeparturesinthelastyear.

To succeed, foreign insurers must innovate and be open to domestic partnerships China’sliberalizingandgrowinginsurancesectoroffersforeigninsurersimportantopportunitiesforgrowth.However,theirabilitytoharnesstheseopportunitieswilldependonbothexternalfactorsandinternalinnovation.

Externally,uncertaintiesaboundintermsof:theimpactofC-ROSS,particularlyinrelationtocapitalneeds;deregulationofautoinsuranceratesandpriceliberalizationinotherpartsoftheinsurancesector;newrulesoninternetfinance;thedirectionandimplementationofhealthcarereform;andtherelaxationofregulations.

Internally,foreigninsurersmustbeopentoinnovativemodels,includingJVsandalliances.Notably,in2014,anumberofJVlifecompaniesrestructuredtheirshareholdings,replacingbothdomesticandforeignpartnersinavarietyofcompanies.Theymustalsoharnessthepowerofdigitalasnewinternetrulesandinitiativesmakepossiblenew,andpotentiallygame-changing,plays.

Theuncertaintiesareplentifulandthescaleofchangeisdaunting.Butforeigninsurersreadytoseizenewopportunities,astheregulatorylandscapechanges,havemuchtogain.

Switzerland

Belgium

Taiwan

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Netherlands

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Germany

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USA 918

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2015e

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USA 1,316

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2025e

Figure 1: Global ranking of primary insurance markets by premium volume to 2025, in Euro billions

Source:MunichReEconomicResearchhistoricaldatainfluencedbyexchangerates


Overviewofthe currentsituation

3

The importance of the Chinese insurance market

MainlandChina’sinsuranceindustrycontinuestogrowatasteadypace.InAugust2014,theStateCouncilissuedablueprintthatenvisagedaworld-classindustryby2020.

Attheendof2014,premiumincomesurpassedRMB2trillion,anincreaseof17.5%.ProfitabilityreachedRMB193billion,anannualincreaseof91.4%.

PropertyandcasualtypremiumincometotaledRMB720billion,whilelifepremiumincomereachedRMB1.3trillion.

TheChinaInsuranceRegulatoryCommission(CIRC)pointedoutintheirannualreportthattherehasbeenahighgrowthinproductswhichsupporttherealeconomy,improvepeople’swellbeingandprovideprotection.Forexample,therewasa66%increaseinguaranteeinsurance,77%increaseinannuityinsuranceand41.27%increaseinhealthinsurance.

Asteadyadvancementoftheindustryisplanned,withstrongerriskcontrolsandbettersupervision,newproductinnovationsandimprovedconsumerprotection.Itishopedthatfinancialreformwillspureconomicandsocialdevelopment.

China’sinsurancemarketisalreadyestimatedbyMunichRetobethefourthlargestintheworld;however,by2025,itisprojectedtomoveintosecondplacebehindtheUnitedStates.

Furthermore,ithasbeenestimatedthatby2025morethanonequarterofglobalprimaryinsurancepremiumswilloriginateinemergingeconomies.

MunichReestimatesacompoundannualgrowthrate(CAGR)of7.7%forEmergingAsia’slifepremiumsbetween2015and2025.Thiscompareswitha2015-25CAGRof1.9%forNorthAmericaand1.6%forWesternEurope.China’sestimated 2015-25CAGRforlifepremiumsisexpectedtobe7.6%.

Onthepropertyandcasualtyside,a2015-25CAGRincreaseof8.9%isforecastforEmergingAsia,comparedto2.3%forNorthAmericaand1.7%forWesternEurope.Chinaisexpectedtorecorda2015-25CAGRof9.4%.

Againstthisbuoyantoutlook,itisimportanttoreviewdevelopmentsintheChinainsurancemarketandtoconsidertheroleplayedbyforeigninsurersinthisunfoldingmarketplace.

• Chinaisforecasttobetheworld’ssecondlargestinsurancemarketby2025,providingamajoropportunityforforeigninsurers

• Foreigninsurersarestrugglingtogainmarketshareinanintenselycompetitivelandscapedominatedbylargedomesticplayers

• “Commoditytype”insuranceproductswillcontinuetoflowthroughtheextensivebankdistributionnetwork

2.5

2.0

1.5

1.0

0.5

0

Figure 2: Market share of foreign life insurers (2004 to 2014)

Figure 3: Market share of foreign property and casualty insurers (2004 to 2014)

Overviewofthecurrentsituation

Source:CIRC,AnnualReportoftheChineseInsuranceMarket,2015 Source:CIRC,AnnualReportoftheChineseInsuranceMarket,2015

Mar

kets

hare

Mar

kets

hare

9

8

7

6

5

4

3

2

1

02004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

2.6%

1.2%

1.3%

1.3%

1.2% 1.2%

1.2% 1.2%

1.1% 1.1%

1.1%

2.2%

8.9%

5.9%

8.0%

4.9%

4.0%

4.8%

5.6% 5.6%5.8%

5.2%


Market share for the foreign property and casualty insurers

Themarketshareoftheforeignpropertyandcasualtycompaniesincreasedsignificantlyin2014,risingfrom1.3%to2.2%.

Overthelastdecade,marketsharehoveredaroundthe1.2%level.ThisincreaseisduetotheinclusionofAXATianpingandStarr.

AXATianping’spremiumincomein2014wasmorethanfourtimeslargerthanthenumbertwocompany,GroupamaAVIC.AXATianpinggrewpremiumincomeby32.6%in2014.

Concentration in the Chinese insurance marketThelevelofconcentrationintheinsurancemarketincreasedduring2014.Attheendoftheyear,thetopfivepropertyandcasualtycompaniescontrolled74.7%ofpremiumincome,whilethetop10captured86.1%.Inthelifesector,thetopfivecompaniescontrolled62.5%ofpremiumincome,whilethetop10captured81.7%.(Source:CIRC,Annual Report of the Chinese Insurance Market, 2015)

Market share for foreign life insurers

Marketsharefortheforeignlifeinsurancejointventurecompaniesincreasedto5.8%in2014.Anumberofcompaniesrecordedsteadygrowthinpremiumincome,withthelargestplayer,ICBC-AXALife,expandingby49.7%.

50

40

30

20

10

0


Figure 4: Growth in the number of life and property and casualty insurers (2001 to 2014)

Source:CIRC

Num

bero

fcom

pani

es

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014

Domesticpropertyandcasualty

Foreignpropertyandcasualty

Domesticlife

Foreignlife


Number of insurance companiesThenumberofinsurancecompaniescontinuestogrow.Attheendof2014,therewere45domesticlifecompaniesand45domesticpropertyandcasualtycompanies.

Theforeigninsurerscomprise28lifecompaniesand22propertyandcasualtycompanies.

Tianjin1.6%

Shanghai4.9%

Shandong6.3%

Shaanxi2.4%

Inner Mongolia1.6%

Hebei4.7%

Guangdong9.0%

Beijing6.0%

Zhejiang5.3%

Yunnan1.9%

Xinjiang1.6%

Tibet0.1%

Sichuan5.3%

Shanxi2.3%

Qinghai0.2%

Ningxia6.0%

Liaoning2.8%

Jilin1.7%

Jiangxi2.0%

Jiangsu8.4%

Hunan2.9%

Hubei3.5%

Henan5.2%

Heilongjiang2.5%

Hainan0.4%

Guizhou1.1%

Guangxi1.6%

Gansu1.0%

Fujian2.8%

Chongqing2.0%

Anhui2.9%

0.1% 9.0%% of Total Data

Figure 5: Total insurance in China 2014, showing overall percentages in each mainland province


Source:CIRC


Total insurance in 2014 by province

ThetotalinsurancemapofChina(below)displaystheconcentrationineachmainlandprovince.ThestrongrepresentationoftheEasternprovincesandcitiesisevident.

Forexample,Guangdongaccountsfor9%oftotalinsurance;Zhejiang,5.3%;Shanghai,4.9%;Jiangsu,8.4%;Shandong,6.3%;Tianjin,1.6%;andBeijing,6.0%.



Some background statistics of survey participantsLife companies

Life insurance employeesSixteenlifecompaniesemploy18,920peoplein2015andexpectthistoincreaseby22.3%to23,130by 2018.

Branches, sub-branches and officesThelifecompaniesprojecta36%increaseinbranchesoverthreeyears,toover200.Theyalsoplantoaddover300newsub-branchesby2018.Twocompanieswillmakesignificantadditionstothistotal.

Life insurance agentsTwelvelifecompaniesreportthattheyhad89,501agentsin2015,whichwillgrowby57%to140,801agentsby2018.Sixcompaniesplantoaddmorethan4,000newagentsby2018,threeofwhichplansignificantadditions.

Life internet customersEightcompaniesprovideddetailsoninternetcustomers.Theyforecastanincreaseinthecustomerbasefromaroundhalfamillioninternetcustomersin2015tomorethanthreemillionby2018.

However,thesefiguresmustbeviewedwithcaution.Somecompaniesinthisgrouparesellingextremelysmallpremiumproductsontheirwebsites(suchastravelinsurance).Onecompanynotedthatitwascurrentlyselling3,000policiespermonthonthewebandexpectedthistoincreaseto5,000policiesby 2018.

Life policyholdersElevencompaniesindicatethattheyhad4.23millionpolicyholdersin2015andexpectthistogrowto9.1millionby2018.Whilemostcompaniesrecordedsteadyincreases,twocompaniesprojectdramaticgrowth.

Property and casualty companies

Property and casualty employeesFourteenpropertyandcasualtycompaniesemploy12,525peoplein2015andanticipateincreasingthisnumberby48%to18,556by2018.Fourcompaniesexpecttoaddmorethan500newemployeesandoneparticipantplansaverysignificantincreaseby2018.

Branches, sub-branches and officesThe14propertyandcasualtycompanieshave81branchesandapproximately288sub-branches,salesandservicecenters.

By2018,thepropertyandcasualtycompanieswillexpandtheirbranchestoover100;however,theywillalmostdoubletheirsub-branchnetworktoexceed500.Twocompanieswillcontributetoalmostallofthisexpansion.

Property and casualty policyholdersThedominanceofAXATianpinginthissectormeansthatitisnotpossibletodocumentthenumberofpolicyholders;however,itisaccuratetosaythatanumberofcompaniesprojectverysignificantincreasesby2018.

Property and casualty internet customersJustthreecompaniesprovideddataoninternetordigitalcustomers.Togethertheyplantohavemorethanonemillioncustomersby2018.

Figure 9: Business mix of foreign life companies premium income in 2014

Figure 7: Business mix of foreign property and casualty companies premium income in 2014

Figure 8: Top five foreign life companies by premium income in 2014

Figure 6: Top five foreign property and casualty companies by premium income in 2014

Source:CIRC,Annual Report of the Chinese Insurance Market 2015




Top five foreign property and casualty insurers

Thetopfivepropertyandcasualtycompaniesbypremiumincomein2014wereAXATianping,followedbyGroupamaAVIC,AIG,StarrandAllianz.

Thebusinessmixforalltheforeignpropertyandcasualtycompaniesshowsthatautoinsurancedominateswith56.6%followedbycommercialproperty,liability,cargo,accidentandothers.

Top five foreign life insurers

Thetopfivelifecompaniesbypremiumincomein2014wereICBC-AXA,followedbyAIA,MetLife,GeneraliandCIGNA-CMB.

Participatinglifedominatesthebusinessmixfollowedbyordinarylife,health,accidentandothers.


CIGNA-CMB7.2%

Generali7.6%

MetLife9.2%

AIA14.4%

GroupamaAVIC8.7%

AIG 7.0%

Starr 6.3%

Allianz 5.3%

AXATianping39.4%

Auto56.6%

Project2.1%

Others2.8%

Others0.3%

Accident4.7%

Accident3.5%

Health16.3%

Ordinary23.1%

Agriculture5.9%Cargo7.3%

Liability9.1%

Participating56.8%

Commercialproperty11.5%

ICBC-AXALife21.0%


Source:CIRC

Source:CIRC

Figure 10: Distribution of the offices of the foreign life insurance companies in mainland China

Figure 11: Distribution of the offices of the foreign property and casualty insurance companies in mainland China

Office networks for foreign insurers

Theforeigninsurancecompanies’networksalsodisplayanoticeableemphasisontheEasternseaboard.Guangdong,ShanghaiandBeijinghavethehighestdensityofforeignlifecompanybranches.

Therearefewerforeignpropertyandcasualtycompanies,andtheyhavealessdevelopednetworkwhencomparedtotheforeignlifecompanies.

ThemapshowsthattheforeignpropertyandcasualtycompanieshavenotyetpenetratedsignificantlyintoWesternareas.





Marketplace dynamicsSeveralcommonthemesemergedfromthisyear’ssurveyinrelationtotheoverallinsurancemarket.

The C-ROSSTheChinaRisk-OrientedSolvencySystem(C-ROSS)isChina’ssecond-generationsolvencysupervisionsystem.Ithasthreeobjectives:toassessriskandthenecessarycapitalrequirements,tomitigateriskexposureandtoassistinthedevelopmentofsolvencysupervisioninemerginganddevelopedmarkets.Itwasviewedbybothlifeandpropertyandcasualtycompanyparticipantsasthemostimportantdevelopmentin2015.

Government recognition of the importance of insurance in the economy

InAugust2014,theStateCouncilannounceditssupportfortheopeningupandmodernizingoftheindustry.

Thismulti-facetedconfirmationofthesignificanceofanexpandedandfurther-developedinsurancesectorisviewedverypositivelybyforeigninsurers.Theybelievethismorereceptiveapproachwillremovebarriersandfacilitategrowth.TheStateCouncilsetapenetrationtargetof5%(itwas3.18%in2014)andper-capitapremiumsofUS$565by2020.

Future growth in health insurance

Arecurringthemeistheneedtoexpandcoverageinthehealthsector.Withagrowingmiddleclass,risingincomelevelsandanagingpopulation,theneedforbetterhealthcoverageiswidelyacknowledgedandemphasized.Asaresult,bothlifeandpropertyandcasualtycompaniesforeseeamyriadofopportunitiesinthehealthinsurancesector;however,thedebateonhowbesttotacklethemarketthwartsprogress.ManyrecognizedandsuccessfulhealthinsuranceprovidersremainonthesidelinesinChina.

Chinese insurers “going out”

Chineseinsurershavebeguntoexpandinternationally.ThisstrategyhasbeensupportedintheStateCouncildirectivementionedabove.Attheendof2014,12domesticinsurershadestablished32overseasoperations.

Foreigninsurers,particularlyonthepropertyandcasualtyside,believetheycanbenefitfromthis.

TheyhopetofosterrelationshipswithChinesecounterpartsastheymoveintooverseasmarkets.

Digital markets

Theopportunitiessurroundingmarketinganddeliveryofinsurancethroughinternetchannels,remainsacommontheme.Although,asnotedlaterinthereport,theforeigninsurersremainchallengedonhowtoleveragethisopportunity.InJuly2015,10Governmentagenciesissuedjointguidelineson“internetfinance”tohelpdeveloparegulatoryframework.Thefinancialmarketplaceisexperiencingrapidchangeasaresultofinternetfinance.

Theroleofmobileinteractionisacceleratingandnowaccountsforaround60%ofonlinepayments.

Chineseconsumersareincreasinglyadoptingthisdeliverychannelandforeigninsurersneedtocapitalizeonthesetrends.

Other developments in the marketplace

Developmentsthataremorespecifictoeitherlife,propertyorcasualtycompaniesarenotedbelow.

Life company changes

Thelifecompaniesreferencedthefollowingdevelopments:

• Continuationofpricingliberalization

• Taxreliefforhealthinsurance

• Improvementsinhealthmanagement

• Thegrowthandimportanceofretirementsavings

Property and casualty company changes

Thepropertyandcasualtycompanieshighlightedthefollowingchanges:

• Deregulationintheautoinsurancesector(includingtariffliberalization)

• Theneedforincreasedcapitaltosupportautoinsurance

• Thepossibilityofgrowthbyacquisition,ratherthangenericgrowth,giventhemoreliberalviewsofpolicymakers

• Opportunitiesinthemarineinsurancesector

Marketplace uncertaintiesTheparticipantsidentifiedthefollowingmarketplaceuncertainties:

• TheimpactofC-ROSS;willitfreeupcapital?Willsomecompaniesengageinhigherrisksasaresult?

• Deregulationofmotorinsurance;rateswilldrop,andtherewillbeincreasedproductdifferentiationandwidercustomerchoice.Willthisfavorthelargercompaniesattheexpenseofsmallerones?

• Enforcementofregulations.WillarelaxationofsomeregulationsparadoxicallyincreaseGovernmentcontrol?

• Thefuturestabilityofthemacroeconomicenvironmentandstockmarketfluctuations

• Capitalmarketsreform

• Impactoftheinternetfinanceguidelinesoninsurance

• Althoughhealthcostsarerisingdramatically,somehealthinsuranceproductshavepricingcaps,whichpreventprovidersfromrepricinginlinewithmarketplaceescalations


Figure 12: Change factors for life companies

Based on the survey responses of 16 life companies

Merger

s/conso

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Economies

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Existin

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Based on the survey responses of 14 property and casualty companies

Economies

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Figure 13: Change factors for property and casualty companies


Marketplace drivers of changeParticipantswereaskedtoidentifyandrankthetopfivedriversofchangefromalistof21factors.Theresultsshowsomevariationbetweenlife,propertyandcasualtycompanies.

Themostimportantdriverbehindchangefortheforeignlifecompanieswastheregulatorychanges.Whileregulationmayhavebeenseeninthepastinanegativecontext,today,regulatoryrelaxationcanbeseeninamorepositivecontext.

Itmayfree-uptheenvironment,increasetransparencyandclarityandprovidenewopportunities.Digitalmarketing,whichwasthetopdriverinlastyear’ssurvey,isnowinsecondplace.

Theagingpopulationcontinuesinthirdplacethisyear.Bothcapitalmarketchangeandtechnologyfollowtocompletethetopfive.

Propertyandcasualtycompaniesscoredregulatorychangeswellaheadofotherfactors.Theyshowsimilaremphasisintheirlifecounterparts,withdigitalmarketinginsecondplace,butelevateurbanizationandtheeconomytothetopfivegroup.


OtherEstablished domestic insurersBank subsidiaries

Foreign insurers already competing in your market

Internet insurance companies

Niche players

Figure 14: Sources of competitive threats to foreign life insurers in the next five years


Figure 15: Sources of competitive threats to foreign property and casualty insurers in the next five years

Other

Established domestic insurers

Banksubsidiaries

Foreign insurers already competing in your market

Internet insurance companies

Foreign insurers

Niche players

Domestic insurers still represent the greatest threat Thegreatestcompetitivethreatforforeignlifeinsurersoverthenextfiveyearsarethedomesticcompanies.Giventhedominanceofthetopfiveinbothlifeandpropertyandcasualtyinsurance,thisisnotsurprising.

Attheendof2014,therewere45domesticlifecompanies.Thepremiumincomemarketshareofthetopfivelifecompanieswas62.5%.Withinthisgroup,ChinaLifehad26.1%;PingAn,13.7%;NewChinaLife,8.7%;ChinaPacificLife,7.8%;andPICCLife,6.2%.(Source:CIRC, Annual Report of the Chinese Insurance Market,2015)

Injointsecondplacewereotherforeigninsurersandbanksubsidiaries.Internetinsurancecompanieswereinfourthplace.

Thetopthreecompetitorsfortheforeignpropertyandcasualtycompanieswereagaindomesticinsurers,otherforeigninsurersandinternetinsurancecompanies.

Therearealso45domesticpropertyandcasualtycompanies.Themarketshareofthetopfivecompaniesin2014was74.7%;PICChad33.4%;PingAnPropertyandCasualty,18.9%;ChinaPacificProperty,12.3%;ChinaLifePropertyandCasualty,5.4%;andChinaUnitedPropertyandCasualty,4.6%.(Source:CIRC, Annual Report of the Chinese Insurance Market, 2015)


Figure 16: Aging of China’s population 2015 to 2100

Source:UnitedNations,WorldPopulationProspects:The2015revision,keyfindingsandadvancetables


Change in the “one child” policyInOctober2015,Chinarevisedits“onechild”policythatwasfirstintroducedbyDengXiaopingin1979.FollowingtheFifthPlenumandreleaseofthe13thFiveYearPlan(2016-20),asof2016coupleswillbeallowedtohavetwochildren.Thepolicyhadbeenrelaxedin2000permittingcouples,whoarefrom“onechild”familiestohavetwochildren.InthepastChina’seconomyhasbenefitedfromareadysupplyofcheaplabor.However,between2010and2030theworkforceisexpectedtolose67millionworkersaccordingtotheUnitedNations.

ThemedianageofthepopulationinChinain2015is37years,ayearyoungerthanintheUnitedStates.However,basedonUNprojectionsmadepriortothepolicychange,by2050themedianageintheUnitedStateswillbe42years,incontrasttoChinawhereitwillhaverisento50years.

Age distribution of the population

Figure16showstheagedistributionofthepopulationin2015,2050and2100.

Itwaspreparedin2015bytheUnitedNationsbeforetheChinesegovernment’spolicychange.Itshowsthedeclineinthedistributionofpeopleintheworkforce,aged15to59,relativetothoseover60andover80yearsold.Theover60agegroupjumpsfrom15.2%in2015to36.5%in2050and39.6%in2100.

Furthermore,theover80agegroupincreasesfrom1.6%in2015to16.5%by2100.

The“onechild”policyhadraisedmanyconcerns,includingthecountry’sabilitytosustainconsumerdemandandstimulatefurthereconomicgrowth,andasaresult,theworkforce’sabilitytocontributetopensionsandsupporthealthinsurance.

Different age groups

Percentage distribution

0

10

20

30

40

50

60

70

80

2100

2050

2015

80+60+15-590-14

Figure 17: Population projections to 2050 based on the one child policy change

Source:PopulationReferenceBureauProjection2015-50

The effect of policy change on China’s population

1.50

2 children per womanbeginning 2016

Gradual increase to2 children per woman

Currentprojection

1.45

2015 2020 2025 2030 2035 2040 2045 2050

1.40

1.35

1.30

Popu

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Predicted demographic impact of policy change

The“onechild”generationarenowintheir20sandearly30sandasaresult,these“sibling-less”couplesarealreadyfacedwithsupportingfourelderlyparents.Inturn,theymaybereluctanttohavetwochildren.Increasedaffluence,afocusonhighereducation,employmentmobilityandrisingcostsmayinfluencetheirdecisiontohaveasecondchild.IfChinafollowsthepatternofotherEastAsiancountriestheremayonlybeasmallincreaseinfertility.

ThePopulationReferenceBureau,aUS-based,demographic“thinktank”hasmadeseveralprojectionsfollowingChina’sannouncementtopermitcouplestohavetwochildren.(Seefigure17).

Thetoplineenvisagestwochildrenperwomanfrom2016(consideredbymostcommentatorstobehighlyunlikely).Interestingly,evenwiththishighlyoptimisticscenario,thepopulationprojectionpeaksonlyfiveyearslaterin2030relativetothebottomline(whichassumesthe“onechild”policyremainsinplace).Themiddleline,whichisprobablyamorelikelyscenario,stillprojectsthepopulationpeakingin2030at1.43billionpeople.

Impact on the insurance sector

Whatisclearisthattheshrinkingworkforcewillnotbenefitfromthenewpolicyformorethanadecadeandahalf.Butduringthistime,therewillbeincreaseddemandsongovernmentservices,suchaseducation.

Inthelongerterm,ariseinthebirthratewillassisttheeconomy.Itwillhelpstimulateconsumerdemand.Alargerworkforcewilladdtothenumberofpensioncontributorsunderthepay-as-you-go(PAYG)scheme.But,wedonotbelieveitwillnotsolvethepensionsustainabilityissue,whichwillstillrequirefundamentalreform.

Fromaforeigninsurer’sperspective,intheshorttermandmediumterm,thedemographicimpactwillbeminimalbutinthelongertermitwillbemoremeaningful.Alargerpopulationwillresultingreaterdemandfortravel,home,car,creditandlifeinsurance.

Asnotedelsewhereinthisreport,increasedaffluence,growthinthemiddleclass,bettereducation,improvedlifestylesandmorepeoplelivinglongerwillleadtoincreaseddemandforinvestmentandretirementplanningproductsandtolifeandmedicalinsuranceservices.

Increasing Same Declining

Intense ****** ***

Moderate **** **

Light

Basedonthesurveyresponsesof15companies

Figure 18: Traditional insurance — marketplace competition


Intense *** *

Moderate **** ****

Light * **


Figure 19: Investment-linked insurance — marketplace competition


Intense **** **

Moderate ****** ***

Light

Basedonthesurveyresponsesof15lifeandsixpropertyandcasualty(P&C)companies

Figure 20: Protection insurance — marketplace competition


Participants’ assessment of competition in a variety of different insurance markets Participantscommentedonthelevelofcompetitioninanumberofdifferentareasofinsurance,andwereaskedtoindicatewhethertheybelievethecompetitionwasincreasing,decliningorremainedthesame.

Traditional insurance Themajorityofparticipantsbelievethattraditionalinsuranceisintenselycompetitive.Whilesixparticipantsthoughtitwasmoderatelycompetitive,fourofthesecompaniesindicatedthatthelevelofcompetitionwasincreasing.

These“traditional”insuranceproductsoftenhavealowfacevalueandaresoldthroughtheagencysaleschannel.

Investment-linked insurance Inkeepingwithlastyear’sassessment,themajorityofparticipantsscoredcompetitionforinvestment-linkedproductsasmoderate.Threeparticipantsdescribedlightcompetition.

However,eightofthe15participantsbelievethatcompetitionisgrowing.Asthefinancialsectorcontinuestoderegulate,increasedcompetitionwillbeexperiencedacrosstheentiresector.

Protection insuranceInlastyear’ssurvey,onlytwoparticipantsconsideredcompetitiontobeintense.Thisyearthatnumberhasincreasedtosixcompanies.Furthermore,10ofthe15respondentsbelievethelevelofcompetitionisincreasing.

Asaresult,companieswillneedtorefinetheattractivenessoftheirprotectionproductsandmakesuretheybetteraddresstheneedsoftheirtargetcustomers.



Intense ****** **

Moderate *********

***

Light *

Basedonthesurveyresponsesof15lifeandsixpropertyandcasualty(P&C)companies

Figure 21: Health insurance — marketplace competition


Intense *******

***

Moderate *******

***

Light

Basedonthesurveyresponsesof10lifeand10P&Ccompanies

Figure 22: Personal accident insurance — marketplace competition


Intense ***** ******

Moderate ***

Light


Figure 23: Group life insurance — marketplace competition


Health insurance Inlastyear’ssurvey,16companiesansweredthisquestion.In2015,21respondents,15lifeandsixpropertyandcasualtyansweredthequestion.Eightconsidercompetitiontobeintense,and16companiesbelievecompetitionisincreasing.

Asnotedlaterinthisreport,healthinsuranceisincreasinglyontheradarofmanyforeigninsurers.

Althoughtheopportunitiesandpotentialofthehealthsectorareexpandingrapidly,foreigninsurerscanexpectstiffcompetitionfromtheirforeigncounterpartsandawiderangeofdomesticinsurers.

Personal accident insuranceOnceagain,competitionisincreasingforpersonalaccidentinsurance.Respondentsassessthecurrentlevelofcompetitiontobesplitevenlybetweenintenseandmoderate.

Group life insuranceGroupliferemainsheavilycontested.Elevenofthe14participantsclassifycompetitionasintense.ForeigninsurersoftenhavecorporateconnectionsestablishedinothermarketsoutsideChinaandusethesecontactstodevelopbusiness.

Asforeigninsurersattempttogrowbusinesswithindigenouscompaniesandgoheadtoheadwithdomesticinsurers,developingnewbusinessbecomesevenmorechallenging.



Intense ***********

********

Moderate ****** **

Light


Figure 24: Group accident and health insurance — marketplace competition


Intense ****** **

Moderate **

Light

Basedonthesurveyresponsesof10P&Ccompanies

Figure 25: Auto insurance — marketplace competition


Intense ** *******

Moderate * **

Light


Figure 26: Commercial property insurance — marketplace competition


Group accident and health insurance Twenty-sevenparticipantsrecordedscoresforgroupaccidentandhealth.

Nineteencategorizedcompetitionasintense,14ofthisgroupwerelifecompaniesandfivewerepropertyandcasualtycompanies.

Auto insuranceTenparticipantsrespondedandeightbelieveautoinsurancecompetitionisintense.Thesamehighpercentagebelievescompetitionisgettingmoreintense.Asaresult,foreigninsurerscananticipateatoughandchallengingmarketplace.Thissuggeststheywillneedtoseekrelationshipsthatminimizedirectpricecomparisons.

Commercial property insuranceLastyear,fourofthe12participantsindicatedthatcompetitionwasintense.Thisyear,onlytwoclassifyitasintense,whilesevensuggestitremainsthesame.Perhaps,asthecommercialpropertymarketretreats,insurancewillfollowsuit.



Intense

Moderate ** ** *

Light ****


Figure 27: Homeowner insurance — marketplace competition


Intense **** *****

Moderate ***

Light


Figure 28: Cargo and transportation insurance — marketplace competition


Intense ***** *

Moderate **** ** *

Light


Figure 29: Liability insurance — marketplace competition


Homeowner insuranceHomeownerinsurancestandsoutfromalltheotherinsurancecategoriesbecausecompetitionisdeemedtobelightandrelativelysubdued.

HomeownerinsurancecontinuestofailtocapturetheattentionoftheChineseconsumer.Consumersremainunconvincedofthebenefitsofpayingtoinsurehomes.

Themarketdisplayslowlevelsofcompetitionbetweeninsuranceproviders.

Cargo and transportation insuranceThree-quartersofparticipantsviewcargoandtransportationasintenselycompetitive.Morethanhalfthegroup,however,believesthelevelofcompetitionremainsstableatpresent.

AsShanghaicontinuestodevelopandmatureasamarineinsurancecenter,insuranceratescanbeexpectedtobecomemorecompetitive.

Foreignanddomesticinsurerswillattempttowrestleloyalclientsawayfromtraditionalprovidersandcompetitionwillexpand.

Liability insurance Thisnichemarketcontinuestoexpandandbecomemorecompetitive.Paradoxically,oneparticipantbelievesthelevelofcompetitionhadactuallydeclined.


Intense *** ***

Moderate * *** *

Light *


Figure 30: Engineering insurance — marketplace competition


Intense *

Moderate *** **

Light


Figure 31: Agriculture — marketplace competition


Intense ***********

*

Moderate ****** *

Light ***


Figure 32: Internet insurance — marketplace competition

Engineering insuranceEngineeringinsuranceisequallydividedbetweenintenseandmoderate.

Thissectorwillfollowthedirectionoftheeconomy.ItmayalsogrowasaresultofChina’s“goingout”strategy.

Thismayhelpforeigninsuranceinothermarkets,butitwillalsolifttheskillsetsandappetiteofChineseinsurers,perhapsfollowingclientsintoforeignmarkets.

Internet insurance Interestcontinuestogrowintheinternetfinancemarketplace,and20respondentsindicatedthatcompetitionwasincreasing.Foreigninsurershavesuggestedthatelectronicdistributionmayhelpovercometheirrudimentarydistributionnetworks.

Theformidableadvancesbydomesticinsurerswillmakethisachallenge.

Fivelifeandsevenpropertyandcasualtycompanies(morethanhalftherespondents)alreadyrecognizethecompetitiontobeintense.

Agriculture insuranceOnlysixcompaniesansweredthisquestionandfivebelievethelevelofcompetitionismoderate.Agricultureinsuranceisexpectedtogrow.

AONBenfield*predictsthatChinawillbecometheworld’slargestagriculturalinsurancemarketwithin20years.

*AsiaInsuranceReview,Agriculture insurance: China: Leading the agricultural

insurance market,http://www.asiainsurancereview.com,June2014



Figure 33: What makes doing business in China difficult for life companies?

Figure 34: What makes doing business in China difficult for property and casualty insurance companies?

Based on the survey responses of 15 life companies in 2015, and 12 life companies in 2014

-1.5 -1.0 -0.5 0.0 0.5 1.0 1.5

20142015

Accounting matters

Foreign insurers

Taxation

Corporate governance

Market volatility

Restricted product range

Risk management

Consumer loyalty

Ownership restrictions

Attracting profitable customers

Innovative products

Brand awareness

Bancassurance

Customer retention

Personnel issues

Domestic insurers

Regulations

Based on the survey responses of 13 property and casualty companies in 2015, and 12 property and casualty companies in 2014

-2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5

Shareholder issues

Bancassurance

Corporate governance

Accounting matters

Foreign insurers

Market volatility

Taxation

Restricted product range

Risk management

Consumer loyalty

Domestic insurers

Innovative products

Customer retention

Attracting profitable customers

Brand awareness

Personnel issues

Regulations

20142015



Challenges faced by foreign insurersParticipantswereaskedtoscoreanumberofchallengesonascaleofonetofive,wherefiverepresentsmaximumdifficulty.Resultswerethendisplayedonacentralaxisrepresentinganeutralscoreofthree.Challengesshowntotherightoftheaxisscoredabovethree,whilethoseontheleftscoredbelowthree.

Foreign life insurersForeignlifeinsurerscontinuetoplaceregulationsandcompetitionfordomesticinsurersasthemostchallengingpartofdoingbusiness.

However,in2015,scoreswerereducedforpersonnel,brandawareness,restrictionsonownershipandcustomerloyalty.Theyreducedtheirscoresforotherforeigninsurersascompetitorsin2015.Thisreinforcesthepointthattheimpactofcompetitioncomesfromthedomesticplayers.

Foreign property and casualty insurersSimilaritiesanddifferencesarefoundinthepropertyandcasualtysector.Theforeignpropertyandcasualtyinsurersbelieveregulationsandpersonnelissuesremaindifficultalongsidebuildingbrandsandwinningandretainingprofitablecustomers.

Interestingly,competitionfromotherforeigninsurersrecordapositivescorein2015,whichmayreflectcompetitionbetweenotherforeigncompaniesinmotorinsurance.

Yes

No

Yes


Figure 36: Is bancassurance sustainable?



5/10

7/10

8/10

10/10

Based on 15 life companies

9/10

Respective scores for companies

Figure 35: Support from the domestic partner in a JV

Support coming from the domestic partner in a JV life companyTheforeignpartnersin15JVlifeinsurancecompaniesaregenerallypositiveaboutthelevelofcommitmentoftheirChinesepartners.Participantswereaskedtoregistertheirlevelofsupportonascaleofoneto10,where10representsmaximumsupportandone,onlyveryminimallevelsofsupport.Fourcompaniesrecordedtheless-than-convincingscoreoffiveoutof10forsupport.In2014,twocompaniesscoredjustthreeoutof10,sothesituationhasimproved.Attheoppositeendofthescale,threecompaniesscored10outof10andthreemorecompaniesnineoutof10.ThemajorityoflifecompaniescommentingonotherJVsbelievethatsignificantshareholderdiscussionsareongoing.

Forexample,in2014,CNOOCdivestedfromtheAEGONCNOOCJV.ThenewarrangementreplacedCNOOCwithTsinghuaTongfang.TsinghuaTongfangwasestablishedbyTsinghuaUniversitytoleveragetheUniversity’sR&Dstrengths,andislistedontheShanghaiStockExchange.

TheCIRCalsoapprovedING’s50%stakeinING-BOBLifetoBNPParibasCardif.

Inaddition,theJV,Sino-FrenchLife,betweenChinaPostandFrenchCNPAssurances,overhauleditsshareholdingswhenChinaPostdiluteditsholdingfrom50%to25%.ChinaPostalreadyhasitsowndomesticinsurancecompany(rankedin10thpositionin2014).

FrenchCNPhasexperienceofapostalconnectioninitshomemarket.Itholdsabout10%ofFrance’sinsurancemarketanddistributesproductsthroughouttheFrenchpostalnetwork.

What will happen to bancassurance?Theparticipantswerealmostevenlysplitregardingthefutureofbancassurance.OneNorthAmericaninsurernotedthatthebank’sproductswerelargelydepositreplacements,hadextremelythinmarginsanddidnotmeettheinsuranceneedsofmostbankcustomers.

Anotherparticipantcommentedthatbanksseeinsuranceasathird-tierproductanddonotprovideaneeds-basedassessment.Manybelievethatbancassuranceasacommodity-drivenserviceisvulnerabletointernetinsurancemarketing.

In2014,Citibanksigneda15-yearpartnershiparrangementwithAIAtodistributeinsuranceproductsthroughoutitsAsiannetwork.Atthetime,BernsteinResearchcommented,“thisisaperfectfittoAIA’sprotection-orientedproductstrategy.”(Source:FinanceAsia,14February,2014).



Pricing in the life sectorTherehasalreadybeensomemovementtowardliberalizationofpricinginthelifesector.Commentingontheimpactontheirownindividualbusinesses,respondentsfeltthat,overall,itwaspositive,asitdrivescompetitionandputsmorepressureonmarginsandimprovementsinproductivity.Oneobserversuggestedthatlarger,strongercompanieswillbecomemoredominantandpressurewillencouragemergersandacquisitions.

TheStateCouncilhasalreadyapprovedpremiumratereformforuniversallife,andfurtherliberalizationofparticipatingproductsisexpectedin2015.Theimpactofliberalizationacrossthefinancialsectorwillalsohaveanimpactoninsurance.InMay2015,theStateCouncilannouncedplanstoliberalizebankdepositsfurtherandestablishedadepositinsurancescheme(fordepositsinRMBandforeigncurrenciesofuptoRMB500,000).

Thesechangeswillempowerfinancialconsumersandforceallfinancialinstitutionstobecomemorecompetitive.



Figure 37: Breakdown of foreign company’s total business in China between Tier 1 cities and regions beyond Tier 1 cities

Percentage of business

Respondents

0 20 40 60 80 100

Beyond Tier 1 cities

Tier 1 cities

P&C 13

P&C 12

P&C 11

P&C 10

P&C 9

P&C 8

P&C 7

P&C 6

P&C 5

P&C 4

P&C 3

P&C 2

P&C 1

Life 16

Life 15

Life 14

Life 13

Life 12

Life 11

Life 10

Life 9

Life 8

Life 7

Life 6

Life 5

Life 4

Life 3

Life 2

Life 1

The emphasis on Tier 1 citiesFourlifecompanieshave80%oftheirbusinessinTier1citiesand,overall,12lifecompanieshaveatleast50%ofbusinessinTier1cities.Onlyoneparticipanthasmorethan50%outsideTier1cities.

Tier1citiesarelargedensely-populatedmetropolises,withhigherincomelevels.Definitionsvary,buttypically,theyincludeBeijing,Shanghai,GuangzhouandShenzhenand,onoccasion,mayalsoincludeTianjinandChongqing.

Withinthegroupof13propertyandcasualtycompaniesthatprovideddetails,threehavealltheirbusinessinTier1cities;however,fivecompaniesrecordedmorethan50%ofbusinessoutsideTier1cities.

Thepropertyandcasualtycompaniesshowgreaterpolarizationofbusiness;nonehavea50%/50%mix.ThesepercentagesaresupportedbythedistributionmapsofforeignlifeandforeignpropertyandcasualtybranchesatMarch2015,asshownonapreviouspage.

ThestrongrepresentationofforeigninsurersinBeijing,Tianjin,ShanghaiandGuangdong(whichincludesGuangzhouandShenzhen)isveryapparent.

Premiumrank2014

Autoinsurance

Cargoinsurance

Enterprisepropertyinsurance

Engineeringinsurance

Liabilityinsurance

1 AXATianping TokioMarine SompoJapanNipponkoa

Allianz AIGChina

2 Starr SamsungP&C SamsungP&C ZurichGeneral Allianz

3 LibertyInsurance

AIGChina Zurich SamsungP&C Zurich

4 FubonInsurance

MitsuiSumitomo

MitsuiSumotomo

GeneraliChina SompoJapanNipponkoa

5 CathayInsurance

SompoJapanNipponkoa

AIGChina AIGChina Chubb

Top foreign property and casualty insurers by business line Thetopfivecompaniesinthefollowingbusinesslinesareshowninthetablebelow.Fulldetailsincludingdatacoveringallcompaniesareshownintheappendix.

Figure 38: Top five foreign property and casualty insurers by business line in 2014


One supervisionemerging markets

risk-oriented with value consideration

Quantitativecapital

requirements

Marketdiscipline

mechanism

Qualitativesupervisory

requirements

Company’s own solvency management (COSM)

Institutional characteristics

Supervisorypillars

Supervisoryfoundation

A conceptual framework for C-ROSS

ForeigncompaniesarewellpreparedfortheimplementationofC-ROSS.

TheyarealreadyfamiliarwithEurope’sSolvencyII’sriskmanagementandgovernancerequirements,andthebroadobjectivesthatseektobringaboutglobalregulatoryandsupervisoryconvergence.

AttheheartofSolvencyIIisathree-pillarapproachcoveringquantitativecapitalrequirements,aqualitativesupervisoryreviewandmarketdiscipline.TheC-ROSSframeworkadoptsasimilarthree-pillarstructure,asshownbelow.

However,C-ROSShasadapteditsframeworktobetterreflectthespecialneedsandcharacteristicsofanemerginginsurancemarket.

Figure 40: The three pillar structure of C-ROSS

Yes58%

No42%

Based on the survey responses of 26 companies

Raise additionalcapital

Figure 39: Raise additional capital?

Foreigninsurersbelievethattheyareadequatelycapitalizedatpresent,andthinkthatC-ROSSwillhaveapositiveimpactontheircapitalneeds.However,presumablyasaresultoffuturegrowthplans,morethanhalfoftheparticipantsindicatedthattheyplannedtoraiseadditionalcapital.Attheindustrylevel,theCIRCnotedintheir2014annualreport,thatonlyonecompanyhadanunsatisfactorysolvencylevel.

Ontheotherhand,underC-ROSS,asat31March2015,theindustryaverageforpropertyandcasualtycompanieswas282%;forlifecompanies,256%;andforreinsurancecompanies,383%.Also,asat31March,2015,13companiesfailedtomeettheminimumsolvencyrequirementunderC-ROSS,whichcomprisesthreeP&Cinsurers,sevenlifeinsurersandthreereinsurers.

Theforeigninsurancecompanies’solvencylevelsattheendof2014areshowninFigure46.

Current solvency levels

Source:CIRC


Regulatorydynamics

4

Regulatory issuesThissectionhighlightsthreeimportantregulatorydevelopmentsin2015thatarebeingcloselyfollowedbyforeigninsurers.Theyare:

• C-ROSS

• ExpansionoftheFTZs

• Regulationoftheinternetchannel

• Regulationisdrivingchange,especiallyC-ROSS,theFTZsandinternetinitiatives

• Relaxedbranchexpansionregulations,alongsideasuccessfuldigitalstrategy,shouldenableforeigninsurerstoexpandtheirfootprint

• Healthandautooffermajorgrowthopportunities

Yes61%

No39%


Resources forC-ROSS

Figure 41: C-ROSS–adequate resources in place?

Regulatorydynamics


Free Trade Zones (FTZs)TheopportunitiessurroundingtheShanghaiFTZ(itsexpansiontoincludeLujiazui)andthethreeadditionalzonesinGuangdong,TianjinandFujian(announcedbyPremierLiKeqianginDecember2014)remainlargelymisunderstoodbytheforeigninsurers.

Theviewsoftheforeigninsurersrangedfromnointerestthroughtoactiveengagement.Manyindicatedthattheymaintainedawatchingbrieftoidentifyopportunitiesthatmightemergeinthefuture.

Propertyandcasualtyinsurerscouldseeclearapplicationsinareassuchasreinsurance,marineinsuranceandinsurancerelatedtoforeignandinboundtrade.OneAsianinsurersuggestedtheremightbepotentialforregionalheadquarters,claimsadjusters,callcenters,riskmanagement,agencies,etc.Otherssuggestedthatnewmedicalfacilitiesmightbesetupinthezones.

Alargeforeignlifeinsurerindicatedthattheystillneededmoreclarityandremainedina“waitandsee”mode.Anotherlifeinsurersuggestedthatitmightprovidehigherreturnsasaresultofmorerelaxedinvestmentrules.

Questions on the FTZsParticipantswereaskedtoproposequestionstheymighthavefortheCIRCregardingtheFTZsandtheirrelevancetoforeigninsurancecompanies.

• WhatincentivesexisttoencourageforeigninsurerstosetupinsideanFTZ?

• Ifwesetupinsidethezonecanwedobusinessnationwide?(mostcommonlyaskedquestion)

• WhichcategoriesofinsurancewillbenefitfromaFTZ?

• DothesamerulesapplytoforeignanddomesticcompaniesinsidetheFTZs?

• HowcanlifeinsurersbenefitfromaFTZlocation?

• AreallproductsinsidetheFTZinRenminbi?Whenwillitbepossibletoofferforeigncurrencyproducts?

• WhatarethebenefitsforahealthinsuranceproviderlocatinginsidetheFTZ?

• Aretherespecialtaxbenefitsforinvestments?

• Aretheretaxbenefitsforinnovativeinsuranceproducts?

Progress on C-ROSSTheforeigninsurerswereaskedtocommentontheimpactofC-ROSSontheinsuranceindustry.

Thepropertyandcasualtyinsurersbelieveitwillhaveamajorimpact,althoughmuchwilldependonhowitisimplementedbytheCIRC.Oneparticipantbelieveditwouldreleasecapitalforallthenon-lifeinsurers.

Autoinsurerswillbenefitfromahighersurplus.Theforeigninsurersbelievetheappointmentofachiefriskofficerisapositiveinnovationfordomesticinsurancecompanies,butlessrelevantforthesmallerforeigninsurers.

Severalforeigninsurerscommentedthatsmallandmediumsizeddomesticinsurerswillrequiremorecapital.

TheforeignlifeinsurersalsobelievethatC-ROSSrepresentsa“stepchange”fortheindustry.Theyarguethatitwasaverypositivemoveforthetop10lifeinsurers,butthatthesmallercompanieswillbechallenged.However,otherscautionthatC-ROSScouldaffecttheperformanceofthelargeCategory1insurers.Category1insurersaredefinedasthosewithmorethanRMB5billion(life)andRMB20billion(non-life)premiums.

TheforeigninsurersbelievetheindustrylackstheexperiencedprofessionalstoimplementC-ROSS.Theypredictincreasingdemandsforriskmanagementpersonnel.

Eighteenparticipantsrespondedtoaquestionregardingtheneedforadequateskillsandresourcestoaddressthenewsolvencyrequirements.Withinthisgroup,sevencompaniesadmittedtheycurrentlydidnothavekeypersonnelinplace.

Figure 42: Is there now a level playing field for foreign life companies?

Figure 43: Do you believe lifting the 50% ownership cap will encourage further investments by foreign partners?

No14%

Based on responses from14 life companies

Yes86%

Lifting the ownership cap will increase investmentAlargemajorityofparticipantsbelievethatforeigninsurerswouldincreasetheirinvestmentsifthe50%ownershipcapwasrelaxed.

Oneparticipantcontendedthatsuchareformwasstillfiveyearsaway.

Anothersuggestedthatarelaxationwouldsharpenthefocusbetweenforeigninsurersthathadadistinct,committedgameplanforChinaandthosesimplymaintainingthestatusquo.

Regulatorydynamics

31Future directions for foreign insurance companies in China 2015 || Future directions for foreign insurance companies in China31

No20%

Based on responses from15 life companies

Yes80%

Life companies and branch expansionFifteenlifecompaniesrespondedunanimouslytoaquestionregardingbeingpermittedtoapplyformultiplebranchlicensessimultaneously.

Threeofthe15companiesbelievethattheyweretreatedonthesamebasisasdomesticlifeinsurers.Fourcompaniessuggestedthattheyexpectedtobegrantedsixnewbranchlicensesoverthreeyears,ontheassumptionthattwobranchesayearwasacceptable.However,twocompaniesenvisagedreceivingapprovalforthreebranchesoverthethreeyearperiodandonecompanypredictedtwobranches.

TheCIRCdatasuggestedthat,collectively,theforeignlifecompanieshavesecured12newbranchlicensesoverthelastyear.Thisincludesthreecompaniesthathaveobtainedpermissionfortwobrancheseach.

Opinionsvariedonthelikelihoodofobtainingnewbranchpermissions.Onecompanyindicatedthatonlyonenewbranchcanberequestedatatime,whileanothersuggestedthatnewlicenseswerenowbeinggrantedmorereadilythaninthepast.

Figure 44: Do you believe multiple investments by foreign insurers should be allowed?

Figure 45: Might there be consolidations?

No

Yes

89% believe there will be

consolidations

Based on responses from 28 companies

Regulatorydynamics

32 | Future directions for foreign insurance companies in China 2015 32Future directions for foreign insurance companies in China |

Yes90%

No10%


Market consolidations likelyParticipantspredictconsolidationsinthedomesticsectorgoingforward.IntensecompetitionandC-ROSSsolvencyissueswilldriveashakeoutinthedomesticsector,andplacesmallerregionalmonolineplayersunderpressure.

MediareportsquotedaCIRCofficialsayinginMarch2015thattwothirdsofChineseinsurerswillregisteraweakeroverallcapitalratiounderthenewsolvencystandards.(Source:FinancialTimes,21June2015)

Tighter regulation on foreign insurance not anticipated InterpretationoftheStateCouncil’sopinionsontheaccelerationofamoremoderninsuranceindustryhasleadparticipantstoconcludethattheregulatoryenvironmentwillbecomemorerelaxedgoingforward.The10directivesareincludedinthisreport’sappendix.

ParticipantsalsobelievethatC-ROSSwillworkintheirfavor.Thestrongdominationofthebigdomesticinsurersmayfacilitateamoreliberalattitudetowardtheforeigninsurersandopenupacquisitionopportunitieswithsecondandthird-tierinsurancecompanies.

Theyalsocontendthattheyshouldbeallowedtohavemultipleinvestmentswithinthesector.

RegulatorydynamicRegulatorydynamicss


OnlinePropertyInsuranceFirmZhongAnRaisesNearly 6BillionYuan.Full article.

FiveinvestorsincludingMorganStanleyandCICCprovidefundraisingtofirstcompanyinChinatosellpoliciesandhandleclaimsonInternet

(Beijing)–ThefirstinsurancecompanyinChinatosellpoliciesandhandleclaimsonlinehassecurednearly6billionyuanfromfiveinvestors,includingMorganStanleyandChinaInternationalCapitalCorp.(CICC).

ZhongAnOnlinePropertyInsuranceCo.,co-foundedinlate2013byagroupoffirmsthatincludetwoInternetgiants,willraiseabout5.8billionyuanbyissuingmorethan240millionsharestothefiveinvestorstoimproveitscapitalstrength,asourceclosetothedealsaid.

Theinsuranceregulatorrecentlyapprovedtheplan,thesourcesaid.

ThenewinvestorsincludeasubsidiaryofMorganStanley,whosenametranslatesasMorganStanleyAsiaSecuritiesCo,Ltd.Itwillhold2.477%ofZhongAn.

CICCHongKongSecuritiesLtd.,asubsidiaryofCICC,willholdanother2.5189%.Threeequityinvestmentfunds,launchedbyCDHInvestments,KeywiseCapitalManagementandSAIFPartners,willeachownlessthan5%oftheinsurer.

ZhongAnplanstouse240millionyuanofthefundstoincreaseitsregisteredcapitalto1.24billionyuandocumentsonthetransactionthatCaixinhasseenshow.

ThematerialsalsosayZhongAnaimstobeacomprehensiveinsuranceprovider.Thiswouldmeanexpandingitsproductsandservicesfrommostlypropertyinsurancetolifeinsurance,investment-typeinsurance,assetmanagementandinformationtechnologies.

DatafromtheinsuranceregulatorshowsZhongAnreceivedatotalof791millionyuaninpremiumslastyear,rankingbehindmostoftheother42propertyinsuranceprovidersinthecountry.

ChenJing,ZhongAn’sCEO,hassaidthefirmisorganizedlikeabeehive,comparedwithtraditionalinsurers,whichareusuallystructuredlikeapyramid.ThedecentralizationenablesZhongAntobetterservenichemarketsatlowercosts,hesaid.

AntFinancialServicesGroup,whichisaffiliatedwithNewYork-listedAlibabaGroupHoldingLtd.,willcontinuetobethesinglelargestshareholderofZhongAn,althoughitsholdingswillbereducedto16%from19.9%,documentsshow.

TencentHoldingsLtd.,anonlinegamingandsocialnetworkingservicedeveloper,willhold12%oftheinsurer,downfrom15%.

AnothermajorinvestorinZhongAn,PingAnInsurance(Group)Co.,willalsohold12%oftheinsureraftertheinvestment,downfrom15%.Source:DingFeng(staffreporter)rewrittenbyWangYuqian,Caixin Online, http://english.caixin.com/2015-06-11/100818356.html,accessed11June2015

Figure 46: Solvency ratios of foreign insurance companies in 2014

Source:Financialstatementsofindividualcompanies,2014

Regulatorydynamics


Solvencyratios 2014 2013

AIGChina 292 338

AIOINissayDowa 213 1,300

AllianzChinaGeneral 176 190

AXATianping 244 289

CathayInsurance 432 151

Chubb 382 664

FubonProperty 206 315

GeneraliChinaIns. 3,565 379

GroupamaAVIC 336 175

HyundaiP&C 1,839 208

LibertyMutual 287 190

LIG 3,896 3,859

Lloyds N/A N/A

MitsuiSumitomo 234 271

NipponKoa 3,139 3,016

RSA* 2,590 2,144

SamsungP&C 1,076 1,318

SompoJapan 309 226

Starr 314 285

TokyoMarine 542 687

XLInsurance 2,245 3,796

Zurich 727 760

Solvencyratios 2014 2013

AEGON-THTFLife 291 187

AIA 337 242

AllianzChinaLife 200 161

Aviva-COFCOLife 294 279

BoCommLife 469 739

CathayLujiazuiLife 346 158

CIGNA&CMBLife 285 168

CITIC-PrudentialLife 194 181

ERGOChinaLife 12,095 205,772

PKUFounderLife 253 244

GeneraliChinaLife 243 153

GreatEasternLife 296 453

HengAnStandardLife 341 277

HSBCLife 571 630

HuataiLife 228 185

ICBC-AXALife 469 413

ING-BOBLife 182 183

KingDragonLife 514 388

Manulife-SinochemLife 262 251

Sino-USUnitedMetLife 273 163

Nissary-GreatwallLife 807 1,019

OldMutual-GuodianLife 237 182

PingAnHealth 596 812

PramericaFosunLife 1,494 33,398

SamsungAirChinaLife 155 258

ShinKong-HNALife 222 130

Sino-FrenchLife 1,218 656

SinoKoreaLife 3,350 12,112

Foreign companies solvency ratiosThesolvencyratiosfortheforeignpropertyandcasualtyandlifecompaniesareshownbelowasrecordedinthecompanies’financialstatements.Significantvariationsareevidentasaresultofthespecialcircumstancesofindividualcompanies.Forexample,somearerecentlyestablishedandareonlybeginningtoleveragetheircapital.

*InJuly2014,RSAagreedtosellitsChinabusinesstoSwissReCorporateSolutions

Source:GlobalHealthExpenditureDatabase,WHO

Healthsectorindicators 2006 2007 2008 2009 2010 2011 2012 2013

Totalhealthexpenditure(THE)%grossdomesticproduct(GDP)

4.55 4.35 4.63 5.15 4.98 5.15 5.41 5.57

Generalgovernmentexpenditureonhealth(GGHE)as%ofTHE

40.65 46.93 49.95 52.50 54.31 55.89 55.96 55.80

Privateexpenditureonhealth(PvtHE)as%ofTHE

59.35 53.07 50.05 47.50 45.69 44.11 44.04 44.20

GGHEas%ofgeneralgovernmentexpenditure 9.90 10.91 11.60 12.07 12.07 12.46 12.52 12.63

Socialsecurityfundsas%ofGGHE 57.29 63.08 66.73 64.69 64.17 67.00 67.92 69.26

Out-of-pocketexpenditureas%ofPvtHE 83.09 83.01 80.76 78.86 77.24 78.83 77.97 76.65

Figure 47: China health sector indicators from 2006 to 2013


Healthinsurance

5

“It is inevitable that health insurance will become massive.”

— Andrew Scott, General Manager, Ping An Health (quoted in the Asian Insurance Review, September 2014)

The health insurance marketThehugepotentialforhealthinsuranceinChinaisveryapparent;however,bothdomesticandforeigninsurersareunsureastohowtobestservethedemandsofthissector.

Alltheexpenditureindicatorspointtoasustainedefforttoimprovetheprovisionofhealthcare.

ChinacontinuestogrowhealthexpenditureasapercentageofGDP.Fromalevelof4.55%in2006,adecadeagoitclimbedsteadilyto5.57%in2013(againstabackdropofsolidexpansionofGDP).

HealthexpenditurepercapitainChinain2013wasUS$362orUS$649onapurchasingpowerparitybasis(OECDHealthStatistics,2015).OfficialChineseGovernmentdatafor2013wasRMB2,326.8.

Asthetablebelowshows,theGovernmenthasalsoincreaseditsexpenditureonhealthasapercentageoftotalGovernmentexpenditurefrom9.9%in2006to12.63%in2013.

TheWorldHealthOrganisationstatisticsshowninthetablemayvarywithsimilardatapublishedoverthesameperiodbytheChineseGovernment.

Healthinsurance


Challenges in the health sectorOntheinsurancefront,theCIRCreportsthatover100insurersprovided2,300healthinsuranceproductsin2014.However,againstthispositivebackdrop,thesectordisplaysmanystructuralproblemsthatrequirechallengingandfar-reachingsolutions.

Increasingaffluenceandanagingpopulationplacehugedemandsonaninfrastructurethat,initspresentform,needsradicalreformandreconfiguration.

Whilethecountry’sbasicmedicalinsurancesystemcoveredmorethan95%ofthepopulationattheendof2014,itdoesnotfullycovercostsassociatedwithmoreseriousmedicalillnesses.

TheStateCouncilisintheprocessofintroducingamorecomprehensivesupplementaryinsurancesystemtomeetcostsnotcoveredbythebasicsystem;however,therearestillshortfallsinbothcoverageandthequalityofcare.

Publichospitalsarethemainprovidersofmedicalservices,andalthoughreformsareplanned,theirefficiencyremainsachallenge.Theyareoverstretchedbyahostoffactors,suchasnewtechnologies(whichleadtoearlierdiagnoses,andoftenhighercosts),growingurbanization,foodsafetyandpollutionissues,unhealthylifestyles,etc.

DiscoveryexcitedaboutChina’s‘enormoushealthinsurancepotential.’ExtractsfromaBusiness DayarticleINSURERDiscoveryisgrowingitsindividualhealthinsurancebusinessbyabout300livesadayinChina,whileithasbecomethelargestinsurerofcorporates,saidCEOAdrianGore.Discovery,throughits25%stakeintheChinesehealthinsurer,PingAn,grewnewbusinessby119%toR339m[US$32million]fortheyearendedJune30[2014].

AtapresentationinJohannesburg,MrGoresaidthatChina’s“healthinsurancebusinesspotentialisenormous”althoughthebusinessmadeanoperatinglossofR65m[US$6.1million]fortheyear.QuotingresearchfromMcKinseyandCo,MrGoresaidinsurancepenetrationinChinawasexpectedtoreach5%ofgrossdomesticproductby2020,whilethegovernmenthascommitted$125billiontohealthcarereformtoprovidecarefortheentirepopulationoverthesametimeperiod.

AccordingtotheFinancialTimes,$10billionwasspentonhealthcaredealsinChinalastyear.Thecountryhasseensignificantinvestmentinprivatehospitals,whichareexpectedtotreat20%ofthepopulationbynextyear...

“Thisisacountrywhichcurrentlyspendsabout$300billiononhealthcare,50%ofthisisoutofpocket,soit’sanobviousinsurancemarket.”HeemphasizedthatwhileChinawasgrowing,Discoverywascautiousgiventhecountry’scomplexity.“Thereisnodoubtthatasahealthinsurancebusinessthepotentialismassive,thequestioniswhetherwecancapitalizeonit,”MrGoresaid.

DiscoveryviewsChinaastwodistinctmarketswithanumberofdistributionchannelstoreachthem.DiscoveryaccessesthegroupinsurancemarketforcorporatesthroughPingAn’sdistributionchannels.Inthereportingperiod,ithadalsobuiltitsownchannelsdirectlytocorporates.

Theothermarketismedicalinsuranceforindividuals.MrGoresaidithadbeendifficulttousePingAn’s500,000agentsacrossChinatosellmedicalinsurance,astheywereusedtosellingonlylifeinsurance,andthisiswhattheyearnedincentivesonselling.

Discoveryhasnowcreatedwhite-labelproductsthroughPingAn’slifeinsurancebalancesheets,whichagentsareselling.MrGoresaidthiswasimplementedinMayandtheagentsweretrainedinJune.FromJuly,healthinsurancesaleshaveincreasedfromabout100individualsadayto300to500aday.

Source:GillianJones,Business Day,http://www.bdlive.co.za/business/healthcare/2014/09/03/discovery-excited-about-chinas-enormous-health-insurance-potential,accessed3September2014

0M 2M 4M 6M 8M 10M 12M 14M 16M 18M 20M

2010

2011

2012

2013

201

Premium income RMB (10,000)

4

11,234,960, 30.22%

15,871,786, 41.27%

8,627,607, 24.73%

6,774,658, 18.03%

6,917,213, 2.10%

Figure 48: Rapid growth in health insurance premiums 2010-2014

Health insurance premium growthTheforeigninsurersareencouragedbythecontinuingstronggrowthinpremiums.Insurancepremiumsin2014werealmostthreetimesmorethanin2010andannualgrowthtoDecember2014was41.27%.

0 2 4 6 8

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

Private insurance as % of private health expenditure

8.03%

6.97%

6.44%

7.42%

6.89%

8.05%

6.25%

6.45%

5.79%

5.46%

Source:WHO

Figure 49: Growing role of private health insurance within private health expenditure

Private insurance as a percentage of private health spend is also growingInaddition,thelevelofprivateinsuranceasapercentageofprivatehealthexpenditurehasgrownannuallyfrom5.46%in2004to8.03%in2013.

Thisdemonstratesthatprivatehealthinsuranceisgainingtractioninthemarket.Fromaforeigninsurers’perspective,itwouldseemthatthebestopportunitieswillbeatthetopendofthemarket.

RegulatorydynamicHealthinsurances

Source:CIRC


Zhejiang741,7934.67%

Yunnan368,5632.32%

Xinjiang323,1842.04%

Tibet11,8250.07%

Tianjin277,8511.75%

Sichuan754,8984.76%

Shanxi287,0431.81%

Shanghai824,5795.20%

Shandong1,315,836

8.29%Shaanxi385,1172.43%

Qinghai49,7290.31%

Ningxia90,8950.57%

Liaoning401,5192.53%

Jilin251,8471.59%

Jiangxi295,3761.86%

Jiangsu1,122,746

7.07%

Inner Mongolia241,7481.52%

Hunan435,0002.74%

Hubei556,4063.51%

Henan790,4974.98%

Heilongjiang295,9081.86%

Hebei778,1654.90%

Hainan44,1990.28%

Guizhou131,7800.83%

Guangxi258,9871.63%

Guangdong1,813,81411.43%

Gansu156,5920.99%

Fujian624,2243.93%

Chongqing296,3751.87%

Beijing1,493,199

9.41%

Anhui452,0902.85%

0.07% 11.43%

% of Total Data

Figure 50: Total health insurance in China in 2014, showing totals and overall percentage in each mainland province (RMB10,000)

Healthinsurance

Source:CIRC


Amapoftotalhealthinsuranceexpenditureduring2014showsthestrongweightingonthecoastalprovinces.Forexample,Guangdongaccountedfor11.43%oftotalexpenditure.

RegulatorydynamicHealthinsurances


Foreign insurance connectionsThereareseveralinterestingpartnershipsbetweenforeignanddomesticcompanies.

• In2004,DKV(DeutscheKrankenverischerung)AG,whichispartoftheERGOgroup),acquiredastakeinChina’sfirstcommercialhealthinsurancecompany,inassociationwithPICC.

• PingAnHealthisaJVcompanywithSouthAfrica’sleadinghealthinsuranceprovider,Discovery,knownforitsinnovativevitalityprogram.

• TaipingGeneralInsurancehasapartnershipwiththeUS-basedGlobalBenefitsGroup(GBG).

• Morerecently,AllianzhassetupaJVwithCPICintheShanghaiFTZ.Invariousmediareports,boardmemberManuelBauersaysthatAllianzhasafirst-moveradvantageandhopesthatCPIC’ssalesnetworkwillsellthehealthinsuranceproducts.HecitedincreasingurbanizationandagrowingmiddleclassasgrowthdriversandpredictedhealthinsuranceexpenditurewillreachUS$1trillionby2020.(SouthChinaMorningPost,22March,2015).

Critical illness coverage to be provided by insurance companies On22July2015,theStateCouncilmadeacommitmentthatcriticalillnessinsurancewouldbeexpandedtocovertheentirecountrybytheendof2015.

Atleast50%ofcostswillbereimbursedtopatientssufferingfromacriticalillnessandtheproportionwillbeincreasedovertime.Thesystemisexpectedtobefullyfunctionalby2017.Commercialinsurancecompanieswillruntheinsuranceschemeonbehalfofgovernment.Theywillbeselectedthroughabiddingprocessbutitisunclearwhetherforeigninsurerswillbeabletofullypartakeinthisnewopportunity.Participantswillberequiredtoeffectivelymanagetheschemeandwillbepermittedtomakelimitedprofits.(Source:Insurancetogonationwideforcriticalillness,22July2015,www.english.gov.cn)

Chinatoexpandcriticalillnessinsurance.Extracts from article.

Chinawillexpanditscriticalillnessinsurancesystemtocovermoreurbanandruralresidents,theStateCouncil,orChina’scabinet,decidedon[July22,2015].Allparticipantsinthecountry’sbasicmedicalinsurancesystemforurbanandruralresidentswillbeprotectedagainstcriticalillnessbytheendofthisyear,accordingtoastatementreleasedafteranexecutivemeetingoftheStateCouncilpresidedoverbyChinesePremierLiKeqiang.

ThecoverageofChina’sbasicmedicalinsurancesystemforurbanandruralresidentsexceeded95%bytheendof2014,reachingmorethan1.3billionpeople,officialdatashows.BytheendofSeptember2014,about650millionChinesewerecoveredbycriticalillnessinsurance.

UnderChina’scriticalillnessinsurancescheme,whenapatient’smedicalbillsfornecessarytreatmentsusingtheexistingbasicmedicalinsurancesystemexceedacertainlevel,heorshewillreceivereimbursementsfromtheschemeThereimbursementratioshouldreachatleast50%thisyearandwillincreasegraduallyinfuture,accordingtotheStateCouncil.

Arelativelysoundsystemforcriticalillnessinsurancewillbeestablishedby2017,theStateCouncilsaid.

In2014,thecriticalillnessinsuranceprogramhelped1.15millionpatientsinChina,withthetotalfundreservefortheprogramreaching9.7billionyuan(US$1.6billion).

Source:Xinhua,extractfrom:http://news.xinhuanet.com/english/2015-07/22/c_134437455.htm,accessed23July2015

Health insurance as a distinct categoryWhilethemajorityofpropertyandcasualtyparticipantsfavoredhealthinsuranceasadistinctcategory,lifeinsurerswereevenlysplit.ThosewhosupportedhealthasaseparatecategorybelievethatthenatureofthenascentmarketinChina,anditsspecialcharacteristics,warrantedspecializedattentionbytheregulator.

Theyarguedthatthemedicalindustrywashighlycomplex,containingamyriadofdifferentrisksthataredifficultforforeigninsurerstounderstand.

Theserisksinclude:ascarcityofmeaningfuldata;insurance;fraud;inaccuratepricing;improvedlevelsofdiagnosisasaresultoftechnology,whichisinturnassociatedwithhighercostsoftreatment;environmentalissues,suchasairpollution;foodsafetyscandals;lifestyleissues;andaninefficienthealthcareecosystem.

No Yes

P&CLife

No Yes

Based on responses from 21 companies,6 were property and casualty and 15 were life

Healthinsurance

Figure 52: Health insurance as a separate category


Figure 51: Health costs compared to other markets

Health care costsFifteenparticipantssharedtheiropinionsontherelativecostsofhealthinsuranceinChina,versusothermarkets.TheirperceptionssuggestthatcostlevelsaresimilarforIT,personnelingeneral,andbranchpersonnelinparticular.

Theybelievethatclaimsandcompliancecostsarehigher,however,manysimilarcompaniesexpressedcontrastingopinionsindicatingthatthereislimitedtransparencyinthissector,andmostforeigninsurersremainrelativelyuninformedaboutitsstructureandprofitability.

LowerLowerLowerLowerLowerLower

SameSameSameSame

Same

Same

Higher

HigherHigherHigher

Higher

Higher

Branch personnel

CompliancePersonnelFinanceClaimsIT costs



Digitalmarketing

6

Internet financeAninternetfinancerevolutionisunderwayinChina,andnewdevelopmentsandinnovationsareoccurringacrossthefinancialspectrum.Theyincludeonlinepaymentandsettlement,lending(includingP2P,microfinance,inventoryfinancing,etc.)assetmanagementandinsurance.Onsomeoccasions,effortsarecollaborativeand,onothers,highlycompetitive.Forexample,AlibabaandTencentarebothshareholdersinthefirstinternetinsurancecompany,ZhongAnProperty.

ThedevelopmentscanbeseeninthebroadercontextoffinancialreformsetoutintheThirdPlenumoftheCentralCommitteeinNovember2013andmore,recentdirectives,suchastheStateCouncilplanfortheexpansionoftheinsurancesectorby2020andthe“InternetPlus.”

Thelatterinitiativehopestomaketheinternetadrivingforcefornewindustrialgrowthmodes,oneofwhichisfinance.InJuly2015,tenstateagenciesannouncedtheirplantodeveloparegulatoryframeworkforinternetfinance.

TheCIRCsetoutitsviewsonthefutureofinternetinsuranceinJune2015.Itnotedthatattheendof2014,85insurancecompanies(58domesticand27foreign)offeredinternetinsuranceproducts.

Premiumincomeincreasedby195%in2014,andtotaledRMB85.89billion.

TheCIRCbelievesthattheinternetwillhelptransformandupgradetheinsuranceindustry.

(Source:CIRC,Internet insurance to increase the rapid integration of innovation,18June2015).

New CIRC regulations on internet insurance InJuly2015,theCIRCissuedguidelinesregardingtheregulationofinternetinsurance.Thenewrulesallowinsurersthatdonothavebranchesorsubsidiariesinprovincesormunicipalitiestoprovidearangeoftypesofinsuranceviatheinternetchannel.Thetypesincludepersonalaccident,termlife,wholelife,homeowners,liabilityandcreditinsurance.

Furthermore,theCIRCindicatedthat,inadditiontothislist,typesofinsurance,wherethesales,indemnityandcompensationprocessesarestraightforward,canalsobeprovidedviatheinternet.

However,theCIRCattachedanumberofcaveatsingrantingthisopportunity.Theyrequireinternetinsurancebusinesstobeconductedthroughheadoffice,prohibitthirdpartiesfromcollectingpremiumsandstipulatethatallpremiumsbepaiddirectlytoaspecially-designatedaccount.

Thisisaverymeaningfuldevelopmentfortheforeigninsurers,giventheirlimiteddistributionnetworks.Itpresentsanexcitingchallengeofhowbesttotakeadvantageofthisnewopportunity.Theforeigninsurers,withtheirexperienceinothermarkets,shouldbeabletoplotanewpathforward.Assumingtheguidelinesremaininplace,andthemarketissubjectedtofairandrealisticpricingandproductdesign,newtargetedcustomersegmentswillbeaccessibletotheforeigninsurers.

Itisdisappointingthatautoinsuranceisexcludedfromtheinternetlist.TheCIRChaveindicatedthatinsurershavetobeabletoconvincethemthat,inordertoofferautoinsurancethroughtheinternetchannel,theinsurerhastheabilitytosettleclaimsinareaswheretheydonothaveaphysicalpresence.

Thiswouldseemtobeatallorderforforeignpropertyandcasualtyinsurerswho,asdemonstratedearlierinthereport,haveveryrestrictedfootprints.

• Chinahasbecomeauniqueandenormousmarketforinternetfinanceandithasthepotentialtorevolutionizetheinsuranceindustry

• Foreigninsurersareharnessingdigital,butwillstruggletooutshinethedigitalactivitiesofthedomesticplayersandnewentrantsthatfocussolelyonthischannel

• Selectiveforeigninsurersaresucceedingatreachingyoungerconsumersviasocialmedia

Digitalmarketing


Figure 53: Online sales for life companies in 2014

Source:IAC

Online sales by life companiesInJuly2015,theInsuranceAssociationofChina(IAC)releaseditsInternetInsuranceDevelopmentReportbasedondataprovidedforthe2014year-end.Thefollowingtablesprovidevaluableinsightintothegrowthofinternetinsurancebetween2012and2014,andconfirmtheexpandingroleofthischannel.

Thetop10companiesbasedoninternetinsurancepremiumsin2014areshowninthefigurebelow.SunLifeEverbright,whichwasoriginallyaforeignJVinsurer,toppedthelist.ItbecameadomesticcompanywhenSunLifereduceditsshareholdingbelow25%in2010.

InsecondplacewastheforeigninsurerICBC-AXA.ThisjointventurebenefitsfromICBC’sstrongbrand-namerecognitionandcustomerbase.ChinaConstructionBank’slifecompanyisalsoincludedinthelist.Thepresenceoftwobanks’subsidiariesonthelistreflectsthe“commodity-type”insuranceproductthatthebanksofferandisassistedbytrafficontheirrespectivewebsites.

Internet life insurance premiums 2014RMB 100 millions

0

10

20

30

40

50

60

Taika

ng Life

Sunshine

GuohuaCCB

Kun Lun

Pearl R

iver

Sino Life

Fores

ea

ICBC-AXA

Sunlife Ev

erbrig

ht

Online sales by property and casualty companiesOnlinepremiumsin2014forpropertyandcasualtyinsurersweredominatedbythetwolargestcompanies,PICCandPingAn.

Theexclusiveonlinepropertyandcasualtyprovider,ZhongAn,isrankedinseventhplace,whiletheonlyforeigninsurer,AXATianping,isinninthposition.

OnlinepremiumRMB10,000

PICC 2,504,226

PingAn 1,457,100

ChinaPacificProperty 348,360

ChinaContinent 348,070

Sunshine 134,097

Huatai 80,898

ZhongAn 79,410

ChinaUnited 40,200

AXATianping 25,023

ChinaLifeProperty&Casualty 16,929

Others 23,431

Figure 54: Online premium for property and casualty companies in 2014 (RMB 10,000)

Source:IAC

ICBC-AXARanksTopThreeAmongInternetInsuranceEnterprises.Extract.

Accordingtostatistics,ICBC-AXApostedanincomeofRMB15.4billionin2014,ayear-on-yeargrowthof50%.Premiumincomegeneratedfrominternetinsuranceandothernewchannelsaccountedfornearly30%oftotalpremium.

ByleveragingtheopportunitytoaccessICBCe-Buy,ane-commerceplatformoftheBank,ICBC-AXAhasdevelopedonlineandofflineO2Oservicemodelandbuiltsixsaleschannelsin2014includingICBCinternetbanking,ICBCe-Buy,self-servicewealthmanagementterminal,telephonebanking,officialWeChatplatformandofficialwebsite.Meanwhile,ICBC-AXAhasbasicallyestablishedanindependente-salesbrandofE-insurancethroughinternet-basedcampaignssuchaschildren’scriticalillnessinsurance,WeChatbonusandsocialnetworkingactivities.

Source:Extracttakenfrom ICBC Website, http://www.icbc.com.cn/icbc/newsupdates/icbc%20news/ICBCAXARanksTopThreeAmongInternetInsuranceEnterprises.htm, accessed26February2015

Digitalmarketing


Very significant10%

Significant33%

Limited 37%

None 10%

No comment

10%


Figure 55: Use of social media by foreign insurers

AIGgeneratesonemillionfollowersChina’strafficpoliceestimatethataccidentsaretheleadingcauseofdeathforpeopleaged45andyoungerinChina.Asoneoftheleadingnon-domesticP&CInsurersinChina,AIGiscommittedtoeducatingandraisingawarenessofroadsafetyonthenation’shighways.

Earlierthisyear,AIGChinalaunchedaChinaRoadSafetyinitiativewithaseriesofthemesaimedatpromotingroadsafetyinChinausingsocialmediavehicles,WeiboandWeChat.Acartoonstory-tellingstylefeaturedinthesesocialmediaplatformstoraiseawarenessamongthegeneralpublic,andwassupportedbyopinionleaderswhojoinedAIGChinainthecampaigntopromoteroadsafety.Themessageencouragedroaduserstobepolite,considerateofpedestrians,andtodrivesafely.

This,alongwithsimilar-themedcampaigns,resonatedstronglywithnetizens,attractingmorethanonemillionfollowerswithinafewmonthsofbeinglaunched.

Source:ExtractfromAIG.com,http://www.aig.com,accessed3June2015

Chinaunveils‘InternetPlus’actionplantojuicesloweconomy. Article extract.

ChinaunveiledaplantousetheInternettorejuvenatetraditionalindustriesandboostflaggingeconomicgrowth,theStateCouncilsaidinastatementSaturday.

“InternetPlus,”astheplaniscalled,willhelpthemanufacturingsectoroptimizeandbetterserveclientsthroughtechnologiessuchascloudcomputingandartificialintelligence,accordingtothestatement.Otherareasthatmaybenefitincludeagriculture,energyproductionanddistribution,finance,medicalcare,logistics,e-commerce,transportationandenvironmentalprotection,itsaid.

Chinaisattemptingtomanageaneconomygrowingatitsslowestpacesincethe2009globalrecession.TheInternetplancomesasthegovernmentseekstode-emphasizedebt-fueledinvestmentgrowthandgiveconsumersandservicesmoreprominenceintheeconomy.

Chinawillupgradeandexpanditsexistinginfrastructure,fromopticfibrenetworkstosatellitecommunications,toimproveandboostdatastreamingability,especiallyforremoteandruralareas,thestatementsaid.

TheStateCouncilmappedoutresponsibilitiesandtasksforgovernmentagenciesinvolvedintheplan.TheNationalDevelopmentandReformCommissionandseveralministrieswilllowermarket-entrybarriersandallowprivateinvestmentsinbasictelecommunicationservices,itsaid.

Thecentralbankwillbuildupanationwidecreditsystemtotrackandsharecreditinformationacrossdifferentplatforms,accordingtothestatement.Thegovernmentwillearmarkfundsforthe“InternetPlus”planandwillencouragefinancingavenuestoshepherdinvestmentsintothisarea,itsaid.

Source:Bloomberg News,www.bloomberg.com,accessed4July2015

Use of social mediaAll30participantsansweredaquestionontheuseofsocialmedia;however,asthechartbelowshows,onlythreecompaniesratedtheireffortsasverysignificant.Thisincludedonepropertyandcasualtycompanyandtwolifecompanies.Halfthegroupratedtheireffortaslimitedornon-existent.However,somecompaniesindicatedthattheywereplanninganewsocialmediastrategyandothersthattheyplannedtoscaleuptheirexistingstrategy.

Digitalmarketing


Property and casualty insurers — Domestic Chinese name Followers Weibo Posts

PICCP&C 中国人民保险 238,394 5,647

SunshineP&C 阳光财险 13,151 3,198

Property and casualty insurers — foreign

AIGChina 美亚保险 1,346,452 1,546

SamsungP&C(China) 三星财产保险 552,179 3,418

AllianzChinaGeneralInsurance 安联财险 10,936 809

LibertyInsurance 利宝保险 101,014 4,305

TokioMarine&NichidoFireInsurance(China) 东京海上日动（中国） 6,844 456

AXATianpingP&C 安盛天平 26,326 4,574

RSABeijing 太阳联合保险北京 470 52

RSAChina 太阳联合保险中国 161 45

HyundaiInsurance(China) 现代财产保险 138 143

Life Insurers — domestic

PingAnLife(FoshanBranch) 平安人寿 386,473 5,160

PICCLife 中国人保寿险 16,063 5,957

TaikangLife 泰康人寿 133,683 7,540

GuohuaLife 国华人寿 15,425 1,312

SunshineLife 阳光人寿 238,748 6,661

HongkangLife 弘康人寿 673 444

NewChinaLife 新华保险 16,764 322

Life Insurers — foreign

ManulifeSinochemLife 中宏保险 859,260 4,417

AEGONCNOOCLife 海康人寿保险改名为同方全球人寿 915,526 1,910

CathayLife 国泰人寿 130,747 2,099

GeneraliLife 中意人寿 61,895 3,050

AIA 友邦中国 205,779 2,069

HuataiLife 华泰人寿 1,917 1,264

PramericaFosunLife 复星保德信 46,495 1,841

HengAnStandardLife 恒安标准人寿 32,059 2,770

SamsungAirChinaLife 中航三星人寿 3,340 2,099

FounderMeijiYasudaLife 北大方正人寿 2,463 528

KingDragonLife 君龙人寿 529 1,367

GreatEasternLife(Shaanxionly) 中新大东方陕西分公司 364 818

BoCommLife 交银康联 111 4

CIGNA&CMBLife 招商信诺 872,124 3,676

ERGOChinalife 德华安顾人寿 58 2

Source:Companywebsites,updatedon8July2015

Social media activity for foreign and domestic insurance companies, as at July 2015ItisrevealingtolookatthenumberoffollowersandpoststhatarangeofcompanieshaveonSinaWeibo.Thedataforthedomesticcompanies,giventheircomparativesizetotheforeigncompanies,issurprising.

SomeforeignplayershavesignificantfollowingssuchasAIG,SamsungPropertyandCasualty,ManulifeandAEGONCNOOC.

Insomecases,datawasonlyavailableforabranchlocation,whichperhapsunderstatesthisnumberoffollowers.

Figure 56: Social media engagement

Digitalmarketing


Number of companies

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based on responses from 28 companies

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Figure 57: Impact of digital on your business model over the next three years

Source: CNNIC, Chinese Internet Network Information Center, July 2015

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668 million usersat June 2015

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Figure 58: Number of internet users in China as at June 2015

Impact of digital on your business model over the next three yearsThelevelofimpact,asaresultofadigitaltransformationoverthenextthreeyears,isevidentamongahandfulofforeigninsurers.

Respondentsscoredcommitmentonaoneto10scale,withascoreof10representingfarreachingchangesintheadoptionofadigitaldistributionmodel.Fivepropertyandcasualtycompaniesandsixlifecompaniesscoredeightorabove.

Onlythreecompaniesscoredthemaximumlevelof10.Attheotherendofthescale,13companiesregisteredfiveorbelow.

Thosewithlowerscorestendedtohavelargeagent-baseddistributionmodels;however,thethreemostcommittedcompaniesincludedanAsian,AmericanandEuropeanparticipant.

Oneofthelowerscoringlifeinsurersbelievesthatthegreatestapplicationfordigitalwouldbeawayfrombancassuranceandtowardtheinternet.Inotherwords,price-sensitive,smallticketcommodity-typeinsuranceproducts.

Almosthalfoftherespondentsplanasignificantorverysignificantuseofsocialmedia.SocialmediainChinaisdominatedbyWeChatandWeibo.WeChat,ownedbyTencent,hasover500millionactiveusers,whileWeibohas200million.AccordingtotheChineseInternetNetworkInformationCenter(CNNIC)atJune2015,Chinahad668millionusersontheinternetandapenetrationrateof48.8%.Mobilephoneuserstotaled594million.Atthesametime,mobilepaymentusageincreasedto46.5%(from39%atDecember2014)andhad276millionpeoplemakingpaymentswiththeirsmartphones.

AccordingtotheCNNIC,themostpopularonlineshoppingsitesinChinain2014wereTaobao,TmallandJingdong.TheforeigninsurershavestoresonbothTaobaoandTmall.AlthoughtheCNNICdoesnotprovidedatarelatedtointernetinsurancebehavior,itismeaningfultolookattheadoptionofmobileonlinebankingasapossibleindicatoroftheacceptanceofinternetfinance.

In2014,thenumberofmobileonlinebankingusersgrewby69.2%from117millionto198million.

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Figure 60: Can you rank the top three reasons for using digital marketing in 2015 and 2018?


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Figure 59: What is holding back your transition to digital channels?

What is holding back foreign companies from using digital?Themostimportantreasonholdingbackthetransitiontodigitalchannelsin2015wasidentifiedasITlegacysystems.

Thesecondpositionwassharedjointlybyregulatoryconstraintsandasmallcustomerbase.Thiswasfollowedbyunattractiveproductsandalackofinvestmentinthenewchannel.

Twolifecompaniesmadethepointthattherewasnothingholdingthemback.Thismightsuggestthattherewassometypeofmismatchbetweentheproducts,brandpositioningofthecompanyandthenatureoftheirexistingcustomerbase.

Iftherearenointernalbarrierstoadigitaltransition,thentheremustbeadisconnectwiththeirtargetcustomergroup.

Digitalmarketing


Top reasons for using digital marketingThetopthreereasonsforcompaniestousedigitalmarketingin2015and2018areidentical.Theyare:

• Toacquirenewcustomers

• Toserviceexistingcustomers

• Toreducecosts

Theseresultsdifferedfromlastyear’sreportwherebuildingbrandawarenesswasrankedinsecondplace,andin2015and2018isinfourthandfifthplace.

Selling through TMall or TaobaoJusteightforeigninsurersindicatedthattheyhadastoreonTMallorTaobao.Onelargepropertyandcasualtyinsurersaiditwasperformingverywell,whileotherscommentednegatively,sayingcostsweretoohighandtheinsurerlackscontrol.

Alargelifeinsurerdismisseditasasupermarketand,instead,theydevelopedtheirownmobileappwhichisgeneratingmorehits.

No

Yes

Only eight participants

said they had a Tmall store


Figure 61: Foreign insurers with a store on Tmall

Digitalmarketing


How much are you spending on the transition to digital channels?ToassessthecommitmenttotransformingtheirChinabusinesstodigitalchannels,participantswereaskedtoindicatethetotalcostin2015.

Forpropertyandcasualtycompanies,thisnumberrangedfromUS$100,000tooverUS$10million.

Atthelowend,twocompaniesprojectedlimitedexpenditurebutatthehigherendthreecompaniespredictedverysignificantexpenditure.

Forlifecompanies,therangewasfromlessthanUS$1milliontoUS$4million.However,mostcompaniesfellintheUS$2milliontoUS$4millionrange.


Premium(10,000) Premiumincrease(%)

Policiesincrease(%)

Taobao 1,293,814.4 497 610

163.com 547,395.9 4,785 34

JD.com 21,038 7,320 46

AntTravel 5,131.4 711 504

Qunar 3,572.6 462 341

Tencent 2,216.5 348 130

Suning.cn 1,756.3 12,466 125,318

ChinaTelecom 703 213 167

Source:IAC

Figure 63: Third-party websites selling life insurance in 2014

Websites selling life insurance in 2014 Foreignlifeinsurershavelimitednetworksandbrandawarenessand,asaresult,third-partywebsitedistributionmayofferagatewaytogreatermarketexposureandfasterdevelopment.

IACdatarecordsverysignificantgrowthinthenumberofpoliciessoldandpremiumsin2014.Asinthecaseofpropertyandcasualtyinsurance,Taobaodominatesthethird-partywebsitegroup,while163.comisinsecondplace.

Policies(10,000)

PremiumRMB(10,000)

%

Taobao 188,903 171,546 61.96

163.com 16 48,372.19 17.47

SpringAirlines 443 9,451.13 3.41

Gowhere(Qunar.com) 72 7,035.14 2.54

Ctrip.com 43 2,937.27 1.06

Others 889 37,524.93 13.55

190,366 276,866.66 99.99

Third-party websites selling insuranceWebsites selling property and casualty insurance 2014 Similarlytothelifeinsurancesector,Taobaoand163.comarethethird-partysitesinthetoptwoplacesforsellingpropertyandcasualtyinsurance.

However,Taobaodominatesonlinelifeinsurancesales.Travelinsuranceisthedominantonlineproductfortheremainingwebsites,astheyareallspecificallytravelrelated.

Source:IAC

Figure 62: Third-party websites selling property and casualty insurance in 2014


Internet sales as a percentage of total sales in property and casualty insurersIACdataforpropertyandcasualtycompaniesexaminesthepercentageofinterestoninternetsalestototalsalesin2014.

AtthetopofthelistwasZhongAn,thenewdomesticinsurerthatsellsonlyonlineinsurance.Thelistincludestwoforeignpropertyandcasualtycompanies,RSAChina(19.3%)andAXATianping(3.78%).

Internetpremium(RMB10,000)

Internetsalesasa%oftotalsales

ZhongAn 79,410 100

RSAChina 481 19.3

ChinaContinent 348,070 15.57

HuataiP&C 80,898 12.7

PICCP&C 2,504,226 11.58

PingAnP&C 1,457,100 10.2

SunshineP&C 134,097 6.33

AXATianping 25,023 3.78

ChinaPacificProperty 348,460 3.59

AlltrustInsurance 13,444 2.3

Figure 64: Internet insurance premium top 10 property and casualty companies in 2014

Source:IAC

Source:IAC

PremiumRMB(10,000) Online%viaownwebsite

PICCP&C 2,403,775.79 92.26

PingAnP&C 1,302,907.01 91.34

ChinaContinent 348,070.47 98.26

ChinaPacificProperty 281,024.42 80.65

SunshineP&C 94,370.32 70.37

ChinaUnited 40,259 100

AXATianping 18720.9 74.81

AlltrustInsurance 11,223.3 83.48

HuataiP&C 3,434.3 4.25

Yingda 3,233.37 99.04

Others 44,051.02

Total 4,551,069.9

Internet sales via property and casualty insurers’ own websitesThetopthreecompanies,bytotalonlinepremiums,allgeneratedmorethan90%ofonlinepremiumsontheirproprietarywebsites.AXATianpingwastheonlyforeigninsurancecompanyonthelist,anditderivesapproximately75%ofitspremiumsfromitsownwebsite.

Figure 65: Internet insurance sold through property and casualty companies proprietary websites

Digitalmarketing


InternetabetterengineforMetLifeChina.Extracted article.

Sino-USUnitedMetLifeInsuranceCoLtd,ajointventurebetweenthelargestUnitedStateslifeinsurer,MetLifeInc,andShanghaiAllianceInvestmentLtd,seestheInternetandriseofonlinesocialnetworkplatformsasamajorenginetodriveitsbusinessintherapidlyevolvingChineseinsurancemarket.Whilemaintainingitstraditionalsaleschannelsthroughbanksandagents,thecompanyisfocusingonthedigitalstrategytoexpanditsclientbaseandtapintothegrowingdemandamongChinesecustomersforeasy-to-purchaselifeinsuranceproducts,CEOGeorgeTantoldChinaDailyinarecentinterview.

Thecompanyisnowindiscussionswith20partners,includingsocialmedianetworkcompanies,onlineretailersande-commerceplatformsownedbymajorbanks,toexplorenewbusinessmodelsandopportunities,Tansaid.ThreecompanyproductsarealreadyavailableonAlipay,theonlinepaymentserviceproviderbackedbyChina’se-commercegiantAlibabaGroupHoldingLtd,Tansaid.

“TheInternetprovidesusabetterengineanditissubstantiallytransformingthebusinessmodelofthesectorandthewayinsurancecompaniesinteractwiththeircustomers,”hesaid.Previously,mostinsurancecompaniesusedanoutboundmarketingapproachtogetitsmessagetopotentialclientsthroughmethodssuchasadvertisementsanddirectcalls.Nowcompaniesareutilizinginboundmarketing,atrendthatseekscustomerattentionthroughsocialmedianetworksandmobileapplications,Tansaid.“Nowourcustomerconversionrateofinboundmarketinghasbeenrisenfrom20percentto50percent,”hesaid.ThedigitalplatformhasbecomeanintegralpartofMetLife’slong-termstrategytobuildandimproveproductrecognitioninChina.ThepartnershipswithsocialmedianetworksalsoenableMetLifeChinatogainup-to-dateknowledgeanddeeperinsightsonchangingconsumerdemandandpurchasingbehavior,Tansaid.

NewtechnologyandtheincreasingpopularityofmobileappshavebecomeanimportantcatalystforaChineseinsurancemarketthatwasoncehighlyregulated,butnowisgraduallyopeningup.

Source:LiXiang,China Daily,http://www.chinadaily.com.cn/cndy/2015-09/23/content_21955594.htm,accessed23September2015

Digitalmarketing


Insurance companies with the most effective digital strategiesParticipantsidentifiedthatPingAn,TaikangandSunshineLifehavethemosteffectivedigitalstrategiesinplace.

Intheforeigninsurersegment,AXATianping,SamsungPropertyandCasualty,AIG,AIA,CIGNACMBandManulifewerealsomentioned.

ZhongAnOnlinePropertyInsurance,China’sfirstonlineinsurancesellerraisedalmostUS$1billioninitsfirstroundoffinancinginJune2015.ZhongAnwasfoundedin2013byagroupoffirmsincludingAlibaba(AntFinancialServicesGroup),TencentandPingAnInsurance.

Followingthisround,theirshareholdingshavebeenreducedto16%,12%and12%,respectively.NewinvestorsincludeMorganStanley,ChinaInternationalCapitalCorporation,CDHInvestments,KeywiseCapitalandSAIFPartners.

Initsfirstyearofoperation,ZhongAnhasserviced150millionclientsandunderwritten630millioninsurancepolicies;however,asthesnapshotofitswebsiteshows,manyareverylow-costpolicies.

On11November2014or“DoubleII”day,theCIRCreportedthatover187millionpoliciesforproductreturninsuranceweresoldonline.

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After sales support Sales Alternative evaluation Early presale interaction Information search

P&C 1P&C 2P&C 3P&C 4P&C 5P&C 6P&C 7P&C 8

P&C 1P&C 2P&C 3P&C 4P&C 5P&C 6P&C 7P&C 8

Figure 66: Role played by digital channels in property and casualty companies in 2015 and in 2018

Digitalmarketing


What is the role, today and in the future, of digital channels in relation to insuranceForeign property and casualty companiesItisdifficulttodiscerndifferencesinusagepatternsforthepropertyandcasualtyinsurersbetween2015and2018intheconsumerdecision-makingprocessforinsurance.

Somerespondentsexpectthedigitalchannelstoplaylessofaroleatthefrontend;forexample,withinformationsearch,andmoreofaroleinsales,andsalessupport.

Forexample,alargepropertyandcasualtyinsurancecompanythatcurrentlycommits80%ofitsefforttoinformationsearchandzerotosalesandsalessupportwill,inthreeyears,have40%insearch,30%insalesand10%insalessupport.

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Life 1Life 2Life 3Life 4Life 5Life 6Life 7Life 8Life 9Life 10Life 11Life 12Life 13Life 14

Life 15Life 16

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Life 1Life 2Life 3Life 4Life 5Life 6Life 7Life 8Life 9Life 10Life 11Life 12Life 13Life 14

Life 15Life 16

After sales support Sales Alternative evaluation Early presale interaction Information search

Figure 67: Role played by digital channels in life companies in 2015 and in 2018

Digitalmarketing


Foreign life companies Lifecompaniesalsopredictsignificantdropsinsearchandgreaterimportanceforsalesandsalessupport.

Sixcompaniesalsoseeincreasednumbersforearlypresaleinteractionby2018.


AutointernetpremiumRMB(10,000)

Onlineautoasa%ofallonlineinsurance

Onlineautoasa%ofallautoinsurance

Numberofpolicies(10,000)

Numberofautoinsuranceclients(10,000)

2012 952,584 94.37 2.97 291.85 243.44

2013 2,514,227 95.27 5.72 867.1 731.2

2014 4,845,742 95.81 9.23 1,799.32 1,409.29

Figure 68: Growth in online auto insurance sales between 2012-2014

Source:IAC

Online auto insurance salesFrom2012to2014,thenumberofcompaniesofferingonlineautoinsuranceincreasedfrom12to20.

Onlineautosales,asapercentageoftotalonlinesales,increasedfrom94.37%in2012to95.18%in2014.Overthesameperiod,thepercentageofonlineautosaleswithintotalautosalesincreasedfrom2.97%to9.23%.

Between2012to2014,autointernetinsurancepremiumsincreasedfive-fold(fromRMB9,526millionto48,457million),autointernetclientsgrewmorethanfive-fold(fromRMB2.4millionto14.09million),andpoliciesexpandedsix-fold(fromRMB2.9millionto17.99million).

Clientssigningapolicy

Visitsperday

Websitevisits

Webconversion(%)

AIA 3.97 0.04 488.24 28.54

Cathay 0.21 0.01 76.19 5.69

PramericaFosun 0.14 0.01 24.31 3.84

KunLun 0.69 0.05 82.26 3.6

Taiping 0.65 0.05 43.93 3.55

Taikang 127.63 13.3 11,860.11 2.63

Guohua 0.44 0.1 232.87 1.25

NewChina 0.65 0.17 96.54 1.05

AllianzLife 3.14 0.84 122.23 1.02

Generali 0.36 0.13 98.77 0.77

Conversion rates on life insurers’ websites TheIACdataexamineswebsitevisitsthatgeneratedsalesoflifeinsurancepolicies.Asaresult,itrevealsthetop10insurers’conversionrates.Theconversionrateisinfluencedbythenatureoftheinsuranceproductbeingpromoted.Thehighestconversionrateof28.54%wasattributedtoAIA.

Withinthelistof10companies,fivewereforeigninsurers.Onlytwocompanieshadconversionratesabove5%.

Source:IAC

Figure 69: Conversion rates on life insurers’ websites in 2014

Figure 70: Life companies’ assessment of their success in different market segments in 2014 and 2013

1

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20132014

Life insurance ILP (11)

Health insurance (13)

Group life (11)

Personal accident (12)

Travel insurance (1)

Group accident and health (9)

Life insurancetraditional (12)

Life insuranceprotection (11)

Numbersinbracketsrefertonumberofparticipantsscoringthissegmentin2015,basedonthesurveyof13lifecompaniesin2015


Performance of the foreign life companies in 2014Lifecompanyparticipantswereaskedtoassesstheirlevelofperformanceineightkeymarketsegmentsduring2014.Theywereaskedtoscoretheirperformanceonascalerangingfromonetofive,wherefivecouldbeconsideredverysatisfactory;threeneutral;andone,veryunsatisfactory.

Scoresabovethreethereforeindicateasatisfactorytoverysatisfactoryperformance,whilethreemightbeconsidered“average.”

Thesegmentswerethenrankedwiththebestscoreatthetopofthecircle,withtheperformancescoredroppinggraduallyasyoumoveclockwisearoundthecircle.Theresultsfromlastyear’ssurveyareshownalongsidethisyear’s2014score.

Figure70suggeststhattraditionalandprotectionproductsperformedbestamongtheeightmarketsegments,withascoreoffouroutoffiveforprotectionproducts.

Theresultfromthischartsuggeststhattheforeignlifecompaniesonlyexperiencedmodestlevelsofsuccessinalloftheirmarketsegments.

Thirteenlifecompaniesrecordedanaveragescoreofjustbelowthree,whichsuggeststhattheywerenotsuccessfulinthehealthinsurancesegment.

Performance andgrowth

7• Largeforeignlifecompaniesachievedthe

strongestlevelsofgrowthin2014premiumincome,forecastingannualgrowthof20-30%to 2018

• Premiumincomedeclinedinsixforeignpropertyandcasualtycompaniesin2014,withgrowthforecastsfor2018inthreegroupingsataround10%,25%andhigher

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Figure 71: Life companies’ scores of future importance for different market segments in 2018

Numbersinbracketsrefertonumberofparticipantsscoringthissegmentfor2018,basedonthesurveyof13lifecompaniesin2015


Someadditionalareasofopportunitiesforforeigninsurersoverthenextthreeyearswerereportedasfollows:

Property and casualty

• AsChinesecorporatesexpandoverseassowillopportunitiesforproperty,liabilityandpeople

• Onlinesales

• Auto

• Accidentandhealth

• Aerospace

• Productliability

Life companies

• Taxrelatedproducts

• Investmentproducts

• Healthproducts

• Agencies

• Grouphealth

• Endowmentproducts

Importance of different market segments for foreign life companies in 2018Participantswereaskedtoscorethesameeightmarketsegmentsintermsoftheirimportance,by2018.Insurancesoldforprotection,andhealthinsurance,wereidentifiedasthetwomostimportantsegmentslookingforwardto2018.Theseresultsmatchedlastyear’sprojectionsfor2017.

Travelinsurancewasdeemedveryimportantbyonecompany.Traditionallifeinsurance,groupaccidentandhealth,andpersonalaccidentinsurancewillallbeimportant,whileinvestment-linkedproductandgrouplifewillbelessimportantby 2018.

Figure 72: Property and casualty companies’ assessment of their success in different market segments in 2014 and 2013

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Homeowners (9)

Professional indemnity (6)

Public liability (11)

Auto insurance (11)


D&O (6)Health insurance (7)


Employers liability (11)

Enterprise property (9)

Products liability (10)


Cargo, transportation (11)

Numbersinbracketsrefertonumberofparticipantsscoringthissegment,basedonthesurveyof11propertyandcasualtycompaniesin2015

PerformanceandgrowthPerformanceandgrowth


Performance of the foreign property and casualty companies in 2014Participantsscoredtheirperformancein13differentpropertyandcasualtysegments.Propertyandcasualtyinsurersonlyawardedthemselvessuccessinonesegmentin2014,namelycargoandtransportation.

Theyachievedborderlinesuccesswithascoreofthreefortravelinsurance,withalltheothercategoriesaveragingascorebelowthree.

Numbersinbracketsrefertonumberofparticipantsscoringthissegmentfor2018,basedonthesurveyof12propertyandcasualtycompaniesin2015

Figure 73: Property and casualty companies’ scores of future importance for different market segments

1

2

3

4 Homeowners (10)

Professional indemnity (7)

D&O (8)

Public liability (12)

Employers liability (10)

Products liability (12)

Enterprise property (12)



Cargo, transportation (10)



Auto insurance (10) 2017

2018



Importance of different market segments for foreign property and casualty companies in 2018 Lookingforwardto2018,sixsegmentsscoredabovethree.Autoinsuranceledtheway,followedbytravelinsurance,personalaccident,cargo,healthandgroupaccidentandhealth.Segmentsthatscoredbelowthreeandweredeemedtobelessthanimportant,includedpublicliability,directorsandofficersprofessionalindemnityandhomeowners’insurance.

0 1 2 3 4 5 6 7 8

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Number of life companies

Predicted marketshare in 2018


Figure 74: Predicted market share of life companies in 2018

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Predicted marketshare in 2018


Figure 75: Predicted market share of property and casualty companies in 2018



Predictions on the overall market share of the foreign companies in 2018

Life companiesThemarketshareforforeignlifecompaniesattheendof2014was5.8%.Fifteenparticipantspredictaslightlyloweraveragemarketshareof5.3%by2018.Thisaverageincludesoneforecastof10%andanotherofjust3%.Futuregrowthamongdomesticcompaniesmeantthatsomeparticipantsbelievethatforeignmarketsharemightdeclineunlessforeignacquisitionrulesarerelaxed.

Property and casualty companiesMarketshareoftheforeignpropertyandcasualtyinsurersjumpedin2014to2.2%,asaresultoftheinclusionofbothAXATianpingandStarrintothegroup.Thirteenrespondentspredictedanaverageshareof2.35%by2018.Severalcompaniessuggestedthatifacquisitionruleschanged,thisnumbercouldgrowto5%.Expansionbyforeignautoinsurerscouldalsoleadtoariseinmarketshare.


Figure 76: Foreign life insurers’ changes in premium income from 2013 to 2014 (RMB)

Premium income 2014 2013 Percentage change (%)

ICBC-AXALife 15,400,430,333 10,287,194,741 49.7

AIA 10,580,188,112 9,411,120,575 12.4

MetLife 6,752,847,536 5,670,060,078 19.1

GeneraliChinaLife 5,607,661,000 4,788,938,000 17.1

CIGNA&CMBLife 5,304,543,870 4,240,273,049 25.1

CITIC-PrudentialLife 5,084,103,876 4,133,291,593 23.0

Aviva-COFCOLife 3,799,128,111 3,530,604,696 7.6

Manulife-SinochemLife 3,344,223,731 2,987,443,912 11.9

BoCommLife 2,640,059,495 1,344,033,220 96.4

HuataiLife 2,523,937,787 2,891,867,051 (12.7)

ING-BOBLife* 2,516,580,371 2,121,595,231 18.6

AllianzChinaLife 2,138,045,457 1,793,868,142 19.2

AEGON-CNOOCLife** 1,315,477,152 1,448,664,376 (9.2)

HengAnStandardLife 1,211,966,407 1,179,897,379 2.7

GreatEasternLife 834,453,901 259,663,452 221.4

HSBCLife 775,093,063 759,377,514 2.1

FounderMeijiYasudaLife 771,799,424 617,390,226 25.0

SamsungAirChinaLife 645,957,017 336,484,888 92.0

CathayLife 472,871,755 476,007,560 (0.7)

PingAnHealth 416,871,659 308,483,645 35.1

KingDragonLife 320,410,910 222,140,124 44.2

Nissary-ChangshengLife 245,026,900 271,175,200 (9.6)

ShinKong-HNALife 236,282,696 347,909,208 (32.1)

OldMutual-GuodianLife 198,260,497 142,538,734 39.1

SinoKoreaLife 180,166,584 89,300,827 101.8

PramericaFosunLife 41,730,359 16,483,576 153.2

ERGOChinaLife 31,619,562 2,142,063 1,376.1

Sino-FrenchLife 2,348,000 10,561,000 (77.8)

Source:2014financialstatementsofindividualcompanies*NowcalledBOBCardif**NowcalledAEGONTHTFLife


Premium income — foreign life companiesThetablebelowshowsthestronggrowthinpremiumincomefromthelargestforeignlifeinsurers.Sixcompaniesreportadeclineinpremiumincomeinthe12-monthperiod.


Figure 77: Foreign life insurers Profit/(Loss) before tax in 2013 and 2014 (RMB)

Profit/(Loss) before tax 2014 2013

AIA 1,843,157,460 1,061,204,010

CITIC-PrudentialLife 436,443,533 261,230,195

MetLife 408,657,648 405,819,395

GeneraliChinaLife 360,725,000 204,060,000

Aviva-COFCOLife 338,728,381 204,471,729

Manulife-SinochemLife 309,589,469 230,177,806

CIGNA&CMBLife 280,900,723 254,072,744

HSBCLife 101,362,410 (23,642,965)

HuataiLife 76,116,566 (72,266,722)

ICBC-AXALife 70,715,259 20,307,753

AEGON-CNOOCLife 64,114,003 (92,523,280)

CathayLife 33,439,076 (33,018,469)

ING-BOBLife* 28,867,751 18,585,830

BoCommLife 20,609,455 (43,467,506)

AllianzChinaLife 9,408,909 (112,871,370)

HengAnStandardLife 8,333,327 (129,969,541)

Sino-FrenchLife (24,928,741) (6,984,415)

Nissary-GreatwallLife (33,993,100) (89,854,600)

FounderMeijiYasudaLife (37,865,052) (65,485,626)

KingDragonLife (40,949,203) (44,380,118)

GreatEasternLife (51,036,928) (60,170,158)

SamsungAirChinaLife (58,233,844) (67,425,226)

OldMutual-GuodianLife (70,666,940) (118,275,595)

SinoKoreaLife (73,670,685) (56,407,825)

ERGOChinaLife (76,718,705) (71,287,602)

ShinKong-HNALife (109,659,543) (85,627,382)

PramericaFosunLife (115,580,374) (89,080,594)

PingAnHealth (124,820,587) (79,036,815)

Source:2014financialstatementsofindividualcompanies*NowcalledBOBCardif


Profit before tax — foreign life companiesSixteenofthe28foreignlifecompaniesgeneratedaprofitbeforetaxin2014.Thiswasanimprovementoverthepreviousyear.


Figure 78: Foreign property and casualty insurers’ changes in premium income from 2013 to 2014 (RMB)

Premium income (RMB) 2014 2013 Percentage change (%)

AXATianpingP&C 6,639,547,284 5,005,606,774 32.6

GroupamaAVICInsurance 1,525,063,983 1,505,416,982 1.3

AIGChina 1,358,081,525 1,297,901,473 4.6

MitsuiSumitomoInsurance(China) 1,279,850,000 1,141,636,000 12.1

Starr 1,170,688,518 1,497,944,062 (21.8)

AllianzChinaGeneralInsurance 985,987,412 751,863,084 31.1

SamsungP&C(China) 868,361,379 672,705,942 29.1

LibertyInsurance 818,143,812 847,012,040 (3.4)

SompoJapanNipponkoaInsurance(China)

725,580,500 647,525,162 12.1

FubonInsurance 692,535,835 384,733,299 80.0

TokioMarine&NichidoFireInsurance(China)

685,943,676 603,222,596 13.7

CathayInsurance 548,542,227 524,915,060 4.5

ZurichGeneralInsurance(China) 513,616,721 495,816,892 3.6

Lloyd'sInsurance(China) 425,302,447 296,544,426 43.4

GeneraliChinaInsurance 298,598,666 232,896,862 28.2

AioiNissayDowaInsurance(China) 262,448,030 100,994,660 159.9

HyundaiInsurance(China) 248,781,906 272,668,744 (8.8)

RSAChina* 210,338,326 218,586,717 (3.8)

ChubbInsurance(China) 205,368,220 163,257,425 25.8

LIGInsurance(China) 132,453,167 110,846,565 19.5

NipponkoaInsurance(China) 57,493,305 71,963,566 (20.1)

XLInsurance(China) 40,628,391 42,501,895 (4.4)

Source:2014financialstatementsofindividualcompanies*InJuly2014,RSAagreedtosellitsChinabusinesstoSwissReCorporateSolutions


Premium income — foreign property and casualty companies Thetablebelowshowsthestronggrowthinpremiumincomeof32.6%forthelargestforeignpropertyandcasualtyinsurer.Anumberofcompaniesreportedsingledigitincreases.Sixcompaniesrecordedadeclineinpremiumincome.

Source:2014financialstatementsofindividualcompanies*InJuly2014,RSAagreedtosellitsChinabusinesstoSwissReCorporateSolutions


Figure 79: Foreign property and casualty insurers: Profit/(Loss) before tax in 2013 and 2014 (RMB)

Profit/(Loss) before tax (RMB) 2014 2013

TokioMarine&NichidoFireInsurance(China) 69,371,885 90,444,118

MitsuiSumitomoInsurance(China) 57,756,000 23,313,000

SamsungP&C(China) 37,413,748 27,565,917

SompoJapanNipponkoaInsurance(China) 26,407,000 (137,819,478)

AXATianpingP&C 20,264,416 19,910,688

Lloyd'sInsurance(China) 14,953,290 4,175,727

LIGInsurance(China) 7,408,083 1,759,167

GeneraliChinaInsurance 3,414,366 12,459,980

AIGChina (4,052,914) 1,367,537

NipponkoaInsurance(China) (4,672,090) (13,189,391)

HyundaiInsurance(China) (5,973,913) (2,184,490)

ZurichGeneralInsurance(China) (14,844,781) (25,202,848)

ChubbInsurance(China) (16,867,074) (13,093,797)

XLInsurance(China) (24,652,679) 7,651,775

RSAChina* (31,823,366) 4,994,391

StarrProperty (38,506,405) (130,966,044)

AioiNissayDowaInsurance(China) (46,295,605) (60,710,536)

CathayInsurance (71,383,018) (185,692,788)

FubonInsurance (118,744,242) (121,658,190)

GroupamaAVICInsurance (135,894,475) 44,913,067

AllianzChinaGeneralInsurance (154,913,794) (27,729,768)

LibertyMutual (176,522,851) (244,501,729)


Profit before tax — foreign property and casualty companiesOnlyeightpropertyandcasualtycompaniesmadeaprofitbeforetaxin2014.ThreeoutofthetopfivecompanieswereJapanese.TokioMarinewasthemostprofitablecompanyinboth2013and2014.


Reduce

Contain


93% say they will aim to contain HR costs in 2015

Figure 80: Will you try to contain or reduce your costs in 2015?

AcquisitionOther

Organic growth of existing operation

Based on the survey responses of 26 companies in 2014 and 30 companies in 2015

2015

2014

JV

Figure 81: Primary method of growth For now, it is still organic growth

ThevastmajorityofforeigninsurersstillbelievethatorganicgrowthisthewayforwardinChina.Onlyonepropertyandcasualtycompanyindicatedacquisition.

However,progressthroughorganicgrowthhasbeenslowandoftenpainful.Amorerelaxedregulatoryenvironmentmayopenthepathtomoreacquisitions.

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Addition of new playersTherearecurrentlyapproximately50foreigninsurersintheChinesemainland.Participantspredictthatoverthenextthreeyears,therewillbe,atbest,theadditionofonlytwoorthreenewplayers.

TheysuggestedthatanumberofHongKongandTaiwanesecompaniesmightenterthemarket,butthatmostofthemajorplayersalreadyhadapresence.ParticipantspredictedanincreaseinM&Aactivitybothinsideandoutsidethemainland.

Theynotedthatindustrypolicysupportedmorereinsuranceonshore,andthismightactasacatalysttoencouragemorereinsurerstoestablishoperationsinmainlandChina.

Figure 82: Number of foreign insurers by 2018


Containment rather than reduction in costsTheforeigninsurerswillendeavourtocontainanycostescalationin2015.Thisisareflectionoftheirdesiretogrowandiscontrarytothepoorprofitperformanceofmanyoftheforeigninsurers.

Twocompanies,onelifeandonepropertyandcasualty,plantoreducecosts.

TheJVlifecompanyhopedtoreducecostsbecauseofdigitalisation,whilethepropertyandcasualtycompanyplannedtochangeitsdistributionmodel.

Figure 83: Projected premium growth in 2015 and 2018 for life companies

0 10 20 30 40 500

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2018Annual percentage growth in premiums

Annual percentage growth in premiums

(100,100)(60,30)


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(100,50)

Figure 84: Projected premium growth in 2015 and 2018 for property and casualty companies

Life companies’ premium growth projections for 2015 and 2018Mostforeignlifecompaniesprojectsteadygrowthinpremiumsforboth2015and2018.Manyprojectgrowthof20-30%forbothtimeframes.

Fivecompaniesexceedtheseprojectionsandtwoanticipatedoublingpremiumsin2015and,againin2018.

Property and casualty companies’ premium growth projections for 2015 and 2018Foreignpropertyandcasualtycompanieshavemoreconservativeexpectations.

Fourcompaniesareinthe10%rangeforboth2015and2018;anotherfivecompaniesareinthe25%range;whilefourcompaniesareoutlierswithmoreambitioustargets.

Basedonthesurveyresponsesof15lifecompaniestwocompaniespredictgrowthof100%in2015and100%in2018andanothercompanypredicted60%in2015and30%in2018.Bothareshownasoutliers.

Basedonthesurveyresponsesof13P&Ccompanies,onecompanypredictedgrowthof100%in2015and50%in2018,anditisshownasanoutlier(100,50)onthechart


Figure 86: Projected premium growth in 2015 and 2018 for the property and casualty industry

Head office metricsTheperformancein2014offoreigncompanieshasalreadybeenoutlinedinprecedingtables.

AlthoughparticipantsselectedprofitabilityasthemostimportantyardstickusedtojudgetheirperformanceinChina,manycompanieshavefailedinthismeasure,andgrowthwouldappeartobeanongoingconsideration.

0 10 20 30 40 500

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Figure 85: Projected premium growth in 2015 and 2018 for the life industry

0 10 20 30 40 500

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Figure 87: How does your head office measure success in China?

0 5 10 15 20 25

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Embedded value

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Top line growth

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Industry growth projectionsWhenitcomestoindustryprojections,asopposedtoindividualcompanyprojections,thenumbersaremoremeasured.

Respondentsprojectannualgrowthforthelifesectorof15—20%overthenextthreeyears.

Forthepropertyandcasualtysector,itisexpectedtobemoreinthe10—15%range.


Basedonthesurveyresponsesof15Lifecompanies Basedonthesurveyresponsesof13P&Ccompanies

Basedonthenumberofmentionsby28companies


Figure 88: Use of different channels by P&C companies in 2015

Figure 89: Use of different channels by P&C companies in 2018

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PC 1 PC 2 PC 3 PC 4 PC 5 PC 6 PC 7 PC 8 PC 9 PC 10 PC 11 PC 12 PC 1 PC 2 PC 3 PC 4 PC 5 PC 6 PC 7 PC 8 PC 9 PC 10 PC 11 PC 12

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2015Acarefulexaminationoftheuseoftendifferentdistributionchannelsdisplayswidevariationacrossthevariousforeignpropertyandcasualtycompanies.

Twelvecompaniesprovideddata.Threecompaniesrecordagentsastheirdominantchannel,whilebrokersareimportanttosixcompanies.

Inaddition,ahandfulofcompaniesdistributeaproportionofsalesthroughdirectchannels.Aggregatorsandbancassuranceareofminimalimportance.


2018By2018,severalcompanieswilllowertheirdependenceontheagentandbrokerchannels.

Asexpected,directonlinewillgrowinimportance,butoverallthepatternwillremainrelativelyunchanged.

Onecompanythatprovidedabreakdownfor2015wasunabletopredicttheirchannelpercentagesfor2018.

Changing channels for the property and casualty companies?


Life 1 Life 2 Life 3 Life 4 Life 5 Life 6 Life 7 Life 8 Life 9 Life 10 Life 11 Life 12 Life 13 Life 14 Life 15 Life 160

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Affinity groupsAgentsBancassuranceBrokersDirect offlineDirect onlineOtherPhone and call centresSocial media

Figure 90: Use of different channels by life companies in 2015

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Affinity groupsAgentsBancassuranceBrokersDirect offlineDirect onlineOtherPhone and call centresSocial media

Life 1 Life 2 Life 3 Life 4 Life 5 Life 6 Life 7 Life 8 Life 9 Life 10 Life 11 Life 12 Life 13 Life 14 Life 15 Life 16

Figure 91: Use of different channels by life companies in 2018


2015Agentsareaveryimportantchannelforfivelifecompanyparticipants.ThisisinlinewiththeCIRCamalgamateddatathatshowsthat48.6%oftotallifeinsurancepremiumsweresoldthroughindividualagentsin2014.

Sixparticipantsrecordedpercentagesatorabove50%forbancassurancein2014.Again,thelifeindustrytotalforbancassurancein2014was39%.

Directonlinesaleswereimportanttothreecompanies.

2018By2018,agentswillbemoreimportantforsixcompanies,butlessimportantforfivecompanies.

Bancassurancewillincreaseinimportanceforfourcompaniesby2018,butdeclineinimportancefor10companies.

ItisimportanttonotethatseveralforeignlifecompanieshavebanksasJVpartners.Again,directonlinesaleswillexpandforanumberoflifecompaniesin2018.

Changing channels for the life companies?

Figure 92: Future demand for individual life products

Universal lifeproducts

Retirementproducts

Protection products

Participating products

Other

Long term savings

Critical illness

Children'seducationproducts

Annuity products

Productbubblesrepresentrelativelevelsofpredictedfutureinterest,basedonthesurveyresponsesof15lifecompanies


Productandsegmentdevelopments

8

Life insurance products in demandIndividual productsThreeproductsstandoutintheindividuallifesegment.Theyareannuityproducts,criticalillnessandretirementproducts.Asthediagrambelowsuggeststheyscoredaheadofparticipatingandprotectioninsuranceproducts.

Iftheretirementandannuityscoreswerecombined,thiscategorywouldfarexceedcriticalillness.

• Keylifeproducts:• Individuallevel–annuities,criticalillness,

participatingproducts• Grouplevel–grouphealth,annuities,

retirementproducts

• Keypropertyandcasualtyproducts:• Individuallevel–autoinsurance,health,

personalaccident,travelinsurance• Grouplevel–generalliabilityinsurance,

property,marine,commercialautoinsurance

• Autoinsurancewillcontinuetogrow,butmarginswillcomeunderfurtherpressure

Figure 93: Future demand for wholesale life products

Productbubblesrepresentrelativelevelsofpredictedfutureinterest,basedonthesurveyresponsesof15lifecompanies

Top end health insurance

Retirement products

Other

Group health insurance

Enterpriseannuities

Creditinsurance

Corporate accident and

health insurance

Annuity products



Wholesale productsOnthewholesaleside,grouphealthinsuranceasof2014wasexpectedtoexperiencethegreatestdemandoverthenextthreeyears.Itwasfollowedbyannuitiesandretirementproducts.

Top-endhealth,asnotedelsewhereinthisreport,isalsoexpectedtocontinuetogrowrapidly.

Productliability

Other

Niche liabilityinsurance

Marineinsurance

Liability – generalHealth

insuranceFinancial linesunderwriting

Extendedwarranty

Export productliability

Enterpriseproperty

Corporateliability

Commercial automobile

Agriculturalinsurance


Figure 94: Future demand for individual property and casualty products

Productbubblesrepresentrelativelevelsofpredictedfutureinterest,basedonthesurveyresponsesof13propertyandcasualtycompanies

Travel insurance

Personal accidentHousehold insurance

Health insurance

Critical illnessAuto insurance

Figure 95: Future demand for wholesale property and casualty products

Productbubblesrepresentrelativelevelsofpredictedfutureinterest,basedonthesurveyresponsesof13propertyandcasualtycompanies


Property and casualty productsIndividual productsAutoinsurance,asnotedearlierinthisreport,madeup56%oftheforeignpropertyandcasualtybusinessmix,toppingtheindividualproductlist.

Itisfollowed,inorderofimportance,byhealthinsurance,personalaccident,criticalillness,travelandhouseholdinsurance.

Wholesale productsOnthewholesaleside,generalliabilityinsuranceisthemostimportantproduct,andisfollowedbyenterpriseproperty,marine,commercialautomobile,financiallines,underwriting,agricultureandnicheliabilityinsurance.

AgriculturalinsuranceAgriculturalinsurancepremiumincomein2014wasRMB32.58billion(anannualincreaseof6.3%),whilethetotalamountinsuredwasRMB1.6trillion.TheCIRCreportedthat32.45millionfarmersbenefitedfromagricultureinsurance,whileparticipationratesforcropswasasfollows,corn(68.7%),rice(69.5%)andwheat(49.3%).67.2%offorests,130millionhogsand3.981millioncowswereinsured.

Foreign insurers presence in the auto sectorThemergerofAXAandTianpinghascontributedsignificantlytoautoinsurance,makingup50%oftheforeignpropertyandcasualtycompanies’businessmix.Furthermore,AXATianpingaccountsfor39.4%ofthetotalmarketshareofforeignpropertyandcasualtycompaniesin2014.

Asshownintheappendix,autoinsurance,inturn,represents80%ofAXATianping’stopfivelinesofinsurance.Anyreviewoftheroleofforeigninsurersintheautoinsurancesector,therefore,needstoacknowledgethecurrentroleplayedbyAXATianping.

AIGwasconsideredbyparticipantstobeatanearlystageinitsmarketdevelopment,butisexpectedtoplayamoresignificantroleinthefuture.

Inacorporatestrategyarticle,datedOctober2014,AllianzPropertyandCasualtyacknowledgedthatChinawasoneofthecompany’skeygrowthmarkets.Italsonotedthat80%ofnewcarbuyersinChinapurchaseinsuranceatthecardealership.Asaresult,AllianzhasdesignedanAutomotiveCollaborationModeltomarketitsofferingstomanufacturers,dealersandcustomers.

Specifically,theyplantocooperatewithPingAnandCPIC.Acompanyspokesmansaid,“wewillprovidethemwithspecificknow-howinsuchareasaswarrantyinsurance,creditinsurance,telematicsorelectricvehicles,forexample,and,inreturn,wewillparticipateinreinsurancedeals.”(Source:Allianzcorporatepublication,China in the driving seat, OpenKnowledge,13October2014).



The auto insurance marketChina,astheworld’slargestautomarket,hasenjoyedstronggrowthinsalesoverthelastdecade;however,currenttrendspointtoasharpdeclineingrowththisyear.

SalesinJune2015were3.4%lowerthanthesamemonthlastyear,accordingtotheChinaAssociationofAutomobileManufacturers.Asaresult,analystshaveloweredsalesgrowthprojectionsfor2015tojust1.7%.

ThisslowdownofnewcarsenteringthemarketwillbemostpronouncedintheTier1citiesandEasternprovinces.HigherlevelsofgrowthareexpectedinWesternChina,butforeigninsurancerepresentationinthesemarketsisminimalornon-existent.

Autoinsurancemakesup73.1%ofthetotalpropertyandcasualtymarket.Premiumincomein2014wasRMB551.59billion,withannualgrowthof16.8%.

in 2015

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Exceeds scale

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30

Figure 96: Forecasted annual growth for motor insurance in 2015 and 2018

2018

2015


Decrease significantly

Decrease slightly

StableIncrease slightly

Figure 97: Forecasted changes in motor insurance rates in 2015 and by 2018


Basedonthesurveyresponsesof10propertyandcasualtycompanies


Auto insurance pricingTheautoinsurancemarketremainshighlycompetitivewithmanycompaniesstrugglingwithprofitability.

Foreignautoinsurersseelittlechangeinthisoutlook.Sixcompaniespredictadropinratesin2015,andagainby2018.

Onlythreecompaniesbelieveratesmightimproveslightlyby2018.

Thissuggestscompetitioninthismarketwillcontinuetobetoughfortheforeigninsurers.

Projected growth in auto premiumsParticipantsrevealedtheirindividualcompanyprojectionsforautoinsurancein2015and2018.Inlastyear’sreport,mostcompaniesprojected15%growth,withtwocompaniesinthe10%range.

Thisyearthegrowthprojectionsareagainaround15%for2015,withthreecompaniespredictingaslowingofgrowthby2018.

However,onecompanypredicts25%growthin2015and2018,another30%inbothyearsand,finally,onecompany,notshown,predictsexcessivegrowthgoingforwardof700%.

Micro-insurance beyond reach for most foreign insurersAminorityofforeigninsurersbelievethatthereareopportunitiesinmicro-insurance.Onepropertyandcasualtyinsurancecompanysaidthiswasahottopic,butwasconfinedtodomesticinsurerswithstrongnetworks.

AlifecompanysaidfourlevelsofGovernmentwouldneedtobepenetratedtoreachthemicro-insurancemarket.

Anotherlifecompanythoughtitwouldonlybepossiblethroughworksitemarketingtocompanieswithlargeworkforces.

YesNo

Based on the survey responses of 28 companies in 2015 and 26 companies in 2014

No comment

2014

2015

Figure 98: Foreign insurers have the ability to develop new products

YesNo


Don’t know

Figure 99: Opportunities for foreign insurers in micro-insurance

Ability to innovateForeigninsurerscontinuetobelievetheyhavetheresourcesandabilitytodevelopnewinnovativeproductsfortheChinamarket.

Assessingriskandgainingmarketaccessareconsideredmuchmorecriticaldeterminantsofsuccess.

Theparticipantsbelievetheyalreadypossessasuccessfulproductmix.


Levels of demand for different foreign insurance positionsFromalistof15insurance-relatedpositions,participantswereaskedtorankthethreepositionsingreatestdemand.

Forpropertyandcasualtycompanies,thepositioninhighestdemandwasunderwriting,followedbysalesforcemanagersandactuaries.

Onthelifeside,salesforcemanagersandactuarieswerealsoinsecondandthirdplace,butproductdesignwasthepositionthattoppedthislist.


0

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design

Actuar

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Figure 100: Property and casualty insurance positions in greatest demand in 2015

0

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Figure 101: Life insurance positions in greatest demand in 2015


Humanresourcedevelopments

9• Highlevelsofhiringdemand:

• Propertyandcasualty–underwriting,salesforcemanagersandactuaries

• Life–productdesignpersonnel,salesforcemanagersandactuaries

• Salariesareexpectedtoincreaseonaverageby6.9%

• Staffturnoverwilldeclinetoapproximately14%in2015

Yes60%

No40%

Based on the survey responses of 30 companies in 2015 and

25 companies in 2014

2015

2014

Figure 102: Are you confident that over the next five years you have the right people to deliver your strategy?

Figure 103: Impact of talent shortages over next three years on growth targets

Verysignificant

Significant

Neutral

Insignificant

Based on 30 companies

Ability to deliver growthInarelatedquestion,73%ofparticipants(22companies)believedthattalentshortagesin2015willhaveasignificantorverysignificantimpactontoplinegrowth.

HHumanresourcedevelopmentumanresourcedevelopments

76 | Future directions for foreign insurance companies in China 2015 76Future directions for foreign insurance companies in China |

Salary increases expectedTwenty-ninecompaniesprovideddetailsofsalaryincreasesfor2015.All29expectincreasestoaverage6.9%.Fourteencompaniessuggested8%.

Withregardtoincentivesandbonusesin2015,16companiesanticipatedanincrease,while11companiessaidtheywouldremainthesame.

Ability to deliver strategyEighteencompaniesbelievethattheyhavetherightmixofpeopletodelivertheirbusinessstrategy.Thisisamarginalimprovementoverlastyear,butitstillleaves12companieswithunfulfilledrecruitmentneeds.

Onepropertyandcasualtycompanymentionedtheneedforonlinesalesandtelemarketing,underwriting,claimssettlementandbranchmanagers.

Anotherpropertyandcasualtycompanymentionednewproductandnewbusinessplanning.

Humanresourcedevelopments

0

8

16

24

32

40

20152014

L14L13L12L11L10L9L8L7L6L5L4L3L2L1P13P12P11P10P9P8P7P6P5P4P3P2P1

Figure 105: Staff turnover levels in 2014 and expected in 2015

Figure 104: Delivery of digital transformation

Basedonthesurveyresponsesof27companies;asthechartshowsthereare13propertyandcasualtycompaniesand14lifecompaniesrepresented


YesNo74%


17 companies are not confident they

can deliver

26%

Staff turnover levels Theaveragestaffturnoverfor27participantswas15%in2014andisexpectedtobe14.2%in2015.Thecloseturnoverratesforbothyearsinthechartsuggestthat18companiesanticipatelittlechange.

Lifecompanieslocatedtotherightsideofthechartappearcloselybunchedinthe15-20%zone.Propertyandcasualtycompaniesshowgreatervariance.

Onecompanyanticipatedstaffturnoverabove35%inboth2014and2015.Asmallpropertyandcasualtycompanyanticipatedthe4%turnoverin2014toberepeatedin2015.

Ability to deliver on digitalConcernswereapparentwhen17respondentsindicatedthattheydidnothavetherequiredtalenttodeliveronthetransformationtowardadigitalplatform.

OnecompanysaidthatathirdoftheirITspecialistswereoutsourced,andanothersaidtherewasaninternaldebateoverwhetheritwasmoreappropriatetouseinsurancepersonnelordigitalspecialists.

Thelattercategorywasconsideredtobemadeupofmoreaggressiveandcompetentmarketers.

Life insurance companies Property and casualty companies

AmericanInternationalAssurance AIGChina

AllianzLife AllianzChinaGeneralInsurance

Aviva-COFCOLifeInsurance AXAandTianpingP&CInsurance

BoComLife CathayInsurance

CIGNA&CMBLifeInsurance GroupamaAVICInsurance

CITICPrudential LibertyInsurance

ERGO Lloyd’sInsurance

GeneraliChinaLifeInsurance MitsuiSumitomoInsurance

OldMutualGuodianLife RSAInsurance**

HuataiLifeInsurance SamsungP&C

ICBC-AXALife SompoJapanNipponkoaInsurance

BOBCardif* TokioMarine&NichidoFireInsurance

Manulife-SinochemLifeInsurance XLInsurance

MetLifeInsurance ZurichGeneralInsurance

PingAnHealth

SamsungAirChinaLifeInsurance

*FormerlycalledING-BOBLife**InJuly2014,RSAagreedtosellitsChinabusinesstoSwissReCorporateSolutions


Intotal,30foreigninsurancecompaniesparticipatedinthepreparationofthisreport.Thistotalismadeupof16foreignlifecompaniesand14foreignpropertyandcasualtycompanies.

TheinterviewswereconductedwithCEOsorseniorexecutivesofthecompaniesbetweenMarchandMayof2015inBeijing,Shanghai,Shenzhen,Dalian,andChongqing.

Researchmethodology

10

Thecontentsoftheindividualcompanydiscussionsareconfidential,andfindingsarepresentedinagroupformat.Anyreferencetoindividualcompaniesortheirdataisbasedoninformationinthepublicdomain.The30participatingforeigninsurancecompaniesarelistedbelow.

Figure 106: Participants


Author of the reportDrBrianMetcalfeisanAssociateProfessorintheGoodmanSchoolofBusinessatBrockUniversity,Ontario,Canada.Hehasadoctorateinfinancialservicesmarketingandhasresearchedandproducedmanyreports,suchasthisone,onbehalfofaccountingandmanagementconsultingfirmsin14differentcountriesincludingAustralia,Canada,China,India,JapanandSouthAfrica.

ThisisthesecondFuture directions for foreign insurance companies in ChinahehaspreparedforEY.

Hehasconsultedforawiderangeoforganisations,includingRoyalBankofCanada,Scotiabank,BarclaysBank,SunLifeInsuranceCompany,EquitableLifeofCanadaandseveralmajorconsultingfirms.

Hehasalsotaughtanexecutivemanagementcourseentitled,“FinancialServicesMarketing”intheGraduateSchoolofBusinessattheUniversityofCapeTown.

Appendices

11

Figure 107: Domestic property & casualty companies GWP RMB (10,000), Jan–Dec 2014

Rank Domesticnon-lifeinsurancecompany Chinesename Jan–Dec2014 inRMB(10,000)

1 PICCP&C 人保财险 25,241,924

2 PingAnP&C 平安产险 14,285,734

3 ChinaPacificPropertyInsurance 太保产险 9,283,733

4 ChinaLifeP&C 国寿财险 4,039,742

5 ChinaUnitedProperty 中华联合财险 3,486,517

6 ChinaContinentP&C 大地保险 2,235,805

7 SunshineP&C 阳光产险 2,117,341

8 Sinosure 中国信保 1,811,836

9 TaipingGeneralInsurance 太平财险 1,326,979

10 TianAnPropertyInsurance 天安财险 1,115,256

11 SinosafeInsurance 华安保险 761,614

12 YongAnInsurance 永安保险 699,368

13 YingdaTaihePropertyInsurance 英大泰和财险 651,181

14 HuataiInsurance 华泰财险 637,239

15 AlltrustInsurance 永诚保险 584,367

16 BOCInsurance 中银保险 532,514

17 AnBangInsurance 安邦产险 513,541

18 DubonInsurance 都邦保险 357,602

19 CindaP&CInsurance 信达财险 351,182

20 ZkingP&CInsurance 紫金财险 336,698

21 AnhuaAgriculture 安华农业保险 326,291

22 ZheshangP&CInsurance 浙商保险 326,252

23 GuoyuanInsurance 国元保险 300,140

24 MinAnP&CInsurance 民安保险 277,228

25 SunlightAgriculturalMutualInsurance 阳光农业相互保险 271,166

26 AnChengInsurance 安诚保险 249,558

27 ChangAnP&CInsurance 长安责任保险 244,884

28 DingHeInsurance 鼎和保险 244,497

29 BohaiPropertyInsurance 渤海保险 217,624

30 UrtrustInsurance 众诚保险 111,527

31 AnxinAgricultureInsurance 安信农险 110,909

32 TaishanP&CInsurance 泰山保险 110,729

33 JintaiInsurance 锦泰保险 109,369

34 BeiBuGulfP&CInsurance 北部湾保险 91,127

35 ChinaCoalInsurance 中煤保险 81,366

36 ZhongAnOnlineInsurance 众安保险 79,410

37 HuaNongP&CInsurance 华农保险 52,343

38 FudePropertyInsurance 富德产险 49,486

39 ChangjiangP&CInsurance 长江财险 49,312

40 ChampionP&CInsurance 诚泰保险 48,625

41 XinAnInsurance 鑫安保险 31,173

42 PetroChinaCaptiveInsurance 中石油专属保险 12,325

43 HuahaiProperty 华海财产 108

Domestic sub-total 73,765,621

Source:CIRC,basedontheCIRCdata,withupdatesfromofficialcompanywebsitesasatJune2015

Appendices


Appendices

Figure 108: Foreign property and casualty companies GWP RMB (10,000), Jan–Dec 2014

Rank Foreignnon-lifeinsurancecompany Chinesename Jan–Dec2014 inRMB(10,000)

1 AXATianpingP&C 安盛天平 655,063

2 GroupamaAVICInsurance 中航安盟保险 146,331

3 AIGChina 美亚保险 117,295

4 StarrProperty 史带财产 106,447

5 AllianzChinaGeneralInsurance 安联财险 89,614

6 SamsungP&C(China) 三星财产保险 80,718

7 LibertyMutual 利宝保险 77,728

8 FubonInsurance 富邦财险 66,050

9 CathayInsurance 国泰产险 54,748

10 MitsuiSumitomoInsurance(China) 三井住友海上（中国） 50,203

11 TokioMarineNichido(China) 东京海上日动（中国） 49,599

12 ZurichGeneralInsurance(China) 苏黎世财险（中国） 45,167

13 SompoJapanNipponkoaInsurance(China)

日本财产保险（中国） 35,611

14 GeneraliChinaInsurance 中意财险 25,564

15 RSAChina** 太阳联合保险（中国） 17,573

16 ChubbInsurance(China) 丘博保险（中国） 12,985

17 HyundaiInsurance(China) 现代财产保险（中国） 12,928

18 LIGInsurance(China) 乐爱金财险（中国） 11,210

19 NipponkoaInsurance(China) 日本兴亚财险（中国） 5,419

20 AioiNissayDowaInsurance(China) 爱和谊日生同和（中国） 5,385

21 XLInsurance(China) 信利保险（中国） 3,540

22 Lloyd'sInsurance(China) 劳合社保险（中国） 82

Foreign sub-total 1,669,259

BasedontheCIRCdata,withupdatesfromofficialcompanywebsitesasatJune2015**InJuly2014,RSAagreedtosellitsChinabusinesstoSwissReCorporateSolutions


Figure 109: Domestic life companies GWP RMB millions, Jan–Dec 2014

Rank Domesticlifeinsurancecompany Chinesename Jan–Dec2014 inRMBmillions

1 ChinaLife 国寿股份 331,242

2 PingAnLife 平安人寿 173,995

3 NewChinaLife 新华保险 109,868

4 ChinaPacificLifeInsurance 太保寿险 98,692

5 PICCLife 人保寿险 78,718

6 TaikangLife 泰康人寿 67,904

7 TaipingLifeInsurance 太平人寿 65,128

8 AnbangLife 安邦人寿 52,888

9 SinoLife 生命人寿 36,711

10 ChinaPostInsurance 中邮保险 21,953

11 SunshineLife 阳光人寿 17,494

12 CCBLife 建信人寿 15,889

13 PICCHealth 人保健康 15,795

14 ChinaLife(before1999) 中保集团 11,990

15 UnionLife 合众人寿 11,776

16 ABCLife 农银人寿 10,506

17 PingAnPension 平安养老 8,861

18 AeonLife 百年人寿 8,531

19 MinshengInsurance 民生保险 7,976

20 HappyLife 幸福人寿 7,587

21 LiAnLife 利安人寿 5,147

22 ZhongrongLife 中融人寿 4,758

23 GuohuaLife 国华人寿 4,132

24 ForeseaLifeInsurance 前海人寿 3,374

25 DragonLife 正德人寿 3,237

26 HuaxiaLifeInsurance 华夏人寿保险 3,165

27 TaipingPension 太平养老 2,910

28 TiananLife 天安人寿 2,800

29 GreatWallLife 长城人寿 2,429

30 SunLifeEverbrightLife 光大永明人寿 2,389

31 HongkangLife 弘康人寿 2,342

32 SinatayLife 信泰人寿 1,791

33 YingdaTaiheLife 英大人寿 1,679

34 JixiangLife 吉祥人寿 591

35 Sino-ConfluxInsurance 华汇人寿 413

36 SoochowLifeInsurance 东吴人寿 385

37 TaikangPension 泰康养老 280

38 HexieHealthInsurance 和谐健康 159

39 KunLunHealthInsurance 昆仑健康保险 90

40 PearlRiverLifeInsurance 珠江人寿 73

41 ChinaLifePension 国寿养老 -

42 ChangjiangPension 长江养老 -

43 AmpangPension 安邦养老 -

Domestic sub-total 1,195,647

Appendices

Source:CIRC,basedontheCIRCdata,withupdatesfromofficialcompanywebsitesasatJune2015


Figure 110: Foreign life companies GWP RMB millions, Jan–Dec 2014

Rank Foreignlifeinsurancecompany Chinesename Jan–Dec2014 inRMBmillions

1 ICBC-AXALife 工银安盛人寿 15,400

2 AIA 友邦中国 10,580

3 MetLife 大都会人寿 6,753

4 GeneraliChinaLife 中意人寿 5,608

5 CIGNA&CMBLife 招商信诺 5,305

6 CITIC-PrudentialLife 信诚人寿 5,084

7 Aviva-COFCOLife 中英人寿 3,799

8 Manulife-SinochemLife 中宏人寿 3,344

9 BoCommLife 交银康联 2,640

10 HuataiLife 华泰人寿 2,524

11 ING-BOBLife* 中荷人寿 2,517

12 AllianzChinaLife 中德安联人寿 2,138

13 AEGON-CNOOCLife 海康人寿 1,315

14 HengAnStandardLife 恒安标准人寿 1,212

15 GreatEasternLife 中新大东方 834

16 HSBCLife 汇丰人寿 775

17 FounderMeijiYasudaLife 北大方正人寿 772

18 SamsungAirChinaLife 中航三星人寿 646

19 CathayLife 国泰人寿 473

20 PingAnHealth 平安健康险 417

21 KingDragonLife 君龙人寿 320

22 Nissay-GreatwallLife 长生人寿 245

23 ShinKong-HNALife 新光海航人寿 236

24 OldMutual-GuodianLife 瑞泰人寿 198

25 SinoKoreaLife 中韩人寿 180

26 PramericaFosunLife 复兴保德信人寿 42

27 ErgoChinaLife 德华安顾人寿 32

28 Sino-FrenchLife 中法人寿 2

Foreign sub-total 73,392

Source:CIRC,basedontheCIRCdata,withupdatesfromofficialcompanywebsitesasatJune2015*NowcalledBOBCardif

Appendices


Figure 111: Geographic breakdown RMB (10,000), December 2014

Location Total Property Life Casualty HealthNationaltotal 202,348,105.82 72,033,761.12 109,016,899.79 5,425,659.20 15,871,785.71

Beijingcity 12,072,445.21 3,147,587.01 7,086,897.61 346,354.29 1,491,606.30

Tianjincity 3,177,501.33 1,088,705.28 1,745,102.60 65842.79 277,850.66

Hebeiprovince 9,319,384.38 3,567,180.64 4,935,865.02 196,402.83 619,935.89

Liaoningprovince 5,577,005.59 1,874,177.13 3,190,824.24 110,484.96 401,519.26

Daliancity 1,992,747.50 718,640.96 1,071,420.22 44456.96 158,229.36

Shanghaicity 9,867,457.18 3,203,568.33 5,456,044.17 383,265.40 824,579.28

Jiangsuprovince 16,837,634.63 6,062,942.38 9,167,226.10 484,720.50 1,122,745.65

Zhejiangprovince 10,510,780.48 4,729,063.75 4,825,271.63 299,178.25 657,266.85

Ningbocity 2,069,802.07 1,115,660.87 814,451.37 55163.23 84526.6

Fujianprovince 5,546,059.83 1,821,864.88 3,033,882.37 161,221.67 529,090.91

Xiamencity 1,312,113.17 570,810.27 605,371.99 40797.78 95133.13

Shandongprovince 12,517,876.43 4,265,121.03 6,804,497.95 283,401.18 1,164,856.27

Qingdaocity 2,031,420.61 881,200.83 950,402.69 48836.98 150,980.11

Guangdongprovince 17,929,706.20 5,899,952.16 10,141,832.34 488,970.04 1,398,951.66

Shenzhencity 5,486,631.81 2,069,536.64 2,829,065.66 173,167.11 414,862.40

Hainanprovince 851,454.75 378,258.67 405,451.56 23545.42 44199.1

Shanxiprovince 4,653,745.51 1,560,273.78 2,719,221.01 87207.45 287,043.27

Jilinprovince 3,300,005.01 1,076,632.54 1,918,905.37 52620.29 251,846.81

Helongjiangprovince 5,070,910.34 1,220,309.10 3,467,931.55 86761.45 295,908.24

Anhuiprovince 5,722,917.95 2,414,468.99 2,744,226.90 112,132.03 452,090.03

Jiangxiprovince 4,003,663.98 1,387,454.31 2,226,033.68 94800.1 295,375.89

Henanprovince 10,360,814.19 2,783,822.33 6,598,833.93 187,660.83 790,497.10

Hubeiprovince 7,002,261.06 2,045,518.43 4,215,125.70 185,211.01 556,405.92

Hunanprovince 5,877,284.52 2,112,733.39 3,169,955.61 159,596.00 434,999.52

Chongqingcity 4,072,587.70 1,388,691.98 2,229,370.84 158,150.00 296,374.88

Sichuanprovince 10,606,332.41 3,717,618.26 5,836,086.60 297,729.53 754,898.02

Guizhouprovince 2,130,624.10 1,124,342.67 788,900.08 85600.87 131,780.48

Yunnanprovince 3,759,882.20 1,772,628.65 1,476,562.61 142,128.29 368,562.65

Tibet 127,557.26 90100.91 10916.67 14714.28 11825.4

Shaanxiprovince 4,767,514.65 1,600,037.96 2,664,835.66 117,523.77 385,117.26

Gansuprovince 2,084,377.16 799,951.94 1,064,391.88 63441.02 156,592.32

Qinghaiprovince 460,890.54 229,942.95 165,703.23 15515.7 49728.66

Ningxiaprovince 839,180.28 363,683.54 360,504.48 24097.52 90894.74

Xinjiangprovince 3,174,099.59 1,316,282.89 1,412,274.53 122,357.90 323,184.27

InnerMongolia 3,139,692.26 1,382,603.22 1,444,365.13 70976.29 241,747.62

Guangxiprovince 3,132,999.56 1,306,241.97 1,437,852.73 129,918.36 258,986.50

GroupandH.O.* 960,744.37 946,150.48 1294.01 11707.14 1592.74

Appendices

*PremiumcollectedbyGrouporHeadOfficeisnotaccountedforinanygeographiclocation.Certaincities’dataisshownseparately.Forexample,LiaoningprovinceexcludesDalianwhichisrecodedasDaliancity.Source:CIRC,unauditeddata,January2015


Appendices


ACEINABeijingRepresentativeOffice

AEGONInsuranceGroupBeijingRepresentativeOffice

AETNALifeInsuranceCompanyShanghaiRepresentativeOffice

AgeasInsuranceInternationalN.V.ShanghaiRepresentativeOffice

AIAHongKongLimitedBeijingRepresentativeOffice

AioiLifeInsuranceCo.,Ltd.ShanghaiRepresentativeOffice

AioiNissayDowaInsuranceCo.,Ltd.BeijingRepresentativeOffice

AioiNissayDowaInsuranceCo.,Ltd.GuangzhouRepresentativeOffice

AllianzSEShanghaiRepresentativeOffice

AmericanInternationalGroupBeijingOffice

AmericanInternationalGroup,ChengduRepresentativeOffice

AnthemLifeInsuranceCompanyBeijingRepresentativeOffice

AOLHealthInsuranceAgencyrepresentativeofficeinXiamen

AsiaInsuranceCompanyLimitedShenzhenRepresentativeOfficeinHongKong

AssicurazioniGeneraliS.P.A.ShanghaiRepresentativeOffice

AXABeijingRepresentativeOffice

B.E.S.T.ReinsuranceCo.BeijingRepresentativeOffice

BenfieldLimitedChinaGeneralRepresentativeOffice

BNPParibasCardifCo,LtdShanghaiRepresentativeOffice

BNPParibasCardifSABeijingRepresentativeOffice

BOCGroupLifeAssuranceCompanyLimitedBeijingRepresentativeOffice

C.V.Starr&CompanyBeijingRepresentativeOffice

CathayLifeInsuranceCo.,Ltd.BeijingRepresentativeOffice

ChevalierInsuranceCompanyLimitedBeijingRepresentativeOffice

ChinaInternationalReinsuranceCompanyLimitedBeijingRepresentativeOffice

ChinaLifeInsuranceCo.Ltd.(Taiwan)BeijingRepresentativeOffice

ChinaTaipingInsurance(HK)CompanyLimitedBeijingRepresentativeOffice

ChungKuoInsuranceCompanyShanghaiRepresentativeOffice

CNPAssurancesBeijingRepresentativeOffice

CofaceCreditInsuranceCorporationBeijingRepresentativeOffice

ContinentalInsuranceCompanyBeijingRepresentativeOffice

ContinentalInsuranceCompanyShanghaiOffice

CooperGay&CoLtd.ShanghaiRepresentativeOffice

DahSingLifeAssuranceCompanyLimitedShenzhenRepresentativeOffice

DKVHealthInsuranceCorporationShenzhenOffice

DongbuInsuranceCo.,Ltd.,BeijingRepresentativeOffice

ERGOInsuranceGroupGeneralRepresentativeOfficeChina

ERGOInsuranceGroupJinanRepresentativeOffice

EuropeanTravelInsuranceCompanyBeijingRepresentativeOffice

FactoryMutualInsuranceCompany,BeijingRepresentativeOffice

FirstAmericanTitleInsuranceCompanyBeijingRepresentativeOffice

FortisInsuranceInternationalN.V.BeijingRepresentativeOffice

FubonInsuranceCo.,Ltd.BeijingRepresentativeOffice

FubonInsuranceCo.,Ltd.ShanghaiRepresentativeOffice

GeneralReinsuranceAGBeijingRepresentativeOffice

GroupamaGanVieBeijingRepresentativeOffice

GuyCarpenter&Company,LLC.BeijingRepresentativeOffice

HangSengInsuranceCompanyLimitedShenzhenOffice

HannoverReinsuranceAGShanghaiRepresentativeOffice

HanseMerkurMutualHealthInsuranceCompanyShanghaiRepresentativeOffice

HollardLifeAssuranceCompanyBeijingRepresentativeOffice

HongKongBlueCross(Asia-Pacific)InsuranceLimitedShanghaiRepresentativeOffice

HortonInsuranceBrokers,Ltd.BeijingRepresentativeOffice

HSBCInsurance(Asia)LimitedGuangzhouRepresentativeOffice

HSBCInsurance(Asia)LimitedShanghaiRepresentativeOffice

HSBCInsuranceBrokersLimitedBeijingRepresentativeOffice

HSBCLifeInsuranceCompanyLimitedBeijingRepresentativeOffice

HSBCLifeInsuranceCompanyLimitedGuangzhouRepresentativeOffice

HSBCLifeInsuranceCompanyLimitedShanghaiRepresentativeOffice

HumanaInc.BeijingRepresentativeOffice

HyundaiMarine&FireInsuranceCo.,Ltd.BeijingRepresentativeOffice

HyundaiMarine&FireInsuranceCo.,Ltd.ShanghaiRepresentativeOffice

InsuranceAustraliaGroupLimitedShanghaiRepresentativeOffice

InterfinancialInc.BeijingRepresentativeOffice

JapanNagamatsuinsuranceadjusterShanghaiRepresentativeOffice

JimmyFallonInternationalHoldingsLimitedShanghaiRepresentativeOffice

KoreaTradeInsuranceCorporationBeijingRepresentativeOffice

KoreaTradeInsuranceCorporationShanghaiRepresentativeOffice

KoreanReinsuranceCompanyBeijingRepresentativeOffice

KyoboLifeInsuranceCo.,Ltd.BeijingRepresentativeOffice

Legal&GeneralGroupPlcBeijingRepresentativeOffice

Legal&GeneralGroupPlcShanghaiRepresentativeOffice

LifeInsuranceCompanyofRoyalBankofCanada,BeijingRepresentativeOffice

LIGInsuranceCo,LtdShanghaiRepresentativeOffice

Lloyd’sBeijingRepresentativeOffice

MarkelCorporationBeijingRepresentativeOffice

MassMutualAsiaLimitedShanghaiRepresentativeOffice

MeiLiInternationalCo.,Ltd.GuangzhouRepresentativeOfficeinHongKong

Foreign insurance company representative offices in China

Source:CIRC,andeditedusingcompanywebsiteinformationinJune2014.Everyefforthasbeenmadetoincludecurrentdataonrepresentativeoffices.Anyupdatesoramendmentstotheinformationshownabovewouldbewelcomedandincludedinfuturepublications

Appendices


MinXinInsuranceCompanyLimitedFuzhouRepresentativeOfficeinHongKong

MitsuiSumitomoInsuranceCo.,Ltd.BeijingGeneralRepresentativeOffice

MitsuiSumitomoInsuranceCo.,Ltd.QingdaoRepresentativeOffice

MitsuiSumitomoInsuranceCo.,Ltd.ChengduRepresentativeOffice

MitsuiSumitomoInsuranceCo.,Ltd.DalianRepresentativeOffice

MitsuiSumitomoInsuranceCompanyrepresentativeofficeinHangzhou

MitsuiSumitomoInsuranceCompanyrepresentativeofficeinSuzhou

MitsuiSumitomoInsuranceCompanyShenzhenOffice

MotorsInsuranceCorporation,ShanghaiRepresentativeOffice

MSIGMingtaiInsuranceCO.,LTDShanghaiRepresentativeOffice

MunichReinsuranceCompanyShanghaiOffice

NetherlandsInsuranceCompanyLimited(II)BeijingRepresentativeOffice

NewYorkLifeInsuranceCompanyBeijingRepresentativeOffice

NipponLifeInsuranceCompanyBeijingRepresentativeOffice

NipponkoaInsuranceCo.,Ltd.DalianRepresentativeOffice

NipponkoaInsuranceCo.,Ltd.GeneralRepresentativeOffice

NipponkoaInsuranceCo.,Ltd.QingdaoRepresentativeOffice

NipponkoaInsuranceCo.,Ltd.ShenzhenRepresentativeOffice

NipponkoaInsuranceCo.,Ltd.SuzhouRepresentativeOffice

NorthAmericanInsuranceCompanyShanghaiOffice

OldMutualPLCBeijingRepresentativeOffice

PhilippinesandChinainsurancecompanyrepresentativeofficeinXiamen

QBEInsuranceGroupLimitedGuangzhouRepresentativeOffice

ReinsuranceGroupofAmericaIncBeijingRepresentativeOffice

RSAInsuranceGroupPLCBeijingBranch

SamsungFire&MarineInsuranceCompany,QingdaoBranch

SCORGlobalLifeSEBeijingRepresentativeOffice

SCORSEBeijingRepresentativeOffice

SecurityGroupBeijingOffice

SeoulGuaranteeInsuranceCo.,Ltd.BeijingRepresentativeOffice

ShinKongLifeInsuranceCo.,LtdShanghaiRepresentativeOffice

ShinKongLifeInsuranceCompanyLimitedBeijingRepresentativeOffice

ShinKongInsuranceCo.,LtdShanghaiRepresentativeOffice

ShinKongInsuranceCo.,LtdSuzhouRepresentativeOffice

SIACISaintHonoréShanghaiRepresentativeOffice

SingaporeReinsuranceCorporationLtd.ShanghaiRepresentativeOffice

SocieteGeneraleInsuranceCorporationBeijingRepresentativeOffice

SompoJapanInsuranceInc.ChongqingRepresentativeOffice

SompoJapanNipponkoaInsurance(China)Co.,Ltd.BeijingBranch

SompoJapanNipponkoaInsurance(China)Co.,Ltd.GuangdongBranch

SompoJapanNipponkoaInsurance(China)Co.,Ltd.SuzhouBranch

SouthChinaInsuranceCo.,Ltd.ShenzhenRepresentativeOffice

SumitomoLifeInsuranceCompanyBeijingRepresentativeOffice

SwissReInternationalSEShanghaiRepresentativeOffice

SwissReinsuranceCompanyLimitedShanghaiRepresentativeOffice

TheCanadaLifeAssuranceCompanyBeijingRepresentativeOffice

TheDai-ichiLifeInsuranceCompany,LimitedShanghaiRepresentativeOffice

TheGreatEasternLifeAssuranceCo.LtdBeijingRepresentativeOffice

TheMAPFREGroupBeijingRepresentativeOffice

ThePrudentialAssuranceCompanyLimitedBeijingRepresentativeOffice

ThePrudentialInsuranceCompanyofAmericaBeijingRepresentativeOffice

TheTokioMarine&NichidoFireInsuranceCompany(China)LimitedSuzhouRepresentativeOffice

TheTokioMarine&NichidoFireInsuranceCompany(China)LtdGuangzhouRepresentativeOffice

TokioMarine&NichidoFireInsuranceCo.,Ltd.(ChengduRepresentativeOffice)

TokioMarine&NichidoFireInsuranceCo.,Ltd.(DalianRepresentativeOffice)

TokioMarine＆NichidoFireInsuranceCo.＆Ltd.GeneralRepresentativeOfficeinChina

TransatlanticReinsurancecompanyShanghaiRepresentativeOffice

UnitedHealthGroupInc.BeijingRepresentativeOffice

W.R.BerkleyCorporationBeijingRepresentativeOffice

WellPointIncBeijingRepresentativeOffice

WorldInsuranceServicesLimitedBeijingRepresentativeOffice

XLGroupLtd.BeijingRepresentativeOffice

ZurichInsuranceCompanyBeijingRepresentativeOffice

ZurichInsuranceCompanyShanghaiRepresentativeOffice

Appendices


AmCham China White Paper on Insurance 2015

IntroductionInAugust2014,theStateCouncilreleasedthe“SeveralOpinionsoftheStateCouncilonAcceleratingtheDevelopmentoftheModernInsuranceServiceIndustryinthePeople’sRepublicofChina”(StateCouncilOpinion).TheStateCouncilOpinionrecognizesthat“acceleratingthedevelopmentofthemoderninsuranceserviceindustryisanimportantpartofimprovingthemodernfinancialsystem”inChina.TheStateCouncilOpinionendorsesamarketorientationfeaturingfaircompetitionandtheopeningofChina’sinsurancemarket.AmChamChinaviewsthisasanimportantsteptowardamoredevelopedandfairerinsurancemarket,whichcanadvancethesafetyandsecurityofChina’speopleandthestabilityoftheeconomy.

TheStateCouncilOpinionincludesoverthirtyparagraphsdiscussingtheenhancementandreformofChina’sinsuranceindustryandcallsformuchneededimprovements,includingbuildingcommercialinsuranceintoapillarofthesocialsecuritysystem,innovatingpensioninsuranceproductsandservices,developingdiversifiedhealthinsuranceservices,andenhancingtheinsuranceindustry’sparticipationindisasterrelief.TheStateCouncilOpinionalsoencouragesinnovativeinsuranceproductsandservicesandsupportstaxpolicyreformtoacceleratethedevelopmentofamoderninsuranceserviceindustry.Italsosetsgoalsforinsuranceindustrydepth(insurancepremiumincome/GDP)offivepercent,andinsurancedensity(insurancepremiumincome/totalpopulation)ofapproximatelyUS$560(RMB3,500)perpersonbytheyear2020.Finally,itcallsforenhancingsociety’soveralleducationandawarenessofinsuranceandriskprotectionproducts.

AmChamChinaapplaudstheStateCouncilOpinionforitsprogressiveencouragementofthedevelopmentofamorerobustinsuranceindustryinChina.Inparticular,AmChamChinawelcomestheStateCouncilOpinion’scallforinnovativeproductsandmarketorientedreformwithrespecttomanylinesofinsurance.AmChamChinaisencouragedbytheStateCouncilOpinionandlooksforwardtothepromptdevelopmentofmorespecificrulesandregulations,aswellastangibleactionswithrespecttoinvestmentandtheopeningupofamodernandcompetitiveinsurancemarketinChina.Specifically,AmChamChinahopestoseefurtherreductionofrestrictionsonforeigninvestmentandmorerapidandfairerinsurancelicensingprocedures.IncreasedparticipationbyexperiencedinternationalinsurancefirmsinChina’smarketwillfurtherthegoalsnotedintheStateCouncilOpinionandhelpChinatodevelopamoderninsuranceindustryforthebenefitofitseconomyandpeople.

Ongoing Regulatory Issues

Market AccessUSinsurancecompanies,manyofwhichhavedecadesofexperienceservingconsumersaroundtheworld,wanttodelivertheirproductstoChineseconsumers.Butinordertodoso,foreign-investedinsurancecompaniesneedbothtoacquirealicensetooperateinChinaandbeaccordednationaltreatmentinordertocompeteonalevelplayingfieldwiththeirdomesticallyinvestedcounterparts.Unfortunately,foreign-investedinsurerscontinuetofacedelaysintheissuanceoflicensesandnewproductapprovals,aswellasartificialownershipcapsandotherbarriers.AmChamChinacontinuestofavorremovalofthesebarriersintheChina(Shanghai)PilotFreeTradeZone(ShanghaiFTZ)andnationwide.

Seasoning RequirementsThe“AdministrativeMeasuresfortheRepresentativeOfficesofForeignInsuranceInstitutions”requirethataforeigninsurancecompanybeincontinuousexistenceforatleast20years,andthe“AdministrativeRulesonForeign-InvestedInsuranceCompanies”requirethatthecompanybeincontinuousexistenceforatleast30yearsandmaintainarepresentativeofficeforatleasttwoyearsbeforeitcanestablishaninsurancecompanyinChina.AmChamChinabelievesthatthe20and30yearseasoningrequirementsareunreasonablylong,constituteunfairmarketentrybarrierscomparedtodomesticallyinvestedcompanies(whichcanbeestablisheddenovo),andtakenoaccountofacompany’sreorganizationthroughmergerandacquisitionevenifthecorebusinessremainedintact.Moreover,severalofourmembersreportinexplicablylengthyandindefinitedelays,extendingseveralyearsinsomecases,inobtainingoperatinglicensesforunclearreasonsevenaftersatisfyingallseasoningrequirements.WenotethattheStateCouncileliminatedthetwoyearrepresentativeofficeseasoningrequirementforforeigninvestedbanksinthe“DecisiononAmendingtheRegulationsontheManagementofForeign-InvestedBanks,”effectiveJanuary1,2015.AmChamChinarecommendsthatseasoningrequirementsbeshortened(includingbyeliminationoftherepresentativeofficeseasoningrequirement),corporatereorganizationsbetakenfullyintoaccountwhendeterminingcontinuity,and,afterseasoningrequirementshavebeensatisfied,theissuanceoflicensesnotbesubjecttoadditionaldelayswithoutadequatejustification.

Appendices


Life InsuranceForeigninsurersremainsubjecttoa50percentcaponforeignownershipinlifeinsurancejointventures,forwhichtherehasyettobeanyrelaxationevenintheShanghaiFTZ.Thiscap,setin2001toprotectdomesticlifeinsurersafterChinawasadmittedtotheWorldTradeOrganization,nolongerhasanyjustification.Domesticlifeinsuranceinaggregatehada94.2percentmarketsharein2014whileallforeignlifeinsurerscombinedhadonlya5.8percentmarketshare.Individualdomesticlifeinsurershavealsogrown,withthreeoftheseprovidersrankedamongtheglobaltop50lifeinsurersintermsoftotalassets.TheequitycaphandicapstheabilityofforeigninsurerstoservetheChinamarketandhascausedoperationalproblemsinmanagingsuchjointventures.AmChamChinacontinuestorecommendliftingthe50percentcaponforeignownershipinlifeinsurance.

Insurance Asset Management CompaniesAmChamChinaapplaudstheincreasedissuanceoflicensesforinsuranceassetmanagementcompanies(IAMCs)inthelastfouryearsandthenewlyestablishedInsuranceAssetManagementAssociationofChina.However,theChinaInsuranceRegulatoryCommission(CIRC)continuestoregulatethisindustryonthebasisofthe“InterimProvisionsontheRegulationofIAMCs,”whichrequirethatIAMCshaveatleasttwofoundingshareholders,eventhoughtheCompanyLaw,asamendedin2005,effectivelyrequiresonlyonefoundingshareholder.Inotherwords,allinsurancecompaniesarerequiredtopartnerwithasecondcompanytomanagetheirownfunds.ThishasaparticularlyseriousimpactonforeigninvestorsinlifeinsurancecompanieswhoareforcedtobecomeminorityshareholdersintheirownIAMCs,evenassumingthatanotherfoundingshareholdercanbeenlistedonacceptableterms.

Health InsuranceAmChamChinawelcomesCIRC’sSeptember29,2013decisiontosupporttheestablishmentofspecializedforeign-investedhealthinsuranceinstitutionsintheShanghaiFTZ.SeveralUS-investedspecialisthealthinsurerswithmanyyearsofexperience,whowishtohelpexpandChina’shealthinsurancemarket,haveremainedonthesidelineswhilewaitingyearsforalicensetobeissuedunderdefactobarrierstomarketentry.WehopethatapplicationstoapproveforeigninvestedhealthinsuranceinstitutionsintheShanghaiFTZwillbereviewedonanon-discriminatorybasis,allowingUS-investedhealthinsurerstobringtheirexpertisetoChina.WefurtherhopethattheShanghaiFTZapprovalprocedurewillsoonbeextendednationwide.

Sales and Service ChannelsBranchingAmChamChinarecognizesthatbranchapplicationprocedureshaveformallyleveledtheplayingfieldbetweenforeign-investedanddomesticallyinvestedinsurerswithrespecttobranchaswellassub-branchapprovals.However,theslowpaceofforeignplayers’geographicalexpansionimpedesthemfromservingmoreChinesecustomers,duetoCIRC’sstricterapprovalproceduresincomparisontodomesticplayersandthedefactorefusaltoapproveforeignplayers’concurrentbranchapplications.AmChamChinacontinuestourgeCIRCto

promptlyreviewforeign-investedinsurers’branchapplications,includingconcurrentbranchapplicationsofqualifiedforeign-investedinsurers.

Internet InsuranceThedevelopmentofInternetinsurancepresentsatremendousopportunityforChinatoeffectivelypromoteinnovationandfinancialreform,andauniqueopportunityforforeigninsurerstoacquirenewcustomerscost-effectivelyandbuildbrandawareness.AmChamChinaapplaudsCIRC’ssupportofInternetinsuranceandisencouragedthatthelatestdraftregulationallowsinsurerstoconductInternetbusinessofcertainproductsundercertainconditionsinprovinceswheretheydonothaveabranch.Liftingthebranchingrestrictionwilltaptheenormouspotentialofonlineinsurancesalesandprovidemoreoptionsforconsumers.AmChamChinarecommendsfurtheropeningthischannelbyallowingmoretypesofproductstobesoldonlinenationwide,whichwillcontributetoChina’sambitiousgoalsofreformingthefinancialsectorandenhancingfinancialinclusion.

BancassuranceItiswidelybelievedthatthecurrentbancassurancemodelisnotsustainable.Thewithdrawalofinsurancepersonnelfrombankbranches,sincetheregulatorychangein2011,hasreinforcedtheemphasisonunsophisticatedproducts,alongsidehighcommissionsandunsatisfactorysalespractices.Bankshaveonlybeenabletosatisfactorilyserve“walk-ins”andareonlyadequatelyskilledtooffersimplifiedinsuranceproductstothelowerlevelsofthebanks’customerbases.AmChamChinaurgesthatqualifiedinsurancecompaniesbeallowedtostationsalesrepresentatives,clearlyidentifiedasrepresentinganinsurancecompanyratherthanbankpersonnel,inbankofficestoassistwithconsumerinquiries.

Inaddition,astricterregulationonbancassuranceintroducedbyCIRCandtheChinaBankingRegulatoryCommissioncameintoforceonApril1,2014.Itreinstatedthe“threeinsurersrule”thatabankbranchonlybeallowedtosellinsuranceproductsofthreedifferentinsurancecompanies.Thisrestrictionimposesparticulardifficultyonforeign-investedinsurancecompaniesassomebankshavetheirowninsurancesubsidiariesandmanybankschoosetocooperatewithlargerdomesticinsurers.AmChamChinacontinuestorecommendrelaxingtherestrictiononbancassurancecooperationtoallowbankstocooperatewithadditionalinsurers.

Investment in Insurance FundsAmChamChinaapplaudsthecontinuedlooseningofrestrictionsoninvestmentvehiclesthathasopenednewinvestmentchannelsandmarkets.However,AmChamChinaurgesthatthesizeandinvestmentexperienceofthecorporateparentsofinsurancecompaniesbetakenintoaccountwhendeterminingqualificationstoinvestinsurancefundsinthecapitalmarket.TakingthesefactorsintoaccountwouldgreatlyassistintransferringknowledgefrommaturemarketstoChina.Itwouldalsohelptomitigatetheshortageoflocaltalentwithadequateexperienceandsophisticationfornewassetclassinvestment.Wealsohopethatrelatedregulatorypolicieswillbereleasedforthenecessaryriskhedgingtoolsforthesenewassetclassesandforinsurancecapitalingeneral.

Appendices


ProductsProperty InsuranceAlthoughpropertyinsurancecompaniesareauthorizedtoprovidemasterpolicies,theprohibitiononofferinggroupwidemasterpoliciesisveryinefficient,forcinginsurerstoofferseparatepoliciestoagroupcompany’ssubsidiarieswhereverinChinatheymaybelocated.Thisprohibitionhasaparticularlydeleteriousimpactonforeign-investedinsurersbecausetheirbranchnetworksaresmallerthandomesticallyinvestedinsurers,inpartbecauseregulationsineffectpriorto2013subjectedforeigninvestedinsurerstomoreonerousbranchlicensingprocedures.Inaddition,minimumannualpremiumandminimuminvestmentrequirementslimittheabilityofinsurerstooffermasterpoliciestosmallerclients.

ReinsuranceCIRCreleasedthe“NoticeonCertainIssuesConcerningReinsuranceTransactionsConductedbyForeign-InvestedInsuranceCompanieswiththeirAffiliates”(draftforsolicitationofcomments)inlateDecember2012.AmChamChinaispleasedthatthisNoticehasyettobefinalizedandhopesthatitwillbewithdrawn.Pressreportsonthe2015AnnualInsuranceSupervisoryWorkPlanoffersomeoptimisminthisregard.AmChamChinacontinuestobelievethattheproposedrestrictions,includingpre-approvalbyCIRC,onrelatedpartyreinsurancetransactionsunfairlydiscriminateagainstforeign-investedinsurersasdomesticallyinvestedinsurersdonotfaceacomparablerestrictionunderthe“RegulationsontheAdministrationofReinsuranceBusiness(2010).”Moreover,AmChamChinaisnotawareofanybasisfortherestrictionsproposedintheDraftNoticeundertheinternationalbestsupervi¬sionpracticespromotedbytheInternationalAssociationofInsuranceSupervisors(IAIS).Totheextentthatanyrestrictionisnecessary,thereisnoneedforthemultipleredundantandunnecessaryqualificationsonrelatedpartiesproposedintheDraftNotice.Asinglecreditratingthresholdshouldsuffice.

AmChamChinaisalsoconcernedthatthedraftChinaRiskOrientedSolvencySystem“C-ROSS”solvencyframeworkwillconcentrateriskonshoreandadverselyaffectinternationalreinsurersbyoverweightingcreditriskandimposingcollateralrequirementsevenforinternationalreinsurerswhicharesubjecttoIAIScompliantsupervisionintheirhomejurisdictions.

BrokeragesAmChamChinaispleasedthatinsurancebrokeragesarenolongerclassifiedasaRestrictedIndustryinthe2015revisionofthe“GuidingCatalogueonForeignInvestmentinIndustry.”Previousrestrictionsgenerallypreventedforeigninvestedbrokeragesfrombrokingsmallerscalecommercialrisks,automobileinsurance,andindividuallifeandaccidentinsurance.

Tax IncentivesPension InsuranceAmChamChinawelcomedCaishui[2013]No.103(Circular103),jointlyissuedbytheMinistryofFinance,theMinistryofHumanResourcesandSocialSecurity,andtheStateAdministrationofTaxationonDecember11,2013.Circular103defersindividualincometaxforenterpriseandoccupationalannuitiesasofJanuary1,2014.

Taxdeferredannuitiesareanimportantmeansforpeopletoprovidefinancialsecurityforthemselvesandtheirfamiliesafterretirementandunderothercircumstancesthataffecttheirabilitytowork.AmChamChinasupportstax-deferredtreatmentforretirementaccountsandhopesthattheceilingonsuchcontributionswillberaisedtofurtheralleviatetheburdenofsupportinganagingpopulationcurrentlybornebythegovernmentandretirees’families,whileincreasingsavingsforinvestment.

Individual Tax Deferred Pension Pilot ProgramTodevelopChina’spensionsystemandencouragepeopletobuycommercialpensions,Shanghaihasbeenpreparinganindividualtaxdeferredpensioninsurancepilotprogramsince2009,butthelaunchhasbeenpostponedasthepreferentialtaxpoliciesinvolvetheinterestsofmanygovernmentbodies.WeapplaudtheindicationintheStateCouncilOpinionthatthislong-awaitedpilotprogramwillbeinitiatedinShanghaibytheendof2015,ifnotsooner.Wehopethatforeign-investedinsurerswillbeallowedtoparticipateintheprogramtothesameextentasdomesticallyinvestedinsurers.

Health InsuranceAmChamChinawelcomestheChinesegovernment’sexpansionofhealthcarebyfocusingonhealthinsurancefollowingtheissuanceofnationalhealthcarereformguidelines.Theseguidelinesrecognizetheimportanceofcommercialhealthinsuranceasasupplementtothegovernmentsupportedbasichealthinsurancesystem.

Taxincentivesareanimportantstimulustothepurchaseofcommercialhealthinsurance,especiallyindemnityproducts.USspecialisthealthinsurershaverichexperienceinthisfieldandareeagertobelicensedsothattheycanassistitsdevelopment.

Advisory, Remuneration, and Regulatory and Compliance CostsAdvisoryAnumberoflocalgovernmentsinChinahaveestablishedinternationalbusinessadvisorycouncilstoprovidearesourceforadvicefrominternationalbusinessleaders.

AmChamChinarecommendsthatCI12CfollowsuitinordertoaccesstheknowledgeandexperienceofinternationalindustryleaderstopromotethedevelopmentoftheinsuranceindustryinChinaonasoundandprudentialbasis.

Appendices


Regulatory and Compliance CostsOurmembers,whohaveextensiveinternationalexperience,findthatthecostsofoperatinginChinaareveryhighcomparedtomostothermarkets.Administrativeandcomplianceburdensareparticularlyonerous,includinginformationtechnologyrequirementsandrulesregardingclaims,finance,andcompliancepersonnelfornewbranches.AmChamChinaurgesCI12Ctotakemeasurestosimplifycostlyburdenswhereverpossible.

Recent DevelopmentsTransparency AmChamChinahasobservedthatCI12Chasfrequentlypublishedregulationsforcommentinvolvingforeigninvestmentwithoutallowingtheminimum30daycommentperiodtowhichtheChinesegovernmenthascommitted.AmChamChinaurgesCI12Ctocomplywiththisrequirementandgenerallybemoretransparentwithrespecttoregulatorydevelopments.

WhileAmChamChinarecognizesseveralregulatoryadvances,weremaindisappointedbythepersistenceofbarrierstomarketentryandexpansionthatforeign-investedinsurersface.Domesticallyinvestedinsurersandinsurancebrokerages,particularlylargercompanies,continuetoenjoymoreregulatoryfavorwithrespecttoownershipstructureandaccesstocapital,allowingthemtobenefitattheexpenseofforeign-investedinsurersandtothedisadvantageofconsumers.

Consequently,foreign-investedinsurershavegenerallylostmarketshareinChinadespiteamodestupticklastyear.Asofyear-end2014,themarketshareofforeign-investedinsurersstoodatamere4.5percent,downfromsixpercentin2004anduponlyslightlyfrom3.9percentin2013.Thedeclineinpersonalinsurancehasbeenparticularlysharp,fallingfrom8.9percentin2005to4.8percentin2012andincreasingslightlyto5.8percentin2014.Eventhelargestforeign-investedlifeinsurer’smarketshareislessthanonepercent.Themarketshareofforeign-investedpropertyandcasualtycompanies,whowerepreviouslyexcludedfromthemotorthirdpartyliabilityinsurancemarket,continuestobarelyregisterat2.2percentin2014.Foreign-investedhealthandpensioninsurerscontinuetobeexcludedfromthemarketaltogether.

Eventhelargestforeign-investedlifeinsurer’smarketshareislessthanonepercent.Themarketshareofforeign-investedpropertyandcasualtycompanies,whowerepreviouslyexcludedfromthemotorthirdpartyliabilityinsurancemarket,continuestobarelyregisterat2.2percentin2014.Foreign-investedhealthandpensioninsurerscontinuetobeexcludedfromthemarketaltogether.

RecommendationsSales and Service Channels• Putintopracticethereviewandapprovalofbranch

applicationsbyforeign-investedinsurersinthesamemannerandatthesamepaceasapplicationsbydomesticallyinvestedinsurers.

• Expresslyremovealllimitsonthenumberofinsurancecompanieswhoseproductsmaybesoldbycommercialbankbranches.

• FurtheropenthechannelofInternetinsurancebyallowingmoretypesofinsuranceproductstobesoldonlinenationwide.

Licenses• Increasecompetitioninpensionandhealthinsuranceby

licensingforeign-investedapplicants.

Ownership• Shortenandrationalizeseasoningrequirements.

• Liftthe50percentcaponforeignownershipoflifeinsurers.

• AllowinsuranceassetmanagementcompaniestobeestablishedbyasinglefoundingshareholderinaccordancewiththeCompanyLaw.

Tax Incentives• Expandtaxincentivesfortax-deferredannuities.

Structural• EstablishaseparatedepartmentinCIRCtoregulatehealth

insuranceatthesamelevelasthelifeinsuranceandpropertyinsurancedepartments.

Source:AmericanChamberofCommerceinthePeople’sRepublicofChina(AmChamChina)WhitePaperonInsurance2015Acopyofthefullreportisavailableatwww.amchamchina.org

TheviewsofthirdpartiessetoutinthispublicationarenotnecessarilytheviewsoftheglobalEYorganizationoritsmemberfirms.Moreover,theyshouldbeseeninthecontextofthetimetheyweremade.

Appendices


European Chamber Insurance Working Group 2014–15 Key recommendations

1. Increase flexibility on ownership for foreign investment in insurance servicesConcern TheobligationofforeignlifeinsurerstoestablishoperationsinChinainthelegalformofajointventure(JV)withamaximumforeignshareholdingof50percentimposesartificiallimitsforparticipationandhascausedoperationalproblemsinmanagingsuchventures.Inparallel,confiningforeigninsurerstoonesingleengagementinthesamelineofbusinessiscontradictorytotheprinciplesoftheRegulationGuidelinesforMerger&AcquisitionofInsuranceCompanies,effectivefrom1stJune,2014.

Assessment The50percentequitycapforforeignlifeinsurerssetupin1998isnolongerjustified.Chinesedomesticlifeinsurershavesignificantlyimprovedtheirriskmanagementskills,corporategovernanceandenhancedtheirfinancialstrengthduringthepast15yearsandhavenearly95percentofthemarketshare.ThereisnodoubttheywillbethedominantplayersinChina’slifeinsurancemarketduringthecomingyears.

TheconceptofstrategicpartnershipsbetweenforeignanddomesticinvestorsmayproveeffectiveiftheJVpartnersprovidecomplementarycompetenciesindevelopingsustainablebusinessmodels,sharecommonlong-termobjectivesandarecapableofconsistentlyprovidingcapitalforfundingorganicgrowth.

Theregulatorhasalreadymadechangestotheshareholdingstructureofforeign-fundedJVstowardshigherequityparticipationfordomesticpartners,includingsplittingupdomesticinvestmentamongseveralChineseshareholders.Thesameshouldinprinciplebeapplicabletoforeignshareholderswhowishtoandagreewiththeirpartnerstoincreasetheirinitialshareholdingtoanequitymajority.Likewise,foreignlifeinsuranceinvestorsshouldbepermitted,fromtheinceptionoftheirJV,toincludeseveraldomesticpartners,whileretaininganequitymajority.

Severaldomesticinsurershaveestablishedmulti-lineengagementsinpersonalinsurancebasedonfinancialholdingstructures.Similarly,Chinesebankshaveestablishedinsuranceoperationsbesidestheiroriginalbankingandsecuritiesbusinesses.Thesepositivedevelopmentsreflectgrowingmarketmaturityandimprovedconsumerchoice.Furthermore,thenewRegulationGuidelinesforMerger&AcquisitionofInsuranceCompaniesclearlyallowsinsurerstohavemorethanonelicenceinthesamelineofbusiness.Thesamepossibilityshouldbeofferedtoforeigninsurersaswell,includingacquisitionfinancingfacilities.

Recommendation:• Removetheobligationforforeignlifeinsurerstosetupan

equityJV.

• LiberatethelevelofshareholdingwithinJVsandpermitsovereignchangestotheshareholdingstructure.

• LiberalisetheoptionoftakingmorethanonedomesticinvestorintotheJVsharingtheChineseinvestmentparticipation.

• OfferalevelplayingfieldtoforeigninsurerstohavemorethanoneequityengagementintheinsurancesectorinChina,includingconcurrentoperationofawhollyforeign-ownedinstitutionandparticipationinanotherlicencedinsurerwhichgoesinlinewiththenewRegulationGuidelinesforMerger&AcquisitionofInsuranceCompanies.

2. Improve Market Access2.1OpenFurthertheExportCreditInsuranceMarkets

Concern Thereisalackoflicencesgrantedtolocalandforeigninsurerstosupportthegrowingneedsofexportcompanies.

Assessment Priorto2013,ChineseexporterscouldonlyturntoSinosure,theexportcreditagencyinChina,forprotectionoftheiraccountreceivablesfrombuyersoutsideofChina.InJanuary2013,thePeople’sInsuranceCompanyofChina(PICC)Property&CasualtyCoreceivedtheapprovaltooffershort-termexportcreditinsurancebytheMinistryofFinance(MOF),albeitonalimited,trialbasis,whichisasignificantdevelopment.HowevertherearetwofactorsthatwillconstituteachallengeforthemtosupporttheneedsofthecompaniesthatwishtoexportfromChina:oneistheirlackofexperienceinoverseasriskassessmentandtheotheroneisSinosure’smonopoly.AlthoughSinosurehasexpandeditscoverageandsupportedChineseexportersforover10years,therearestillonly20,000companiesthatareinsuredwithSinosure,comparedtoaroundonetotwomillionactivecompaniesinChina.Whilethedemandforexportcreditinsurancecontinuestoincreaseamidglobaleconomicuncertainty,otherinsurers,i.e.Chineseinsurersthathavebeenoperatingindomesticcreditinsuranceforyears,underapartnershipwithforeignspecialisedcreditinsurancecompanies,ifgrantedwithanexportcreditinsurancelicence,canhelptoprovideadditionalsupporttoChineseexporters,leveragingontheexperiencesoftheirforeignpartners.Chinanowisoneofthetwoonlymajoreconomiccountries,whereinexportcreditinsuranceisnotentirelyopen,whiletheothermarketisSouthKorea.

Chinastillreliesonexportstosustainitsgrowthanditfollowsthatprotectionagainsttheriskofnon-paymentisvitaltoensurethatChinesecompaniesarenotadverselyaffectedbynon-paymentscausedbysucheventsastheglobalfinancialcrisisandtheEurozonecrisis.

Tradecreditinsuranceisacrucialstabiliserfortheeconomy,itprotectsagainstvolatility.Duringtheglobalfinancialcrisis,alargenumberofChineseexportersfacedfinanciallossesstemmingfromdefaultedpaymentofcreditaccounts.Inordertoreducetheserisks,tradecreditinsuranceprotectslocalcompaniesagainstthesedefaults.Generallyspeaking,accountsreceivablesaccountforaround40percentofacompany’sbalancesheet.Traditionally,Chinesecompaniesreliedonlettersofcredit;however,inrecentyearsopenaccountsalesforexportbusinesseshasbecomewidespread.Exporttradecreditinsuranceprovidesprotectionagainst

Appendices


theriskofnon-paymentatafavourableratecomparedtothecostoflettersofcredit.Theadditionalbenefitofexporttradeinsuranceisthatcapacityinthebankingsectorwouldotherwisebeusedfortheletterofcredit.In2012,theChineseGovernmentannouncedthatexportsalescouldbedenominatedinRMB.ThiswillstimulatemoreopenaccountexportsalesinRMB.

Byfurtheropeninguptheexportcreditinsurancemarket,therewillbegreateropportunitiesforChineseexportcompaniestoreceivemorediversifiedandtailor-madeservicesthroughoutChinaandhaveeasieraccesstoexportinsurancebecauselocalinsurershaveawidergeographicalspreadandservicingnetworkthanSinosure.

Secondly,thefinancialburdenontheChineseGovernmentasaresultofclaimswillbedissipatedthroughouttheprivatesector.

Recommendation:• Openupexportcreditinsurancemarkets,bygranting

additionallicencestootherlocalinsurers,especiallythosewhohaveoverthreeyearsofexperienceinofferingdomestictradecreditinsuranceinChina.

2.2RemoveMarketAccessRestrictionsforForeignLossAdjustingCompanies

Concern InJune2012,theCIRCissuedacircularthatsuspendsthegrantingoflicencesfornewinsuranceintermediariesexceptforlargeinsuranceintermediarieswithstrongfinancialcapability.Thiscircularpreventsnewlossadjustingcompanies(bothdomesticandforeign-invested)fromenteringtheChineseinsurancemarket.

Assessment InJune2012,theCIRCissuedthecircularonFurtherRegulationofMarketEntryofInsuranceIntermediaries.Accordingtothecircular,theCIRCsuspendsthegrantingofnewlicencesforinsuranceintermediariesexceptforthefollowing:

• Insuranceintermediarygroup.

• Insuranceagency/brokerwithstrongfinancialcapabilityandwheresuchagency/brokerisinvestedbymotormanufacture/sales/repairenterprises,banks,ChinaPostalofficesorinsurancecompanies.

• Branchofficesofanexistinginsuranceagencyoperatingonanationwidebasis.

ThecircularsendsaclearsignalthattheCIRCisseekingtoreformtheChineseinsuranceintermediarymarketbyencouragingthedevelopmentoflarge,professionalinsuranceintermediarieswithstrongfinancialcapability,andprogressivelyeliminatingunqualified,smallinsuranceintermediaries.

However,asaresultthegrantingofnewlicencesforinsurancelossadjusters(bothdomesticandforeign-invested)hasbeensuspended,thuspreventingthemfromcontributingtothefurtherdevelopmentoftheChineseinsurancemarket.OntheotherhandtheChineseinsurancemarketisbecoming

moredynamicandcomplicated,thereforesmallinsuranceintermediariesmaybemorecapableand/orquicklyadaptedtotheheterogeneousneedsofthemarket.

GiventherisingstandardsintheclaimsareaoftheChineseinsurancemarket,thedemandforclaimsmanagementservicesprovidedbylossadjustingcompaniesisexpandingrapidly.Insurersarealsolikelytohavegreaterexpectationswithregardtoserviceproviders,andwilldemandthatthelossadjustingmarketimprovesanddevelopsinordertomeetthesegrowingrequirements.

ForeignlossadjustingcompaniesshouldbeabletoprovideclaimsmanagementservicestotheChinesemarket.Suchcompaniescancontributebybringingwesternlevelsofserviceandbyintroducingbestpracticeprocedures,whichwouldinturnenhancecompliancewithregardstotheacceptedprofessionalstandards.PreventingtheestablishmentofnewforeignlossadjustinginstitutionsinChinawill,however,mostprobablyhindersuchdevelopments.

Recommendation• Removethelicencesuspensionforlossadjustingcompanies

(bothdomesticandforeign-invested)sothattheycancontributetotheChineseinsurancemarket.

• Allowsmallinsuranceintermediariestoexistinthemarket.

2.3TreatHealthInsuranceasaDistinctCategoryofInsurance

Concern Foreignspecialisthealthinsurershavebeenunabletoenterthemarketonawholly-ownedbasis.Theyarediscouragedbyboththeexistingcategorisationofhealthinsuranceasatypeoflifeinsuranceanditsrelatedforeign-ownershiprestrictions.

Assessment TheworkinggroupsupportsChina’spushtodevelopaspecialisthealthinsurancemarketthatwillcatertocustomers’growingdemandforqualityhealthcarefunding,whileensuringthattheirinterestsareprotectedthroughappropriateregulation.Thenatureofhealthinsurancediffersmarkedlyfromthatoflifeinsurance,andthereforerequiresatailoredsetofregulations.Healthinsurancerequiresspecialoperationalexpertiseandriskmanagement,particularlywithrespecttothemanagementofmedicalriskandmedicalcosts.Itssingleproductnaturealsomeansitsoperatingscaleandassetscalearenotcomparablewithlifeinsurance.Infact,giventheshort-termnatureoftraditionalmedicalindemnityproducts,theriskprofileofhealthinsurancemorecloselyresemblespropertyinsurancethanitdoeslifeinsurance.InmostjurisdictionsinEurope,healthinsuranceisactuallyregulatedasaformofgeneralinsurance(referredtoaspropertyinsuranceinChina).InChina,thesimilarityofhealthandpropertyinsuranceisalreadysomewhatreflectedintheregulations,inthatpropertyinsurersarepermittedtosellshort-termhealthinsuranceproducts.

Incontrastwithpropertyinsurance,whereforeigninsurersmayapplyforawhollyforeign-ownedenterprise(WFOE)licence,foreignownershipofhealthinsurersisrestrictedto50percent.Europeanspecialisthealthinsurersarekeentosharetheir

Appendices


expertisewithChinabutaredelayedfromenteringintothemarketbyforeign-ownershiprestrictionsandfindingapartnersimilarlycommittedtothesector,whilelifeinsurers,propertyandcasualtyinsurerswhohavenoparticularexpertiseinhealthinsurancearealreadyofferinghealthproducts.

Recommendation:• IssuemonolineP&Clicencesenablinghealthinsurance

operatorstodoshort-termbusiness.

• Amendthelawsothathealthinsuranceistreatedasastandalonecategoryofinsurance.Specificregulationsmightalsobedevelopedtoaddressthespecificneedsofthehealthinsurancesector,suchasalowerminimumcapitalrequirement.

• Provideaplatformtosupportthedevelopmentofthehealthindustrychain,forexample,collaboratewiththeNHFPC,andtheMOHRSS,tohelphealthinsurancecompanies’workwithmedicalinstitutionstoprovideaffordableandqualitymedicalservicesandreduceovertreatment.

3. Distribution Channels3.1EnlargeAccessofBancassuranceBusiness

Concern A2010CIRCregulationeffectivelyrestrictedeachbranchofcommercialbankstocooperatingwithnomorethanthreeinsurancecompanies(i.e.eachbranchofthesamecommercialbankcanhavedifferentcooperatinginsurancecompanies).Thisrestrictionhasledtobanksdemandingveryhighcommissions.

Assessment ManyoftheforeigninsurersthathaveestablishedsubsidiariesinChinahavemorethanacenturyofindustryexperienceoverseas.Thismeansthattheyhavegeneratedagreatdealofprofessional,technologicalandoperationalexpertise.TheworkinggroupunderstandsthattheChineseGovernmentwishestoabsorbadvancedknow-howfromoverseasandthatthishasbeenafactorinitsdesiretoopenChina’sinsurancemarkettoforeignplayers.

Howevertherestrictiononbancassurancepresentsparticulardifficultiesforforeign-investedinsurers:China’slarge,state-ownedbankshavethemostextensiveresourcesanddistributionnetworksandsocompetitionbetweeninsurerstocooperatewiththosebanksisverysevere.Manybankswillelecttocooperateonlywithdomesticinsurerswithwhichtheyarealreadyfamiliar.Foreign-investedinsurerscurrentlyhaveonlyasmallmarketshareinChinaandthislimitationintheirabilitytocooperatewithbanksisafactorintheslowgrowthoftheirmarketshare.

Besidesthis,therestrictionlimitsforeignplayers’accesstoresourcesanddistributionchannels,whichrendersthemlesscompetitiveandpreventsthemfromactivelysharingtheirtechnologyandbusinessskillsacrosstheindustryinChina.

TheChineseinsuranceindustryiscurrentlydealingwiththechallengeofmis-sellingthroughbancassurancechannelsandthishasledtosubstantialdemandsforrefunds.Manyoverseasmarketshistoricallyexperiencedsimilardifficulties,

butwereabletoovercomethemandbuildmatureandhealthybancassurancesystems.Allowingforeignplayerstomoreactivelyusethebancassurancechannelwillallowthemtoshareexperienceinthisrespectandtoassistwithbuildingmarketdiscipline.

Recommendation:• Relaxtherestrictiononbancassurancecooperationtoallow

bankstocooperatewithagreaternumberofinsurers.

• Allowmoreaccessforforeignplayers,andmakeitpossibleforforeignplayerstousetheiroverseasexperiencetotakeapositive,leadingroleinsettingthedirectionofthebancassurancemarketchannel.

3.2AbolishtheGeographicalRestrictiononOnlineInsuranceSales

Concern Currentregulationsprohibitinsurancebusinessesfromcarryingoutbusinessoutsidetheprovincewheretheyareregisteredorhaveabranch.WhilethereisprovisionintheregulationsfromtheCIRCtocarveoutonlinesales(andtelephonesales)fromthisrule,ithasyettodoso.Thisgeographicalrestrictionlimitstheenormouspotentialofonlineinsurancesalesandoptionsforconsumers.Itdisproportionatelyaffectsforeign-investedinsurancebusinesseswhichhaverelativelyfewbranchesinChinawhiletheirdomesticcounterpartstendtohaveapresenceinmanyprovinces.

Assessment ThehugeincreaseinonlinesalesofalltypesinChinaoverthepastfewyearsindicatesthegrowingpopularityoftheInternetasasaleschannel.Itwillbeanincreasinglyimportantchannelforinsurancesales—particularlysincethegrowthofinsurancepremiumsgeneratedbymoreconventionaldistributionchannels(individualagentsandbancassurance)hasslowed.

Oneofthegreatadvantagesofonlinesalesisthatitinvolvesnophysicalobstacles:theoreticallyanyoneintheworldcanlogontheInternetandmakeapurchaseonlinewithouttheneedtoattendtheseller’spremises.Anotherisreducedcosts:onlinesellingrequiresfewerbusinesspremisesandstaff.

Restrictingonlinesalesofinsurancetotheprovince(s)inwhichanentityhasaphysicalpresencerestrictstheimpactofthesepotentiallyenormousbenefitsonthemarketandconsumers.

Inparticular,itlimitscompletionintheindustryandthereforeconsumerchoice.MembersoftheInsuranceWorkingGrouparecommittedtotheChineseinsurancemarket.TheyaimtointroducetoChinaincreasinglysophisticatedinsuranceproductstestedinothermarketsandtailoredforChina.Thedefactorestrictionontheexpansionofforeign-investedinsurancecompanies’presenceinChinatogetherwiththerestrictionofonlinesalesmeansthatalargeproportionofChineseconsumershavenoaccesstosuchproducts.Abolishingthegeographicalrestrictionononlinesaleswouldincreasethataccessandwouldgosomewaytowards‘levellingtheplayingfield’forforeign-investedinsurerscomparedwiththeirdomesticcounterparts.

Appendices


Perhapsthemainreasonforthecurrentgeographicalrestrictionononlinesalesisaconcernthatinsurancecompaniesmaynotbeabletoprovideadequateservicestoconsumersinprovinceswheretheinsurerhasnophysicalpresence.Inthisrespect,weproposetwomeasuresforconsideration.First,insurancecompaniescouldberequiredto:(i)engagelocalinsuranceinstitutions(insuranceagentsand/orlossadjustors)toprovideservices;and(ii)overseethoseservices.Second,theycouldberequiredtostateclearly,ontheirwebsites,theprovincesinwhichtheyareregisteredandhowcustomersoutsidethoseprovinceswillbeserviced.Customerscouldthenmaketheirowninformedpurchasingdecisions.

TheworkinggroupisencouragedbythedraftforcommentsNoticeConcerningCertainIssuesofRegulatingLifeInsuranceCompaniesSellingOnlineInsurance,whichprovidesthatlifeinsurerssellingcertaintypesoflifeinsuranceonline,providedtheyhave“correspondinginternalcontrolcapability,andareabletosatisfycustomerneeds”,mayexpandtheirgeographicalsalesareatothosewheretheyhavenotyetestablishedabranchorganisation.Ifthisbecomeslaw,itwillallowforeign-investorsgreateraccesstoChina’slifeinsurancemarket.

Recommendation:• PuttheNoticeConcerningCertainIssuesofRegulatingLife

InsuranceCompanies’SellingOnlineInsuranceintolawandabolishgeographicallimitationsononlineinsurancesalesgenerally.

• Allowinsurancecompaniestoenterintopolicyagreementsonlineregardlessofthelocationofthepurchasingparty.

3.3EstablishaLegalFrameworkforWorksiteMarketing

Concern ThereiscurrentlynolegalframeworkallowingforworksitemarketinginChina.

Assessment Worksitemarketingisamethodofdeliveringsupplementalbenefitstoemployeeswithoutthefinancialparticipationoftheemployerbutwiththeendorsementoftheemployer.WorksitemarketingisarelativelyundevelopedchannelforthedistributionofinsuranceproductsinChina.Bycontrast,inmanyoverseasinsurancemarkets,particularlythoseinEuropeancountries,thischannelisusedextensively.Somespecialinsurancecompaniesoperateonlyonelineofbusinessand/oruseworkplacemarketingastheirsingledistributionchannel.

TheChinainsurancemarketisworkingtowardsapositionwhereitoffersavarietyofproductstocustomersthroughavarietyofdistributionchannels.

Foreignplayersarewillingtocontributetothedevelopmentofworksitemarketing.Aclearlegalframeworkforworksitemarketingisneededandthatframeworkshouldbeonewhichallowsforeigninsurersequalaccesstothischannel.

Recommendation:• Establishalegalframeworkforworksitemarketingand

ensurethattheframeworkallowsforeign-investedinsurerstousethechannelonalevelplayingfieldwiththeirlocalcounterparts.

4. Allow Insurance Companies to Combine Certain Life Covers with Property and Casualty (P&C) Covers, and Vice VersaConcern ThePeople’sRepublicofChina’slegislationcurrentlyestablishesaverytightseparationbetweenlifeandpropertyandcasualtyinsurancelicence.Asaresult,insurancecompaniesworkinsilosandareunabletoofferinsuranceproductscoveringcustomerneedscomprehensively.

Assessment Inmanycountries,insurersareabletoobtaina’composite‘licenceforpersonallines,combiningcertainaspectsoflifeinsurance(suchasdeathbyaccidentanddeathbysickness,criticalillnessanddisability)andnon-life(suchasaccident,healthandmedicalexpenses,andmiscellaneousfinanciallossessuchasjoblossandlivingexpensesprotection).

Whereacompositelicenceisnotpermitted,thereisusuallyatleastsomeflexibilityforcertainpersonallinescovers,whichcanbewrittenbyalifeaswellasbyanon-lifecompany.

Alternatively,alifecompanycanwritecertainnon-lifecovers(andviceversa)providedthatsuchcoversareancillary,i.e.areofferedtogetherwithlifecoversandtheydonotrepresentthemajorityofriskundertakenunderthecontract.

Theworkinggroupbelievesthatallowingmulti-linecontractsintheareaofpersonalinsurancewillenrichtheofferandultimatelybenefittheconsumers;moreover,theworkinggroupisalsoconvincedthatthisamendmentwouldbeinstrumentaltoCIRCandCBRCpoliciesaimingatincreasingthevolumeofinsuranceprotectionproductssoldthroughthebancassurancechannel(inlinewiththejointCIRCandCBRCNoticeFurtherstandardisationforsalesbehaviourofinsurancethroughcommercialbanks,whichcameintoforceon1stApril,2014).

Allowinginsurancecompanies—andespeciallynon-lifecompanies—tocombinelifeandnon-lifeelementsinthesameinsurancepolicywillhelpmeetthedemandforinsuranceprotectionproductsandwillhelpcompetitionbyextendingnon-lifeinsurancecompanycapabilitytoofferprotectiontypesofproductswhichcanbesoldthroughthebancassurancechannel.

Recommendation:• Allow‘composite’insurancelicence.

• Allowlifeinsurerstounderwritepropertyandcasualtyrisksaslongastheyareancillarytolifecovers.

• AllowP&Cinsurerstounderwriteliferisksaslongastheyareancillarytopropertyandcasualtyrisks.

• AllowP&Cinsurerstounderwritehealthandmedicalrelatedrisksformulti-yearcontracts.

Appendices

Source:EUROPEANBUSINESSINCHINAPOSITIONPAPER2014-2015,whichcanbefoundatwww.europeanchamber.com.cn


5. Reduce Constraints on Foreign Insurance Companies’ CapitalConcern CapitalcontributionspaidbyforeignshareholdersinCNYarestillsubjecttocapitalaccountlimitations.

Assessment TheworkinggroupwelcomesthefactthatthePeople’sBankofChinapublishedCircularNo.225onthe23rdSeptember,2013which:1)clarifiedtheissueraisedintheInsurancePositionPaper2013/2014regardingthecapitalcontributionofforeignshareholdersinCNY;and2)easedforeigncompaniescapitalcontributioninCNY.

However,thecapitalcontributionspaidbyforeignshareholders,inCNYorconvertiblecurrency,arestillsubjecttocapitalaccountlimitations.Thosefundscanforinstanceonlybeusedforinvestmentsinlessthanoneyearbankdeposits.ConsideringthecurrentinvestmentenvironmentinChina,andthehighminimumcapitalrequirementsforinsurancecompanies,thoselimitationsareharmingforeign-fundedinsurancecompaniesprofitabilitycomparedwithChinesepeers.

Recommendation:• Widentheinvestmentscopeofcapitalcontributiontomore

investmentcategories,andclarifythewaythosecapitalfundscanbeusedforoperations.

• ReleasepreciserulesforcapitalalreadypaidinconvertiblecurrenciesregardingthepossibilitytochangethosefundsintoCNY,sothatinsurancecompanieshaveaclearpictureofthematerialandapplicationprocessrequiredbytheSAFEandcanmakeplansaccordingly.

6. Provide Favourable Taxation Support for Commercial Retirement ProtectionConcern Tocopewiththeageingpopulation,Chinapursuedamulti-levelretirementsystemwhichincludesthreepillars—basicpension,enterprisesannuity(EA)andthecommercialpension.Howeverthe3-pillarsystemisquiteimbalancedasthesecondandthirdonescannotplaytheirfullpotentialduetoalackoftaxationincentives.

Assessment Bytheendof2012,18.47millionemployeeswereinvolvedinEA,whichaccountsfor4.98percentofthetotallabourforce.Yetthe54,700enterprisesthatwereinvolvedinEAonlyaccountsfor0.4percentofthetotalenterprisesinChina,accumulatingatotalEAvolumeofCNY482.1billionwhichcontributes0.93percenttoChina’sgrossdomesticproduct(GDP).Comparedwiththewholepensionsystem,thescaleofEAisstillquitesmall.

Duringthe18thThirdPlenumoftheCommunistPartyofChina,itwasmentionedthattheGovernmentwillenactpreferentialpolicies,suchastaxexemptionanddeferral.TheGovernmentwillalsoencouragethedevelopmentofEA,occupationalannuityandcommercialinsurancetoshapeamulti-levelretirementsystem.Onthe6thDecember,2013,theMOF,the

MOHRSSandtheStateAdministrationofTaxation(SAT)jointlyreleasedasimplifiedversionofthepolicyguidance,theNoticeofIssuesRegardingIndividualIncomeTax(IIT)ofEnterpriseAnnuityandOccupationalAnnuity.Thisnoticeconfirmedthatindividualscanenjoytaxdeferralswithregardtoindividuals’EApaymenttounderfourpercentoftheirpayrolltaxbase.However,therearenoadjustmentsrelatedtoenterprises’taxationwhichfailstoappealtoenterprisesthathavenotestablishedEA.

AsfortheCommercialPension,itsaveragedensityisCNY750.13whileitsdepthwasonly1.97percentbytheendof2012.Undertheburdensofthemandatorypensionpaymentsandtaxexpenses,individualshaveaverylimitedbudgetorevennoadditionalbudgettobuycommercialpensions.Meanwhilethepilotschemeoftax-deferredpensioninShanghaihasnotspecifiedrulesofimplementation.Givenallthesefacts,thecommercialpensionfailstodevelopprosperously.

Recommendation:• Extendtaxationincentivesfurthertoenterprises.

• Provideafavourableandefficienttaxationpolicyforcommercialinsurancetoensureitsactiveandsustainableroleinthesocialwelfaresystem.

7. Eliminate the Regulatory Control on Motor Vehicle Insurance Premium Rates, Floating Rate Factors, Rebate Rates and Commission RatesConcern MotorvehicleinsuranceclausesandratesarecurrentlycentralisedandformulatedbytheInsuranceAssociationofChina(IAC).

Aflexiblerangeoffloatingratefactors,rebateratesandcommissionratesarealsocontrolledbytheIAC.Insurancecompanieshavenoneorverylimitedautonomyregardingcontroloverthesefactors.

Assessment Controlovermotorvehicleinsurancerates,inparticularoncommissionratesforsales,hasariskofviolatingtheAnti-MonopolyLaw(AML).Investigationsbyanti-monopolyenforcementauthoritieshavetakenplaceandsubsequentfineswereissued.IftheIAC’scontroloverpricingremainsunchanged,itwouldnotbefavourableforthedevelopmentoftheinsuranceindustry’smarketisation,butwouldalsobringhugelegal,complianceandreputationalriskstoinsurancecompanies.

Recommendation:EliminatetheIAC’scontrolovermotorvehicleinsurancepricing,specificallywhendeterminingcommissionrates.


Source:2014financialstatementsofindividualcompanies*On3July2014,RSAagreedtosellitsChinabusinesstoSwissRe

CorporateSolutions.Theacquisitionissubjecttoregulatoryapproval. (Source:Reuters)

Figure 112: Foreign life insurers Profit/(Loss) after tax 2014/2013

Figure 113: Foreign property and casualty insurers Profit/(Loss) after tax 2014/2013

Profit/(Loss)aftertax 2014 2013

TokioMarine 48,163,359 69,788,023

MitsuiSumitomo 43,653,000 17,317,000

Starr 34,860,378 (160,334,962)

SompoJapan 26,407,000 (163,272,400)

SamsungP&C 24,866,088 20,038,959

AXATianping 21,367,140 17,545,697

Lloyds 9,085,649 325,727

LIG 5,765,856 2,240,689

GeneraliChinaIns. 3,414,366 12,459,980

AIGGeneralChina (1,709,594) 2,321,389

NipponKoa (4,672,090) (13,189,391)

HyundaiP&C (5,973,913) (2,184,490)

ZurichGeneral (14,844,781) (25,202,848)

Chubb (16,867,074) (13,093,797)

XLInsurance (24,593,496) 6,838,407

RSA* (31,823,366) 4,994,391

AIOINissayDowa (46,295,605) (60,710,536)

CathayInsurance (71,383,018) (185,692,788)

GroupamaAVIC (118,387,665) 45,166,552

FubonProperty (118,744,242) (121,658,190)

AllianzChinaGeneral (147,436,527) (23,064,440)

LibertyMutual (176,522,851) (244,501,729)

Profit/(Loss)aftertax 2014 2013

AIA 1,551,200,794 987,083,073

Sino-USUnitedMetLife 383,825,514 405,819,395

GeneraliChinaLife 324,088,000 210,129,000

PrudentialLife 321,313,632 203,656,314

MANULIFE-SINOCHEM 290,829,602 182,638,081

Aviva-COFCO 244,564,216 173,484,727

CIGNACMCLife 214,655,777 191,973,091

HSBCLife 101,362,410 (23,642,965)

HUATAILife 76,116,566 (72,266,722)

ICBCAXALife 70,715,259 20,307,753

AEGONCNOOC 64,114,003 (92,523,280)

ING-BOBLife* 37,632,236 18,585,830

CathayLife 36,804,140 (33,018,469)

BOCOMMLife 20,609,455 (43,467,506)

ALLIANZLife 9,408,909 (112,871,370)

HengAnStandard 8,333,327 (129,969,541)

Sino-FrenchLife (24,928,741) (6,984,415)

Nissary-ChangshengLife (33,993,100) (89,854,600)

FounderMeijiYasuda (37,865,052) (65,485,626)

KINGDRAGONLife (40,949,203) (44,380,118)

GreatEasternLife (48,208,965) (60,542,486)

SAMSUNGAIRCHINA (58,233,844) (67,425,226)

OldMutualGuodian (70,666,940) (118,275,591)

SINO-KOREALife (73,556,156) (56,407,825)

ERGOCHINALife (76,718,705) (71,287,602)

ShinKong-HNALife (108,278,899) (85,627,382)

PramericaFosunLife (115,580,374) (89,080,594)

PINGANHEALTH (122,994,288) (79,021,228)

Appendices

Source:2014financialstatementsofindividualcompanies*NowcalledBOBCardif


1 Overall requirements

2 To make insurance a part of the multi-layered social security system

3 To exert insurance risk management functions and improve the social governance system

4 To perfect the economic compensation mechanism of insurance and increase insurance participation in disaster relief

5 To promote insurance for agriculture, farmers and rural areas, and innovate methods to support and benefit them

6 To expand the functions of insurance and facilitate economic upgrade

7 To promote the reform and opening up for better development of the insurance industry

8 To enhance and improve regulation for better risk prevention and mitigation

9 To strengthen infrastructure construction for a better development environment of the insurance industry

10 To improve the policy support for modern insurance service development

Opinions of the State Council on accelerating the development of the modern insurance industry, August 2014

Source:CIRC,Opinions of the State Council on Accelerating the Development of Modern Insurance Industry,www.circ.gov.cn,accessed19September2014

Appendices


Figure 114: Foreign property and casualty insurers auto insurance premiums as at 31 December 2014

Foreign property and casualty insurers premiums by type, 31 December 2014

Figure 115: Foreign property and casualty insurers cargo insurance premiums as at 31 December 2014

Figure 116: Foreign property and casualty insurers enterprise property insurance premiums as at 31 December 2014

Appendices

Source:CIRC,Annual Information Disclosure Report 2014forrespectivecompanies




0 500 1000 1500 2000 2500 3000 3500 4000 4500 5000RMB Millions

AXA Tianping P&C

Starr

Liberty Insurance

Fubon Insurance

Cathay Insurance

Groupama AVIC

Samsung P&C (China)

Allianz China General

Generali China Insurance

Hyundai Insurance (China)

Sompo Japan Nipponkoa

6,285

435

733

223

536

774

112

302

29

56

31

6AIG China

0 20 40 60 80 100 120 140 160 180 200 220RMB Millions

Tokio Marine & Nichido Fire

Samsung P&C (China)

AIG China

Mitsui Sumitomo


Allianz China

RSA China

AXA Tianping P&C

Generali China

Zurich General

Nipponkoa Insurance

Chubb Insurance

Starr

Fubon Insurance

LIG Insurance (China)

Hyundai Insurance

Aioi Nissay Dowa Insurance

Cathay Insurance

150.8

209.8

191.7

129.1

187.1

13.9

16.9

38.9

26.3

12.7

44.7

27.3

41.7

54.6

65.0

15.4

24.1

6.9

0 20 40 60 80 100 120 140 160 180 200 220 240 260 280 300 320 340 360 380 400RMB Millions


Samsung P&C

Zurich General Insurance

Mitsui Sumitomo Insurance

AIG China



Starr

AXA Tianping P&C

LIG Insurance

Hyundai Insurance

Generali China

Fubon Insurance

Cathay Insurance

RSA China

Groupama AVIC


Nipponkoa Insurance

Liberty Insurance

XL Insurance

Chubb Insurance

Lloyd's Insurance

167.9

132.9

211.3

102.7

315.0

169.0

205.2

374.1

42.5

62.9

30.8

79.9

70.7

58.3

52.4

72.4

86.1

23.1

10.1

7.8

0.8

3.7

Figure 117: Foreign property and casualty insurers engineering insurance premiums as at 31 December 2014

Foreign property and casualty insurers premiums by type, 31 December 2014

Appendices




0 20 40 60 80 100 120 140 160 180



Starr

Samsung P&C

Generali China

AIG China


LIG Insurance


RSA China

Liberty Insurance

Cathay Insurance

Hyundai Insurance


Nipponkoa Insurance

163.6

64.9

16.7

11.7

22.6

57.6

11.0

30.0

37.1

55.1

6.9

1.7

4.6

0.4

0.2

RMB Millions

0 50 100 150 200 250 300 350 400

AIG China




Chubb Insurance


Mitsui Sumitomo Insurance

RSA China

Generali China

AXA Tianping P&C

Cathay Insurance

XL Insurance

Liberty Insurance

Fubon Insurance

Starr

LIG Insurance


Hyundai Insurance

Nipponkoa Insurance

409.9

127.9

116.1

298.1

193.1

22.9

47.9

12.3

55.3

58.3

30.3

83.6

26.6

76.6

27.6

38.1

8.3

5.7

8.6

RMB Millions

Figure 118: Foreign property and casualty insurers liability insurance premiums as at 31 December 2014

Foreign property and casualty insurers’ major segment types, 31 December 2014

Source:DatatakenfromtheAnnualfinancialstatements2014,oftherespectivecompanies

Appendices


Enterprise property21.13%56,126

Short term health47.60%126,453

Accident11.45%30,422

Auto14.27%37,922

Home5.56%14,760

AIG China Allianz ChinaAioi Nissay Dowa

Auto1,5220.03%

Enterprise property111,6422.20%

Short term health505,2069.95%

Accident3,921,805

77.25%

Liability138,1482.72%

Cargo338,1126.66%

Home16,0560.32%

Engineering 20,1910.4%

Special risk13,462 0.26%

Auto27,1234.48%

Cargo18,4733.05%

Engineering43,9917.26%



Cargo12,8290.91%

Enterprise property248,308

17.61%



Auto1,121,263

79.53%


Accident62,68215.48%


Cargo78,87219.48%

Auto90,97822.47%



Cargo186,48249.84%


Auto4,5161.2%



Cargo50,09018.26%

Auto65,88424.01%






Cargo8,092

17.14%

Accident3,1692.35%


Engineering634

0.47%

Cargo53,84939.99%

Liability6,0324.48%

Groupama AVICGenerali ChinaFubon Insurance

Chubb InsuranceCathay InsuranceAXA Tianping

Figure 119: Foreign property and casualty companies market segments by coverage (RMB million)


Appendices



SamsungRSA China

NipponkoaMitsui SumitomoLloyd’s Insurance

LIG InsuranceLiberty InsuranceHyundai Insurance



Cargo49,11729.16%

Liability4,2632.53%

Auto4,2802.54%





Auto116,39748.12%



Accident7,6033.79%

Cargo70,93135.39%

Liability8,6124.30%

Enterprise property131.3

100.0%


Engineering100

0.13%

Accident1,2001.58%

Cargo35,30046.45%

Liability4,9006.45%


Cargo111,932

39.76%




Auto4,4550.37%



Cargo401,12932.98%


Accident1,6310.10%

Auto48,8293.00%



Cargo863,01852.98%

Credit2,2730.28%



Ship2,4970.31%

Cargo452,69556.04%

Appendices




Special risk3

0.02%

Liability5,110

32.32%

Zurich General

XL InsuranceTokio Marine & Nichido FireStarr


Accident134,46415.36%

Auto136,87215.63%


Cargo442,30150.52%

Credit6,1890.59%


Liability21,403

2.03%

Cargo703,94366.77%


Accident76,9084.85%

Enterprise property1,159,246

73.05%


Cargo227,20814.32%


Tianjin1,088,705

25

Shaanxi1,600,038

16

Jilin1,076,633

26

Jiangsu6,062,942

2

Hebei3,567,181

7

Gansu799,952

27

Inner Mongolia1,382,603

20

Heilongjiang1,220,309

23

Guangdong7,969,489

1

Chongqing1,388,692

18

Shandong5,146,322

4

Guangxi1,306,242

22

Guizhou1,124,343

24

Zhejiang5,844,725

3

Fujian2,392,675

12

Henan2,783,822

9

Hubei2,045,518

14

Hunan2,112,733

13

Jiangxi1,387,454

19

Anhui2,414,469

11

Liaoning2,592,818

10

Yunnan1,772,629

15

Xinjiang1,316,283

21

Beijing4,093,737

5

Shanghai3,203,568

8

Shanxi1,560,274

17

Sichuan3,717,618

6

Qinghai229,943

30

Ningxia363,684

29

Hainan378,259

28

Tibet90,101

31

90,101 7,969,489

Data

Figure 120: Total property insurance in China 2014, showing ranking of each mainland province (RMB10,000)

Yunnan1,476,563

1.35%

Tibet10,9170.01%

Tianjin1,745,103

1.60%

Shanghai5,456,044

5.00%

Shaanxi2,664,836

2.44%

Jilin1,918,905

1.76%

Jiangxi2,226,034

2.04%

Hebei4,935,865

4.53%

Hainan405,4520.37%

Guangdong12,970,898

11.90%

Gansu1,064,392

0.98%

Fujian3,639,254

3.34%

Beijing7,088,192

6.50%

Inner Mongolia1,444,365

1.32%

Heilongjiang3,467,932

3.18%

Chongqing2,229,371

2.04%

Shandong7,754,901

7.11%

Zhejiang5,639,723

5.17%

Henan6,598,834

6.05%

Guangxi1,437,853

1.32%

Hunan3,169,956

2.91%

Anhui2,744,227

2.52%

Jiangsu9,167,226

8.41%

Liaoning4,262,244

3.91%

Xinjiang1,412,275

1.30%

Sichuan5,836,087

5.35%

Hubei4,215,126

3.87%

Shanxi2,719,221

2.49%

Guizhou788,9000.72%

Qinghai165,7030.15%

Ningxia360,5040.33%

0.01% 11.90%

% of Total Data

Figure 121: Total life insurance in China 2014, showing totals and percentage for each mainland province (RMB10,000)

Foreign insurers’ business in China, 31 December 2014

Appendices

Source:CIRC

Source:CIRC


Tibet14,7140.27%

Tianjin65,8431.21%

Shanghai383,2657.06%

Shandong332,2386.12%

Shaanxi117,5242.17%

Jilin52,6200.97%

Heilongjiang86,7611.60%

Hebei196,4033.62%

Hainan23,5450.43%

Guizhou85,6011.58%

Guangdong662,13712.20%

Gansu63,4411.17%

Fujian202,0193.72%

Beijing358,0616.60%

Inner Mongolia70,9761.31%

Chongqing158,1502.91% Zhejiang

354,3416.53%

Liaoning154,9422.86%

Guangxi129,9182.39%

Sichuan297,7305.49%

Hunan159,5962.94%

Jiangsu484,7218.93%

Hubei185,2113.41%

Henan187,6613.46%

Yunnan142,1282.62%

Xinjiang122,3582.26%

Anhui112,1322.07%

Qinghai15,5160.29%

Ningxia24,0980.44%

Jiangxi94,8001.75%

Shanxi87,2071.61%

0.27% 12.20%

% of Total Data

Figure 122: Total casualty insurance in China 2014, showing totals and percentage for each mainland province (RMB10,000)

Tibet-54.12%

Tianjin18.20%

Shanghai12.79%

Shandong-30.42%

Shaanxi12.91%

Jilin-10.04%

Hebei9.04%

Hainan5.87%

Gansu118.21%

Chongqing84.22%

Inner Mongolia17.75%

Heilongjiang6.93%

Guangdong20.72%

Zhejiang1.85%

Liaoning37.31%

Guangxi10.47%

Guizhou36.02%

Sichuan32.41%

Xinjiang9.93%

Yunnan-4.24%

Jiangsu10.98%

Qinghai5.68%

Henan23.17%

Hubei17.11%

Ningxia13.25%

Hunan10.80%

Beijing18.35%

Jiangxi11.90%

Shanxi9.82%

Fujian1.73%

Anhui8.22%

-54.12% 118.21%

% Change

Figure 123: Percentage changes in health insurance from January to June 2014, versus January to June 2015

Foreign insurers’ business in China, 31 December 2014

Appendices

Source:CIRC

Source:CIRC



Contacts

Shaun Crawford Global Insurance Leader +44 207 951 2172 [email protected]

Jonathan Zhao Asia-Pacific Insurance Leader +852 2846 9023 [email protected]

Andy Ng China Insurance Leader +86 10 5815 2870 [email protected]

BeijingRick Huang +86 10 5815 4056 [email protected]

Hong Gu +86 10 5815 2881 [email protected]

Carol Yu +86 10 5815 3549 [email protected]

Wei Zhang +86 10 5815 2050 [email protected]

Bonny Fu +86 10 5815 3618 [email protected]

Arthur Bi +86 10 5815 3818 [email protected]

ShanghaiAJ Lim +86 21 2228 2929 [email protected]

Philip Guo +86 21 2228 2399 [email protected]

Alden Chen +86 21 2228 2788 [email protected]

Jacob Zhu +86 21 2228 3613 [email protected]

ShenzhenNiko Wu +86 755 2502 8090 [email protected]

Hong KongJeff Malatskey +852 2849 9308 [email protected]

Dennis Leung +852 2846 9060 [email protected]

Peter Telders +852 2629 3328 [email protected]

Tze Ping Chng +852 28499200 [email protected]

Frank Wong +852 2629 3594 [email protected]


Notes

Notes


Notes

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