China Insurance PWC

Insurance
Foreign insurance
companies in China
September 2010
Foreign insurance companies in China

September 2010
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Table of contents
Foreword 1
Executive summary 2
Market environment 11
Human capital 37
Risk management 47
Competition and positioning 50
Products and market segments 63
Market expansion 72
Regulation 79
Peer review 88
Appendices 98
• Methodology 100
• Participants 101
• Premium income for domestic life insurance companies, June 2010 102
• Premium income for foreign life insurance companies, June 2010 103
• Premium income for domestic property and casualty insurance companies, June 2010 104
• Premium income for foreign property and casualty insurance companies, June 2010 105
• Background comments on participants 106
• American Chamber of Commerce in China White Paper – Insurance Section 2010 112
Partners in success 117
Foreword
Welcome to the fourth PricewaterhouseCoopers1 survey Our respondents’ outlook for China over the coming
on foreign insurance companies in China. This year three years is that they expect the same share of a
we have increased the participation in our survey from much larger pie. From a positive standpoint, there are
29 companies last year to 31 foreign insurers currently increasing expectations of overall market growth in
active in China. We would like to thank the chief China, with most of our respondents anticipating a
executive officers and senior executives who participated doubling of policyholders by 2013. However, over the
in this survey for their time and effort in making this next three years, our respondents do not anticipate any
publication possible. We would also like to thank Dr Brian increase in the foreign players’ existing 5% share of the
Metcalfe for his research and analyses. life market. This is a big contrast from our survey in 2008
where the respondents were more optimistic. Then, they
The objectives of the survey continue to be: were expecting a 10% market share by 2011.
• Find out how the companies see the market issues
Nevertheless, foreign insurers’ commitment levels to
facing them in China;
China still remain strong, and in some cases, are even
• Get a consensus view on industry trends; increasing. However, this strong commitment will not
necessarily preclude certain foreign players from making
• Understand the thinking of chief executive officers in
significant changes to the manner of their participation in
China’s insurance industry;
the China market.
• Provoke discussion and debate on the best options
open to foreign insurance companies to capitalise on Many foreign players are taking a fresh look at their
current trends; business models and are re-examining their China
positions. Some that have been in the market for several
• Provide industry views on how insurance in China may
years, and were unable to generate satisfactory profits/
evolve over the next three years.
growth, are now taking a long hard look at the future
feasibility of their relationships with local partners.
The survey includes observations on changes in
In some cases, some foreign insurers are reducing
China’s marketplace, the risks, the development of the
their shareholdings so that their investee company
regulatory environment, future opportunities and how the
could achieve domestic status. The move by Chinese
participants in the survey view their competitors.
banks into the insurance space is also fuelling the
domestication trend.
2010 is proving to be a year of unprecedented change for
foreign insurance companies in China. As we launch this
report, several foreign insurers have announced plans
to reduce their shareholdings in their joint ventures. A
number of new entrants have also emerged from Asia.
Shu-Yen Liu Peter Whalley

Actuarial Practice Leader, Insurance Industry Leader,
Asia Hong Kong
1 “PricewaterhouseCoopers” refers to the network of member firms of

PricewaterhouseCoopers International Limited, each of which is a separate and
independent legal entity.
Foreign insurance companies in China 2010

PricewaterhouseCoopers 1
Executive summary

Background
This survey focuses on the strategic Life insurance companies (21) Property and casualty insurance
and emerging issues surrounding companies (10)
• AEGON-CNOOC Life Insurance
foreign insurance companies in
• Allianz Insurance
China. It attempts to bring together • Allianz China Life Insurance
diverse viewpoints and offer insights • AXA General Insurance
• American International Assurance
into this fast changing investment
• Chartis Insurance
market. • Aviva-COFCO Life Insurance
• Chubb Insurance
• AXA-Minmetals Assurance
The survey is based on interviews
• Groupama
with CEOs and senior executives • CIGNA & CMC Life Insurance
of 31 foreign insurance companies • Liberty Mutual Insurance
• CITIC-Prudential Life Insurance
operating in China. Confidentiality
• Mitsui Sumitomo Insurance
is protected by not identifying • Generali China Life Insurance
individual responses. The interviews • Royal & Sun Alliance Insurance
• Great Eastern Life Assurance
were undertaken in April and May (RSA)
2010, and were approximately one • Haier New York Life Insurance
• Tokio Marine & Nichido Fire
hour in length. They were conducted
• Heng An Standard Life Insurance Insurance
in Beijing, Chengdu, Chongqing,
Guangzhou, Hong Kong and • HSBC Life Insurance • Zurich Insurance Company
Shanghai.
• Huatai Life Insurance
• Manulife-Sinochem Life Insurance
• United MetLife Insurance
• Pacific Antai Life Insurance
• Samsung Air China Life Insurance
• Sino-French Insurance
• Sino-US MetLife Insurance
• Skandia Guodian
• Sun Life Everbright Life Insurance
What counts as a foreign insurer?

As at 30 April 2010, the China Insurance Regulatory Commission (CIRC) listed 27 foreign life companies and 18 foreign
property and casualty companies in China (see appendix for rankings based on premium income). Although a number of these
companies have announced proposed changes to their shareholding structures, the new structures have not been given official
regulatory approval. As a result, the companies invited to participate in this year’s survey were drawn from these lists.
It should also be noted that several foreign companies have significant shareholdings in domestic insurers. However, because
the shareholdings are below 25%, they have not been included in this survey.
HSBC has a 19.9% stake in Ping An Insurance, China’s second largest insurer. AIG (Chartis) has held a 9.9% stake in PICC, the
property and casualty insurer, since October 2003. And, ACE Group has a 22% holding in Huatai Insurance Company.

Overview
Market share remains stagnant Significant shifts in expectations

2009 was defined as a difficult year There have also been other
for foreign insurers in China. When significant shifts in expectations.
we reviewed the findings of this For example, projections by 19
survey, which was undertaken in the life insurers predict a doubling in
first half of 2010, we found that while policyholders to 15.8 million by 2013
there are signs of optimism, there (the three year projection in 2009 was
are also deep concerns across the an increase of 74%).
sector from both large and small,
The life participants expect a 60%
foreign life and property and casualty
upsurge in employment by 2013 (in
companies.
2009, they projected a 31% increase
The foreign players consider China by 2012), and the number of agents
to be a highly regulated environment, is expected to grow by 134% to
and they have struggled to try and over 250,000 by 2013 (a projection
gain traction and increase market of 125% by 2012 was recorded in
share. 2009).
This year, the respondents expect The property and casualty
their share of the Chinese market companies are operating from a
to remain stagnant over the next narrower base, but still envisage
three years. The life companies a 37% employment increase, and
believe their share to hover around policyholder growth from 225,000 to
the current 5%, while their property 299,000 over the next three years.
and casualty counterparts do not
see their slice of the pie increasing in Direction of bancassurance
2013 from 1% currently. The respondents expressed
This is a dramatic lowering of concerns over the direction of
expectations from our survey in 2008 bancassurance as major banks
in which participants had anticipated enter the market as manufacturers,
their market share to reach 10% by especially the impact on their bank
2011. distribution channel.
Although individual company growth The foreign insurers see their

projections look encouraging, the domestic counterparts as their major
foreign companies believe that the competitors. The large domestic
overall market share will continue to insurers are a major force, while the
expand at a pace that is insufficient new smaller domestic insurers have
to grab share from the large- and been aggressive in their geographic
medium-sized domestic insurers. expansion, and have increased their
efforts to gain a critical mass at a
Domestication trends faster pace than the foreign joint
ventures (JVs).
Recognition of this trend may be
behind the decisions of some foreign In response to some of these threats,
partners to dilute their shareholdings foreign life insurers are taking a
and follow the path to domestication. hard look at their future distribution
strategies. Some larger foreign
players place great hope on the
agency system and are investing
Foreign insurance companies in China 2010 heavily in this channel.
Bank Joint venture insurance company
Bank of China Heng An Standard Life. In August 2010, the CIRC
gave its approval for Bank of China to take over
BoC Insurance from Bank of China Group Insurance
Company. It has been reported in the media that
Bank of China will inject significant capital into BoC
Insurance, which will then invest in Heng An Standard
Life, and convert it to a domestic insurance company.
Bank of Beijing Bank of Beijing, China’s leading city commercial bank
by market value, has been given approval to buy 50%
of ING Capital Life. ING owns 19.9% of Bank of Beijing.
Its new name from July 2010: ING-BoB Life Insurance
Company Ltd.
Bank of Communications China Life-CMG renamed BoCom Life (BoCom
purchased the 51% stake previously owned by China
Life Group).
China Construction Bank Pacific Antai Life (CCB bought ING’s 50% stake).
China Everbright Bank Sun Life Everbright Life (Sun Life received regulatory
approval to reduce its stake in July 2010).
The move by Chinese banks into the Other foreign insurers, meanwhile,
insurance sector has led to a trend continue to keep all their options
towards increased domestication open and adopt a multi-distribution
of the foreign JV partnerships. The channel strategy.
above table documents the domestic
banks that have announced plans to
invest for the first time, or increase Untapped potential
their shareholdings, in the JV China remains an underinsured
companies. market with huge upside potential.
However, insurance continues to be
viewed primarily as an investment
Distribution channels
rather than protection, function
There is a dramatic turnover each despite the increasing efforts of the
year in the agent network, and some CIRC and the insurance industry to
foreign insurers have aggressive promote the latter.
plans to recruit and increase training
and skills in this channel. They are
pursuing a belief that as the bank New accounting standards
channel becomes more commodity- The new accounting standards
oriented, opportunities will arise for represent a sea change in the
skilled agents to go out and sell to marketplace for both foreign and
a growing mass affluent market. At domestic companies.
the same time, foreign insurers are
hoping to ride the bancassurance For example, changes to the rules
wave by leveraging on their bank concerning provisions will permit
partnerships. some companies to report larger
profits and higher net assets.
As a result, significant changes Human resource management
in market share among the larger
One of the most difficult obstacles
domestic companies are expected,
for foreign insurers to negotiate over
and the product mix will undoubtedly
the next few years will be human
change as well.
resources.
Some respondents suggest these
Recruiting and retaining good
new rules may be good for foreign
personnel ranked at the top of the
life companies, specifically those
list of what foreign players find to
that struggled to explain to their non-
be the most difficult aspect of the
insurance local partners the “long
Chinese insurance industry. This
term” nature of the business, and
can only get tougher as banks and
their inability to deliver a healthier
domestic insurers, both large and
bottom line after seven, or more
small, continue to grow.
years, of operation.
Some of the changes in shareholders
Strong commitment represent a significant strategic shift
in how some foreign insurers view
But there are also glimmers of hope. the market and its future.
Commitment to the China market
remains firm and, in some cases, While many of the survey’s
is increasing. Premium growth participants expressed great
projections look very buoyant relative optimism surrounding the changes,
to other more developed markets. other foreign insurers who continue
to operate on their existing
structures remain sceptical.
Highly regulated environment
While more regulatory changes are They often question the loss of
predicted, there is also a feeling, management control under the new
expressed by a few, that there might arrangements. In addition, they
be dramatic changes by the opening commented on the narrow product
up of the market with respect to margins that might accompany the
selected product lines. One example dramatic increase in volumes of the
of this might be a willingness by new operating models.
the CIRC to allow entry into the
enormous, but profit challenged,
auto insurance sector.

Main findings
The following findings are based on Global financial crisis fades major concerns. The life companies
interviews with 31 foreign insurance feel under more imminent threat
Foreign insurance companies in
companies2 which are considered than their property and casualty
China say they remain strongly
to provide a valid representation of counterparts.
committed to the Chinese market as
the 45, or more, foreign insurance
the global financial crisis fades.
companies currently active in the Drivers of change
Chinese market. Only two life companies contended
that the crisis had a negative impact The survey found that the big
on their China operations. Eighteen three drivers of change in China’s
companies said there had been a insurance industry were regulatory
more positive stance towards China changes, banks’ entry into the
from their head offices in the post- insurance space and the rising
crisis environment. influence of existing domestic
insurers.
Overall, China is viewed as a growth
opportunity in global terms.
Pressing issues
In 2010, 17 life insurers that Although the survey found that the
responded recorded a commitment most pressing issue was improving
score of eight out of 10 or greater. premium growth, the fifth ranked
Looking forward to 2013, the concern was profit performance.
numbers are higher, whereby 16 Although many companies continue
companies anticipate scores of nine to pursue top line growth, underlying
or above. the quest for growth is the need to
Nine property and casualty be profitable.
companies scored above seven Recruiting and training competent
out of 10 in the commitment scale, staff is in second spot. Forming
and four of these registered the partnership relationships is also
maximum score of 10 out of 10 (in considered crucial. Many foreign
2009, only one company had this insurers, both life and property
high score). and casualty, stressed the need to
develop effective partnerships as a
Domestic insurers represent the way to expand business.
greatest threat
The foreign insurers strongly believe Channel diversity
that the established domestic The report found that 11 life
insurers represent the greatest companies distribute 50% or
competitive threat. Under the new more of their products through the
accounting standards, it is predicted bancassurance channel. Tied agents
that the market share for China Life are considered very important to
Insurance will rise from 36.2% to eight foreign life companies, and
over 40% — eight times the size of many of them plan on strengthening
all the foreign life insurers combined. this channel in the future.
Other foreign insurers and new
2 A foreign insurance company refers to one
based outside mainland China. bank subsidiaries were also seen as

Partnership relationships turnover of 10% to 20%, while nine
companies expect it to climb above
Eleven life companies answered
20%.
a question on whether there was
a divergence of views between Those who expect the status quo to
themselves and their domestic remain are, in general, companies
partner in the joint venture. Nine that experienced major upheaval
said no, while two said yes, and a over the last year, whereby many
further nine companies declined have already seen significant
to comment. A number of foreign turnover.
companies said the relationship,
particularly expectations of Personnel in demand
both parties had been carefully
established from the outset. Staff functions that are expected
to be in greatest demand in 2010
It is clear, however, that there are include retail insurance agents,
also some times where relationships corporate sales agents and legal and
have not been so agreeable. In these compliance personnel.
situations, partners on both sides
are taking a fresh look at the future While sales personnel have always
viability of their relationship. been very much in demand, the
position of legal and compliance
has been elevated in importance,
Human resources
reflecting the expanding regulatory
Compared to 2009, the respondents framework.
expressed a higher level of concern
over human resource management Market share predictions
this year.
The stalled increase in market
Salaries which had stabilised in share for both life and property
2009 are expected to track upwards and casualty companies makes
in 2010. In fact, 26 companies that the participants’ future predictions
answered this question said they particularly prescient.
would increase salaries. The level of
increase is expected to be in the 6% The life companies think that market
to 10% range. share will reside in the 4% to 6%
range by 2013. It is around 5% in
Twelve companies said they would 2010. This suggests they expect no
increase bonuses in 2010, while 16 improvement going forward.
said bonuses would remain at the
2009 level. The same goes for the property
and casualty side. Four companies
predict market share to be at 1.5% in
Staff turnover expected to rise
2013. Only two companies think that
again
their share will reach as high as 3%.
Staff turnover rates in 2010 appear The current market share for foreign
to return to pre-crisis levels. Half property and casualty companies in
the group interviewed anticipate China is just 1%.

Two factors may see a change Typical examples include
in market share. On the life side, participating products, universal life
the new accounting standards are and investment-linked products,
expected to see some re-alignments and health insurance. More
in share and product mix. commoditised products are expected
to be sold through direct channels.
And, if there was to be a change
allowing foreign companies to offer Growth at the group level is
third party liability auto insurance, predicted for medical (and
foreign property and casualty supplementary medical) insurance,
players may see their market share embedded options, group annuities,
expanding. together with a range of other
pension offerings.
At the time of this research, some
respondents expressed optimism Meanwhile, travel, personal
that the pending review of China’s accident, homeowner and auto-
progress under the accession insurance products are expected to
to the World Trade Organisation be in demand for the property and
(WTO) might result in some positive casualty sector. At the corporate
changes. level, the respondents anticipate
growth in various types of liability,
Contrasting opinions on market marine and enterprise property
entrants and departures insurance.
About half of the respondents

Premium growth
believe there will be no more than
10 new entrants into the Chinese Four life companies expect their
insurance marketplace, taking premium growth to double in size in
the foreign insurer total to just 2010, while five expect growth to be
under 60 companies. However, 10 in the 50% to 70% range. Only two
respondents predicted the opposite companies expect less than 20%
scenario, envisaging a reduction increase in their premiums.
through consolidations and market
For the property and casualty
exits.
companies, expectations in premium
growth are more modest. Most
Products expected to be in higher expect growth to fall below 30%
demand by 2013 over the next three years. One
While the survey found that the respondent, however, predicts a
global financial crisis had slowed the growth rate of 100% in both 2010
rollout and development of some and 2013.
products, foreign insurers expect an
increased demand for a plethora of
offerings at both the individual and
group level by 2013.

Peer ranking summary
A summary of peer ranking (top

three positions) of foreign insurance
companies is shown in the table
below. Peer rankings are based on
the opinions of CEOs and senior
executives that participated in this
survey. Please refer to page 89 for
full details.
First Second Third
Life insurance — Traditional savings AIA Manulife-Sinochem CITIC-Prudential Life
Life insurance — Investment-linked CITIC-Prudential Life Allianz Life MetLife
Life insurance — Protection AIA Manulife-Sinochem Aviva-COFCO
Health insurance AIA Manulife-Sinochem CITIC-Prudential Life
Personal accident insurance AIA CIGNA Chartis (AIG)
Auto insurance Liberty Mutual Tokio Marine Samsung Fire & Marine
Homeowner insurance Chartis (AIG) Chubb Zurich
Enterprise property insurance Chartis (AIG) Zurich Tokio Marine
Cargo, transportation insurance Tokio Marine Mitsui Sumitomo Chartis (AIG)
Group life Generali AIA Aviva-COFCO
Group accident and health Generali AIA Aviva-COFCO
Customer relationships AIA Manulife-Sinochem Allianz Life
Geographic expansion Manulife-Sinochem CITIC-Prudential Life Aviva-COFCO
Innovation Chartis (AIG) Aviva-COFCO AIA
Distribution effectiveness CIGNA AIA Manulife-Sinochem
Marketing strategies Chartis (AIG) AIA Aviva-COFCO
Technically competent staff AIA Manulife-Sinochem Chartis (AIG)
Brand awareness AIA Chartis (AIG) CITIC-Prudential Life
Corporate social responsibility Allianz Life AIA AXA-Minmetals

Market environment

Background profile
Projected growth in Number of employees three year projection of 6.7%. Two

employment by 2013 companies project increases above
The 21 life companies currently
100% while only one company
employ 18,799 employees. This
expects below 20%.
is expected to increase by 59.8%
to 30,013 by 2013. This estimate
Once again, these are much more
includes one company that was
significant expected increases in
unable to project forward (and the
comparison to 2009.
respondent average was applied)
and one company where 2009
employment numbers were used. Non-PRC employees
The 59.8% projected increase is The number of non-PRC employees

significantly more optimistic than in the 21 life companies was
the three year increase of 31.4% estimated to be 178. Applying
reported in last year’s report. industry projections to two
companies that were unable to
Five life companies expect increases predict three years ahead, the
of 100% or greater by 2013. total declines to 175. While many
companies anticipate that the
Nine companies in the group number will remain the same, one
interviewed now have more than company predicted a significant
1,000 employees. drop.
Five companies expect their number Two property and casualty

of employees to grow by less than companies currently employ 108
20% over the next three years. non-PRC employees. This is
expected to decline by 6% to 102 in
Overall the more buoyant 2013. This includes a 2013 estimate
employment growth projections for one company.
mark a return to the levels predicted
in previous reports. In 2008, the One company expects to double its
respondents anticipated a growth in number of non-PRC employees but
employment of 69%. two companies expect significant
reductions.
Ten property and casualty companies
employed 2,251 people in 2010. The
Number of branches and sub-
number is expect to rise to 3,077 by
branches and offices3
2013. This included a 2009 number
3
Under the CIRC regulations, a branch of a foreign
insurance company can only conduct business within for one company, and an industry Twenty-one life companies projected
the territory of the province, autonomous region or average projection for another. The an increase from 145 branches in
municipality where the branch is located.
36.7% increase projection is much 2010 to 242 branches by 2013,
However, a foreign insurance company may also apply to
establish a central sub-branch or sub-branch, operating more optimistic than last year’s representing a 67% increase.
office or marketing service office.

In 2009, the respondents indicated Seven of the 10 property and
that they have 496 sub-branches and casualty companies indicated that
service centres. The composition of they expect the 2010 number of
this year’s 21 respondents is slightly agents to grow by 75% to 2,065 in
different. Together they have 598 2013.
sub-branches and service centres,
and they expect this number to more Number of individual policyholders
than double by 2013, rising to 1,293.
Nineteen of the life insurers had 7.9
The ten property and casualty million policyholders in 2009, and
companies have 17 branches in this number is expected to double
2010. This is expected to more than to 15.8 million by 2013. In the 2009
double by 2013. report, 20 life insurers estimated the
individual policyholders to grow from
This is very similar to the projections 6.2 million to 10.8 million by 2012.
made in last year’s report. Sub-
branches and sales offices for eight This year’s report expects a much
of the participants total 31 in 2010 higher growth rate. Eight life
rising to 51 by 2013. companies expect to increase by
more than 100% by 2013.
Number of agents Eight property and casualty

Eighteen of the 21 life companies companies provided individual
provided estimates of the number policyholder data. One respondent
of their agents. The 2010 total is was significantly larger than the
expected to expand by 134% from other companies. The total in 2010
107,200 to 251,100 by 2013. was 224,800 rising by 33% to
299,000 by 2013. In the 2009 report,
Nine companies expect to more than the 2012 projection was 199,000
double the number of agents over policyholders.
the next three years. This expansion
is in line with last year’s projection of
Number of corporate policyholders
232,720 agents in 2012.
Only 14 companies provided data
Nine companies anticipate more than which projected growth from 17,880
10,000 agents by 2013, and several policyholders in 2010 to 38,000 in
of these expect significantly higher 2012.
numbers.
One life insurer that has a bank
partner was omitted from the
group because the classification of
corporate policyholders dramatically
inflated the numbers.

Eight property and casualty Strong growth from indicators
respondents provided data. They such as employment, branches,
predicted an increase of 86% from agents, premiums etc, and the
34,000 in 2010 to 63,300 by 2013. inability of foreign insurers to
increase market share
Assets under management On the next page, the actual market

share of the foreign insurance
Nineteen life respondents indicated companies is displayed. Later in
they currently have RMB 197.86 the report, the survey finds that
billion worth of assets under participants expect little change in
management, and projected an market share over the next three
increase of just over 100% to RMB years. How can these two findings
401.8 billion by 2013. This is a much be satisfactorily reconciled?
higher rate of growth than that
predicted last year when the 2012 As noted above, although life
figure was expected to reach around companies expect employment to
RMB 200 billion. increase by 69%, branches and
sub-branches to expand by 67%
Five property and casualty and the number of agents to more
companies expect total assets of than double, they still see little or no
RMB 2.9 billion to expand by 19% to gains in market share. This suggests
RMB 3.46 billion by 2013. that, while they will increase in size
and scope, the overall market will
also expand significantly, and the
Gross premium income domestic companies will maintain
Seventeen life companies indicated their momentum and dominance.
that gross premium income will grow This may explain the direction being
by 70% from RMB 62.3 billion in chosen by a number of companies
2010 to RMB 106 billion in 2013. The to dilute their shareholdings and
omission of four companies excluded become part of a larger and faster
two medium-sized companies and growing domestic entity.
two small companies. The property and casualty
companies have more modest
Nine of the 10 property and casualty growth ambitions. Market share is
companies provided data which currently around 1%. It peaked at
predicted a doubling of gross 1.5% in 2005, and only four of this
premium income from RMB 3.2 year’s participants believe it will
billion in 2010 to RMB 6.6 billion grow to between 2% and 3% by
by 2013. This is very similar to the 2013. The property and casualty
projections made in 2009 for 2012. companies expect a 37% increase
in employment by 2013. From a very
small base, they also plan to double
the number of agents. One regulatory
reform that could dramatically
change this would be the CIRC
granting permission for foreign
property and casualty insurers to
enter the auto insurance market.
Market share of foreign life and The chart on the right illustrates the Market share of foreign life
property and casualty companies rise in foreign life companies’ market companies
in China between 2004 and 2010 share to almost 9% in 2005, and 8.9%
9
their subsequent decline to 5.1% in
8%
the first half of 2010. 8
7
Market share for the foreign life 6 5.9%
companies has remained around 5% 5.2% 5.1%
5 4.9%
for the last two years.
Market
share 4
3 2.6%
2
0
2004 2005 2006 2007 2008 2009 2010*
China Regulator: To Open
Source: CIRC
Insurance Market To Foreign * Relates to first half 2010
Firms
The head of China’s insurance
The foreign property and casualty Market share of property and
regulator said Saturday China will companies experienced their highest casualty companies
further open its markets to foreign market share in 2005 at 1.3%. The
competition, apparently addressing market share remained at 1.2% 2.0
rising complaints among foreign between 2006 to 2008, fell to 1.1%

financial institutions about their in 2009, and to 1% in the first half of
shrinking shares in China’s domestic 2010. 1.5
1.3%
market. 1.2% 1.2% 1.2% 1.2%
1.1%
Market 1.0%
“China’s insurance market will 1.0
share
become one of the world’s most
important markets in the coming
years, and provide huge development 0.5
potential for foreign insurers,” Wu
Dingfu, chairman of the China
Insurance Regulatory Commission,
0.0
said in a financial forum in Shanghai. 2004 2005 2006 2007 2008 2009 2010*
Wu said he expects China’s insurance Source: CIRC
market, which is now the world’s * Relates to first half 2010
sixth-largest insurance markets by
premiums, to keep high growth rates
in anticipation of a robust economy in
the coming years.
“China will further open its insurance

market to foreign companies, and let
foreign insurers play a bigger role in
the local market,” Wu said, without
elaborating.
Source: www.dowjones.com, 25 June 2010

Life insurance — Traditional The traditional savings segment
Intensive 23.8% 14.3% 28.6% 9.5%
savings of the life insurance market
remains intensively competitive as
categorised by over three quarters Moderate 9.5% 4.8% 4.8%
of the 21 respondents. It is also
undergoing a product review, as Light 4.8%
Competition
almost half the group indicated they
had made significant fundamental None
changes.
Response
No Minor Significant Fundamen-
change change operational tal change in
and organisa- strategy and
tional change positioning
Note: Based on responses from 21 companies
Shading represents greater than 20%
Life insurance — Just over 20% of the respondents Intensive 5.3% 10.5% 5.3%
Investment-linked product consider the investment-linked
market to be intensively competitive,
Moderate 10.5% 21.1% 15.8%
while almost 50% viewed it as
moderate.
Light 5.3% 10.5% 10.5% 5.3%
Competition
In 2009, 70% said it was intensely

competitive. Only 10% of companies None
reported making fundamental
changes. Response
Life insurance — Protection In last year’s report, it was

acknowledged that the marketing Intensive 10.0% 10.0%
of insurance to provide protection
remains a challenge. Although a Moderate 40.0% 15.0% 10.0%
number of respondents commented
that the CIRC would like to see more Light 10.0% 5.0%
Competition
activity in this area, it is clear that

protection continues to reflect lower None
levels of competition.
Response
Overall, 65% of respondents said No Minor Significant Fundamen-
competition was moderate, and and organisa- strategy and
15% light. Only two companies have
made fundamental changes to their Note: Based on responses from 20 companies
strategy.

Health insurance Around half the group consider Intensive 5.3% 15.8% 31.6%
health insurance to be intensely
competitive. No companies claimed
to have made fundamental changes
Moderate 5.3% 31.6% 5.3%
over the last year.
Light 5.3%
Competition
None
Response

Personal accident insurance Personal accident is one of the least Intensive 8.7% 17.4% 8.7%
competitive market segments for
the foreign insurers. Almost one
third of respondents classified the
Moderate 26.1% 21.7% 8.7% 4.3%
competition as light.
Light 4.3%
Competition
Most companies have made either

no change or minor change to their None
strategies.
Response
Competition has declined in this No Minor Significant Fundamen-
segment when compared to the and organisa- strategy and
results from last year’s survey. tional change positioning

Group life There appears to be increased levels
Intensive 12.5% 31.3% 12.5% 18.8%
of competition in group life in 2010.
Twelve of the 16 respondents Moderate 12.5% 12.5%
reported intensive competition.
Around a third of the companies Light
Competition
have made significant or
fundamental changes. None
Response

Group accident and health A similar pattern is found with group

accident and health. Intensive 19.0% 28.6% 14.3% 9.5%
Over 70% of respondents now

Moderate 14.3% 9.5% 4.8%
categorise it as intensively
competitive and a third have made
Light
Competition
significant or fundamental changes.
None
Response

Homeowner insurance In 2009, five companies responded Intensive 11.1%

to this question. In 2010, the number
expanded to nine companies.
Moderate 22.2% 11.1%
Only one company said it was
intensively competitive, while five Light 33.3% 11.1% 11.1%
Competition
contended competition was light.

None
Response
Note: Based on responses from nine companies


Auto insurance Auto insurance remains on the Intensive 66.7% 33.3%
sidelines for foreign insurance
companies. Several companies
Moderate
participate “indirectly” in the sector,
and three commented that the
Light
sector was intensively competitive.
Competition
Foreign players continue to be
denied access to the mandatory None
third party liability (MTPL) market. Response

Several respondents suggested that No Minor Significant Fundamen-
restrictions concerning entry to this and organisa- strategy and
market might be relaxed in the future tional change positioning
as China addresses progress made Note: Based on responses from 3 companies

under accession to the World Trade
Organisation (WTO).
Enterprise property insurance Although only eight companies

Intensive 25.0% 50.0% 12.5% 12.5%
provided a response to property
insurance, they unanimously agreed
Moderate
that competition was intensive
in this sector. This matches the
response given in the 2009 report. Light
Competition
None
Response
Note: Based on responses from eight companies
Cargo, transportation insurance The cargo and transportation Intensive 10.0% 60.0% 10.0%
insurance market remains highly
competitive. Eight companies
viewed it as intensive and two
Moderate 10.0% 10.0%
companies moderate.
Light
Competition
The slowdown in exports in 2009

added to the challenges in this None
sector.
Response


Q Can you identify three major New capital requirements Many companies are looking for
concerns of the Chinese market share and top line growth
Investments — one respondent
insurance business at present?
posed the question where do you
place capital to generate yield Underinsured market
without having risk management The market is still very much
concerns? underinsured, and people view
insurance as an investment function
rather than protection.
Quality people
Future growth plans are based
on being able to hire good quality Breakeven pricing
people, and this is increasingly an A life company said that China
issue. One property and casualty pricing is just breakeven, particularly
company commented that all in the bank channel.
the talent was ex-AIG, and that
companies did not invest enough in
developing quality talents. Highly regulated environment
One participant asked, “How deeply
There is also a severe shortage involved is the CIRC going to be in
of skilled marine underwriters. our business”?
The respondents also expressed
difficulties in retaining good quality
staff. Sales force turnover
Turnover in the agent sales force
The future direction of has a major impact on customer
bancassurance satisfaction.
As more banks enter the insurance
space, foreign insurers are Differences between large and
concerned about the impact that this small companies
would have on their bank distribution
Divergence between large domestic
channel.
companies which are becoming
more professional than their smaller
Absence of a capital market counterparts.
Limited choice for different types of
investments.
International standards are not as
widely used as in the past
Lack of profitability
One property and casualty company P&C companies’ dependence on
said only a few foreign companies export for success
were making a profit if expenses
Some of the property and casualty
were fully allocated.
companies’ profits are very tied to
the export market.

Q What are the most important New accounting standards* players such as ICBC, Agricultural
changes taking place in China’s Bank and the Postal Savings Bank
The participants believe the new
financial market? might also choose to enter the
accounting standards will affect the
insurance business and leverage
calculation of provisions, and permit
their extensive branch networks.
insurance companies in general to
report higher net assets and profits
The arrival of the banks in the
at the time of the change. The new
insurance sector is expected to
standards will also cause some
create further pressures on human
changes in market shares.
resources and skills development.
Regulatory Changes
Expansion of the domestic
Respondents anticipate more companies
regulatory developments, including
The rapid growth and geographic
an increased focus on innovation,
expansion of the small and medium
risk management and more
sized insurance companies was
inspections.
identified as a major change.
*The CIRC and the Ministry of Consolidation

Localisation of shareholdings and
Finance (MOF) jointly issued new The participants expect consolidation management style
accounting standards to be used particularly amongst the domestic
in the preparation of companies’ Several references were made to
insurance companies.
2009 reports. Under these rules, the need to improve understanding
insurance-related risks under a of the needs of the local market in
mixed insurance and non-insurance Arrival of the banks order to effectively adapt products
policy need to be recorded more effectively. They also believed
separately from non-insurance China has been gradually permitting this could be facilitated by more
related risks. As a result, income banks to break into the insurance PRC nationals assuming more senior
from non-insurance risks will cease sector. Bank of Communications has management positions.
to be treated as premium income. a joint venture with Commonwealth
The rules also calculate provisions Bank of Australia (the previous
differently, thus allowing most company was called China Life Impact of WTO review
insurers to report larger profits and CMG), while Bank of Beijing agreed
Several property and casualty
higher net assets. to take over Beijing Capital Group’s
companies implied that a pending
50% stake in ING Capital Insurance
review of the progress, or lack of
early this year. China Construction
progress, of foreign insurers was
Bank will take ING’s 50% share in
behind CIRC’s move to open up the
Pacific Antai Life Insurance’s joint
market.
venture with China Pacific Insurance.
And, Bank of China has agreed to
There was a feeling that branch
buy 25% in Heng An Standard Life.
expansion controls had been relaxed.
A few companies even speculated
In the past, both Bank of
that the current prohibition of foreign
Communications and Bank of
insurers to provide compulsory
China had established insurance
third party liability insurance may be
companies in Hong Kong. Other
relaxed or lifted.

Q What does your insurance Respondents were asked to score domestic insurers and finding
company find the most/least the level of difficulty associated and retaining good personnel.
difficult aspects of the Chinese with a range of activities within the Ownership restrictions continue to
insurance industry? insurance industry. They scored each be a challenge for the joint venture
factor on a scale of one to five. The life insurance companies. The
chart below indicates scores above property and casualty companies
three on the right side of the axis, recorded higher scores with regard
and below three on the left side. All to the economy, finding profitable
the factors listed scored above three, clients, brand name recognition and
and therefore, reflect different levels risk management. Neither group
of difficulty. recorded a score above three for
bank insurance companies. This is
The most difficult component of the because most participants noted that
insurance industry was identified these companies have yet to become
as the regulatory environment, active in the market.
followed by competition from
Finding and retaining good personnel
Building a customer base
Product/revenue diversification
Innovative product/service offerings
Ownership restrictions*
Corporate governance
Accounting policy changes
Brand name recognition
Risk management
Taxation
Economy and market volatility
Identifying profitable clients
-1.5 -1.0 -0.5 0.0 0.5 1.0 1.5

Increasingly difficult
Based on responses from 31 companies both Life and P&C
* Answered by the 21 Life companies only

Q Have there been any significant Participants were asked to provide
strategic shifts by foreign some insight and explanation
insurers over the last year? regarding the recent proposed
For example, Sun Life changes in shareholdings by foreign
Everbright Life and Heng An insurers such as Standard Life and
Standard Life Sun Life, and the reported breakup of
the Haier New York Life joint venture.
There was a general feeling that

a number of companies were
disappointed that they had failed
to gain traction in the market. They
concluded that they could not make
a meaningful impact in the market
in their present form, saying radical
changes are needed.
One life company suggested that

there had been some mismatches in
partners, and that local partners had
become frustrated with their lack of
profits and growth in comparison to
their own core businesses.
Another company noted that both

Sun Life and Standard Life had
bank partners, and this review had
occurred simultaneously with the
opening up of the market to bank
subsidiaries. Others commented
that in the first quarter of 2010, both
these companies had experienced
rapid growth, although they raised
the issue of margins on this new
business. Finally, one participant
rationalised they were seeking a
smaller piece of a bigger pie, but
asked “are they just becoming
investors with no management
control?”
It seemed clear that going forward,

more foreign insurers would seek
creative approaches to the market
and that further departures are
possible.

Q What are the major drivers Although respondents viewed capital requirements, economies of
of change in the Chinese regulatory changes as the most scale, mergers/consolidation capital
insurance business? important driver of change in 2010, markets and the economic cycle.
two other drivers were considered
as very important – banks’ entry into Existing foreign insurers was placed
manufacturing of insurance and the in 14th position, while new foreign
influence of domestic insurers. entrants was in ninth position.
Following these top three drivers

are six drivers that have very similar
scores. In order of importance,
they are new domestic entrants,
120
100
80
Score 60
40
2010
20
0
ap est insu e
lo on a n
ew na c s
O reig ial c le
Fu C Liq rers
ns ce
ew m ns ges
Ec l re ntr rs
er om irem ts
ne ntr s
ts
s
en ts
re alis y
y
C nso cale
hn er
nc
rs s o ent
N l fi mi ket
er n e risi
nt
G Ec al m tio
g lob log
n tio
in ver dit
fo nc yc
on qu an
in
e re
w an
co gen
ec th
tra
do est ura
tra
g int han
it da
a
su
nd on ui
c
ba o r
o
O
o fs
in
ap li
c
m ic
c
N do o i
ry
ig
ge ie
i
T
en ato
tin G
g
/c
fo
ita
l
y
gu
th
tr
Re
C
tin
is
s’
Ex
nk
is
Ex
Ba
Based on responses from 31 companies in 2010

Q On a scale of 1 to 10 where 10 The chart below shows that life will influence the design and mix
is maximum impact, can you companies anticipate the new of products. These developments
score the impact of the Chinese Chinese accounting standards will will link to sales agents, and one
accounting standards on your have a greater impact on them participant asked the question “will
company? compared to property and casualty the agents be able to sell universal
companies. Seven life companies life correctly?”
assigned scores of seven out of 10,
The property and casualty
or higher, versus one property and
companies made the following
casualty company.
comments:
The one company that scored 10 out
• impact on compliance
of 10 indicated there would be a very
positive impact on profitability and • allows our competition to look
that par products could be profitable profitable without being profitable
in the first year. However, they also
• will not have a big influence on
cautioned these moves would require
the marine business
higher levels of capital. Another
company said they expected a major • A positive move, it increases
impact on tax. Others believed it standardisation
Life companies
4 P&C companies
Number of
companies
0
10 9 8 7 6 5 4 3 2 1
increasing impact of new accounting standards
Based on responses from 20 Life companies

and 6 P&C companies

Q Do you have a strategy to Most participants confirmed they
address the growing mass have a strategy to target the mass
affluent market? Can you affluent market.
expand on this?
One life insurer commented they
have located branches in the affluent
markets. With the expectation middle
class income would double or triple
in the next five years, they predicted
significant growth potential. They
contended that the issue was about
distribution, and not segmentation.
Another life company said they were
targeting this group, and is making
financial planning tools available.
A number of participants linked a

discussion on the mass affluent to
the bancassurance model.
Responses were less uniform

among the property and casualty
insurers. Several indicated they have
a more wholesale focus and were
not interested in this market at the
moment.
One property and casualty insurer

viewed health insurance as a key
product for the affluent segment.
Again, the property and casualty

insurers suggested collaboration
with banks provides a good targeting
opportunity, for example, in the SME
sector, they believe banks could
help them gain access to successful
entrepreneurs.
If the foreign property and casualty

companies are permitted entry to the
auto insurance sector, this may also
provide new access opportunities
into the affluent market.

Q What are the most pressing The most pressing issue in 2010 growing importance of forming and
issues you face? Can you rate was improving premium growth, leveraging partnerships for foreign
them 1 to 5? the same as in 2009. This was insurers. Although premium growth
followed by recruiting competent was recognised as critical, profit
staff and partnership relationships. performance was placed in fifth
The latter issue was introduced tor position.
the first time this year, reflecting the
Improving premium growth

Recruiting/training competent staff
Partnership relationships*
Increasing regulatory demands
Profit performance (margin)
Recruiting/training in distribution channels
Government intervention
Cost reduction
Head office expectations*
Quality of insurance books (lapse risk)
Retaining existing customers
China economic downturn
Risk management
Financial reporting methodology*
Fraud levels 2010
Targeting previously uninsured market
Impact on rates of global catastrophes 2009
Currency-related issues
Global economic downturn 2008
Market volatility
IFRS
Appropriate staff incentive schemes
Guaranteed returns in products
Managing customers expectations
Natural disasters
Transparency of fees & commissions
Litigator risk
Brand awareness
High dependence on new technology
Business continuation
Internet security risks
Regulated solvency requirements
Data security
Asset liability management*
Consolidation of financial industry
In the adjacent chart, the axis is based on Globalisation
a scale of the respondents’ rating of 1 to Availability of reinsurance
5, where five is most pressing. The central Epidemics (H1N1)
spine of the chart is “0” which reflects a score AIDS
of 3 on the 1 to five scale. As a result, 2.0
-2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0
represents five and -2.0 represents 1 on the
scale. Increasingly pressing issue
Based on responses from 20 companies in 2010, both Life and P&C

*New issues in 2010
Pressing issues: Differences The most important issue for foreign The property and casualty insurers
between life companies life insurers in 2009 was recruiting recorded relatively higher scores
and property and casualty and training in the distribution than their life company partners in
companies channels. This factor slipped to joint areas such as increasing regulatory
third position in 2010. demands, cost reductions and quality
of insurance books.
Improving premium growth

Partnership relationships*
Recruiting/training competent staff
Recruiting/training in distribution channels
Profit performance (margin)
Government intervention
Increasing regulatory demands
Cost reduction
Head office expectations*
Quality of insurance books (lapse risk)
Financial reporting methodology*
IFRS
Retaining existing customers
Risk management
Currency-related issues Life companies
China’s economic downturn
Fraud levels
Market volatility P&C companies
Global economic downturn
Guaranteed returns in products
Targeting previously uninsured market
Appropriate staff incentive schemes
Managing customers expectations
Impact on rates of global catastrophes
Asset liability management*
Data security
Transparency of fees & commissions
Business continuation
Brand awareness
Regulated solvency requirements
Natural disasters
Internet security risks
Litigator risk
High dependence on technology
Consolidation of financial industry
Availability of reinsurance
Globalisation
Epidemics (H1N1)
AIDS
-2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5
Increasingly pressing issue
Based on responses from 14 Life and 6 P&C companies

*New issues in 2010

Q From the perspective of your The global financial crisis has not Negatively
head office, has the agenda for had a negative impact on the strong
your China operation changed commitment of foreign insurance
Neutral
following the global financial companies towards China. 2009 2010
crisis?
In 2009, 18 companies said there
had been a positive change towards 18 companies
China, and the number remains said positively
in 2010 and 2009
exactly the same in 2010.
Only two companies believe the

crisis had a negative impact on their Positively
Chinese operations. Both are life
companies. Based on responses from 30 companies in 2010
and 29 companies in 2009
companies emphasised the growth
potential in China. For example,
one noted exports were picking up,
another commented on the lack of
growth in their home market, while a
third made a comparison with India
saying that they believe China offers
better opportunities.
The life companies also emphasised

or the growth opportunities and
scalability in China.

Q What changes do you see in the Respondents were asked to
distribution channels comment on relative movements
(i.e. moving towards or away in different distribution channels.
from their use)? In the case of the life companies,
only telemarketing received 100%
recognition of a movement towards
this channel.
Greater than 50% towards scores

were recorded for the internet, direct
sales, brokers, bancassurance and
affinity schemes.
Two categories recorded responses

suggesting “an away from” trend.
One was tied agents, (40% of
responses) and bancassurance (5%
of responses).
Bancassurance
Direct sales (promotional)
Telemarketing
Insurance agents (tied)
Independent financial advisors
Brokers
Internet
Affinity schemes
Post office
0 20 40 60 80 100
Towards No change
Away from

Q What changes do you see in As the chart below shows, property away from these channels. The
distribution channels and casualty companies anticipate three channels that are expected
(i.e. moving towards, or away, movement towards most channels. to experience significant growth in
from their use)? Only tied agents and direct sales usage are telemarketing, brokers and
(promotional) record some opinions the internet.
where there may be movement
Property and casualty companies
Bancassurance
Direct sales (promotional)
Telemarketing
Insurance agents (tied)
Independent financial advisors
Brokers
Internet
Affinity schemes
Post office
0 20 40 60 80 100
Towards No change
Away from
Based on responses from 10 P&C companies
Distribution of new premiums Results for the actual volume of tied agent channel accounts for 30%
by channel (see next page) business flowing through the different or more of their product distribution.
channels was provided by 19 life
companies. To protect their individual The ten property and casualty
identity, these respondents are not respondents recorded strong
shown by name. The significant movements toward bancassurance
role played by the bancassurance (70%), telemarketing (80%), brokers
channel is reflected in the fact that 11 (80%), the internet (80%) and affinity
companies distribute 50% or more schemes (60%).
products through this channel. Eight
life companies also indicated that the

Distribution of new premiums They indicated that two channels, of product through this channel.
by channel (continued) direct sales (promotional) (30%) One company recorded 25%, two
and tied insurance agents (30%) companies recorded 10%, and one
might expect a movement away. recorded 5%. Brokers are clearly
The significantly less important very important to the property and
involvement by the property casualty players alongside direct
and casualty companies in the sales. Two companies also attached
bancassurance channel was importance (around 30%) to the
demonstrated by only four affinity channel.
companies confirming distribution
Independent
Insurance financial
Bancassurance Direct sales Telemarketing agents (tied) advisors Brokers Internet Others
Life 1 35% 0% 20% 10% 0% 35% 0% 0%
Life 2 15% 0% 10% 70% 0% 5% 0% 0%
Life 3 60% 0% 5% 30% 0% 4% 1% 0%
Life 4 40% 0% 15% 20% 0% 20% 0% 5%
Life 5 30% 0% 0% 40% 0% 0% 0% 30%
Life 6 40% 0% 3% 42% 0% 15% 0% 0%
Life 7 65% 0% 0% 20% 0% 15% 0% 0%
Life 8 80% 0% 0% 20% 0% 0% 0% 0%
Life 9 0% 0% 50% 50% 0% 0% 0% 0%
Life 10 50% 5% 5% 35% 0% 5% 0% 0%
Life 11 80% 0% 0% 20% 0% 0% 0% 0%
Life 12 70% 0% 10% 0% 0% 20% 0% 0%
Life 13 0% 0% 0% 100% 0% 0% 0% 0%
Life 14 50% 0% 40% 10% 0% 0% 0% 0%
Life 15 100% 0% 0% 0% 0% 0% 0% 0%
Life 16 60% 0% 0% 40% 0% 0% 0% 0%
Life 17 75% 0% 5% 10% 0% 0% 0% 10%
Life 18 45% 0% 40% 10% 0% 0% 0% 5%
Life 19 90% 0% 2% 8% 0% 0% 0% 0%
P&C 1 10% 44% 5% 10% 0% 30% 1% 0%
P&C 2 0% 30% 0% 0% 0% 70% 0% 0%
P&C 3 5% 10% 0% 25% 0% 60% 0% 0%
P&C 4 25% 33% 0% 0% 0% 9% 0% 33%
P&C 5 0% 60% 0% 20% 0% 20% 0% 0%
P&C 6 10% 0% 0% 25% 0% 60% 0% 5%
P&C 7 0% 50% 0% 0% 0% 50% 0% 0%
P&C 8 0% 80% 0% 8% 0% 12% 0% 0%
P&C 9 0% 0% 0% 0% 0% 70% 0% 30%
Based on responses from 28 companies

Q Some have suggested there is a Sixteen of the 21 participating The most radical change which has
growing trend in the life sector life companies agreed there was been reported in the media is Haier
that domestic joint venture evidence that some domestic New York Life. Reports in March
partners would like to leave the (Chinese) joint venture partners 2010 suggested Haier was unhappy
relationship. Do you agree or would like to leave the relationship. In with the joint venture’s performance
disagree? the 2009 report, 13 foreign insurers over the last seven years.
expressed this view.
Mr Zhang Li, Vice President of Haier
Foreign insurers that have New York Life, was quoted as saying
announced shareholding changes that Haier Group’s 50 million home
include Sun Life Everbright Life appliance consumers in China gave
Insurance, Heng An Standard Life it an outstanding advantage and
Insurance, Skandia-BSAM Life that this market remains largely
Insurance (Skandia Guodian), Pacific untapped.
Antai Life Insurance, ING Capital Life,
BoCom Life and Sino-US Met Life (Source: www.cb.com.cn, 30 March 2010)
Insurance.
No comment
No
16 companies
said that, in general,
they believe
domestic partners Yes
would like to leave the
relationships Yes

Q Can you expand on the The general consensus among
emergence of Shanghai as a respondents was Shanghai would
global financial centre? emerge as a global financial centre.
However, they expressed frustration

with the limitations imposed on
foreign financial institutions, and
portrayed these as real impediments
to the pace and scope of the
transition.
Respondents believe China will be

able to support multiple financial
centres including Shanghai, Beijing
and Shenzhen.
Q What developments would you Necessary developments to

like to see occur? encourage transition:
• Free currency exchange
• Free capital movement
• Incentives to attract talent:
personal taxation levels
competitive with Hong Kong and
Singapore
• Greater transparency
• Tax incentives for insurance
products
• Favourable tax incentives in the
Shanghai Maritime Economic
Zone

Shanghai as a global financial and
China draws roadmap for global financial innovations, despite the global
shipping centre financial meltdown, Liu Tienan, deputy
financial, shipping centers in
Shanghai head of the National Development and
Reform Commission (NDRC), said at a
China elaborated on plans to build press conference in Shanghai.
Shanghai into an international financial
and shipping center, with pledges to However, the security and stability
gradually allow foreign companies of the financial system would be
to list in Shanghai and let overseas prerequisites for such innovation
firms issue yuan-denominated bonds. efforts and reforms, he added. The
The country was aiming to make country would gradually increase
Shanghai an international financial yuan-denominated bond issues by
center in accordance with the country’s international development agencies,
economic strength and the international according to the plans.
status of its currency by 2020,
according to plans published on the In addition, it would steadily work
central government’s website by the to allow foreign companies to issue
State Council. yuan-denominated bonds in Shanghai,
and would let some foreign firms list in
The nation would develop a multi- Shanghai “at a suitable time.”
functional and multi-layer financial
market in Shanghai with the Liu stressed that the goal was to build
introduction of more financial products, an international financial center in
instruments, derivatives and futures, Shanghai that matched the status of its
according to the plans. China would economic strength and its currency.
not hesitate to introduce new financial
products and services, or flinch from Source: www.chinaview.cn, 29 April 2010

Quotes from the Lujiazui Forum in Quotes from the Lujiazui Forum Liu Mingkang, Chairman of China
Shanghai, May 2010 in Shanghai, May 2010 Banking Regulatory Commission said
“Innovation is an inevitable choice for
Zhou Xiaochuan, Governor of China’s financial sector to combat the
People’s Bank of China said “China’s financial crisis. All financial institutions
financial hubs should look at global need to enhance innovation of risk
development. Shanghai and Hong Kong management. Financial institutions in
should cooperate and coordinate with Shanghai should focus on optimizing
each other to boost overall financial products and services, increasing
development. China’s voting power productivity and efficiency and
in the IMF should increase again in reforming the salary system.”
2011. China is also expected to play
an important role in making up the new Wu Dingfu, Chairman of China
rules of the game in the post-financial Insurance Regulatory Commission
crisis era.” said “We are aiming to make Shanghai
into an innovation and R&D center for
Shang Fulin, Chairman of China insurance products, and an insurance
Securities Regulatory Commission said management and back-up service
“China’s capital market should gradually center, as well as a pilot city for
improve market mechanisms, act as an insurance capital reforms.”
economic boost, and push ahead with
structural adjustments. It should also Source: www.CCTV.cn, 18 May 2010
support the development of small and
medium sized firms.”

Human capital

Q In 2010 will base salaries Some of the cost controls imposed Remain
the same
remain the same, increase or during the financial crisis will be lifted Increase
decrease? by the foreign insurers.
In 2009, 18 companies indicated

they would increase salaries. This
year, that number rises to 26 of 26 companies
said they
the 29 companies that answered this would increase
question. Two life companies and salaries
one property and casualty company
said salaries would remain the same.
One life company that predicted a
salary increase noted that domestic
insurers were more stable and
provided a better benefits package
than their foreign counterparts.
Seventeen companies anticipate an 20

increase of between 6% and 10% in
2010, significantly above the 2009
figure of six companies. 15
Number of
10 2010
companies
2009
0
%
ss
ed
e
m
15
10
le
ifi
sa
ec
or
to
to
sp
5%
%
6%
ot
11

in 2010 and 19 companies in 2009

Q In 2010, will bonuses increase, In 2009, ten companies said they Increase
remain the same or decrease? would increase bonuses over the
Remain
previous year. This year, that number the same
increased to 12 companies with 16
recording that bonuses would remain
the same. 12 companies
said they would
increase bonuses
Two life companies noted they
performed well in 2009, and their
bonus was performance-based.
They expected increases of 60% and
50% respectively.
Only two of the eight property and
casualty companies that responded,
said they would increase their
bonuses in 2010.
Two life companies said they plan a

head count reduction in 2010. One of
these plan to do this through natural
attrition.

Q In your opinion as a foreign As in 2009, the largest number of the needs of the regulator purposes
insurer, how effective is the companies hold a neutral position and was beneficial for networking
current training offered by the on the effectiveness of the training purposes.
CIRC? offered by the CIRC. However in
2010, 10 companies categorised it Several companies mentioned the
as ineffective versus eight companies CIRC’s requirement that senior
in 2009. management be tested in Mandarin.
Overall this was viewed negatively by
Only three companies labelled it the foreign companies who argued
as effective in 2010. This included that it worked against the importation
two life companies and one of foreign skill sets.
property and casualty company.
They contended that the training Interestingly, not all of the
was useful on technical material. It respondents had been required to
helped attendees better understand submit to a Mandarin based test.
13
MetLife’s two China JVs
merging 12
Sino-US MetLife Insurance Co., Ltd. 11

and United MetLife Insurance Co.,
10
Ltd., MetLife’s two life insurance 2010
joint ventures in the Chinese market, 9 2009
have reached an agreement over a
merger. 8
Number of
7
companies
Sino-US MetLife will be merged
by United MetLife and after the 6
deal, the Shanghai-based insurer 5
will own both assets and debts
of the Beijing-based one. Both 4
ventures announced the news on
3
their websites recently and the
deal now is subject to the China 2
Insurance Regulatory Commission
1
(CIRC), the top Chinese insurance
regulator. The merged company 0
will be renamed as Sino-US United
e
t
tra
en
iv
iv
iv
iv
MetLife Insurance Co., Ltd. The deal

ct
ct
ct
ct
eu
m
fe
fe
fe
fe
m
N
ef
Ef
ef
ef
co
is expected to be completed before

In
in
y
o
r
ry
Ve
N
Ve
the end of this year.

Source: Insurance News Net, 6 June 2010 and 29 companies in 2009

Q Are you currently evaluating Twenty-three of the 31 participants Agents’ effectiveness
your agents’ effectiveness? said they were evaluating the
effectiveness of their agents. Yes
No response
The remainder did not provide a
response.
23 companies
said they were
evaluating Yes
agents’ effectiveness
Q What percentage of agents will The turnover rate among agents Percentages of agents’ termination
you terminate in 2010? remains very high. For example,
five companies anticipate shedding 2010
50% of their agents in 2010 and
one of these companies predicted 80% to 89%
the turnover rate could be as high 60% to 69%
as 80%. Eight companies fell in the 50% to 59%
30% to 39% range.
40% to 49%
30% to 39%
The scale and turnover of the
agency channel is evident in the 20% to 29%
responses to the number of new 10% to 19%
agents companies plan to recruit

in 2010. While most life companies Based on responses from 21 companies
fall in the 1,000 agent range, several
companies predicted in the 10,000
2009
to 15,000 range, with one company
predicting 20,000 new agents.
Data provided by 18 life companies
70% to 79%
indicated they would collectively
50% to 59%
recruit 91,500 new agents in 2010.
40% to 49%
30% to 39%
20% to 29%
10% to 19%
0% to 9%

Q What percentage of agents will Estimates on the industry termination
the industry terminate in 2010? rate for agents showed a wide
variation.
It ranged from 20% to 70% with

five companies in the 30% to 39%
range, three companies in the 40%
to 49% range and five companies in
the 50% to 59% range.
70% to 79%
60% to 69%
50% to 59%
40% to 49%
30% to 39%
20% to 29%

Q How do you define an active Respondents were asked to explain Defining an active agent
agent? how they defined an active agent. 18
13
of the 21 life company participants
12
answered this question.
11
10
Thirteen companies stated active 9
agents must sell one policy per 8
month, while five had to sell a policy Number of
7
companies
every three months to stay active. 6
There are also some variations on 5
these requirements. Some companies 4
also require premium tests. 3
2
On the property and casualty side, 1
one company indicated three 0
th
s
submissions per week and one
th
th
er
on
on
on
th
m
O
policy per month; another said four
m
ne
e
re
Tw
O
submissions and a productivity ratio
Th
Required to sell a policy during the time period above
of RMB 100,000 per annum. Based on responses from 18 Life companies
Other performance measures

mentioned included number of cold
calls per month and specific product-
based targets.

Q What percentage of your In a related question, respondents The challenge of constantly hiring
agents fall into this category? were asked to consider their new agents has already been
agency sales force and to state mentioned. Clearly, part of this
the percentage of agents that were problem could be overcome if life
active based on the definition that companies increased the productivity
they had just given. of their existing teams. Given the
scale and number of agents who
One company indicated a level
fail to meet their targets, high agent
below 20%, but most fell in the
turnover rates seem inevitable.
40% to 60% range. Two companies
indicated 70%, one 80% and one
90% in terms of agents meeting their
targets.
90% to 99%
80% to 89%
70% to 79%
60% to 69%
50% to 59%
40% to 49%
30% to 39%
20% to 29%
10% to 19%

Q What will your annual staff Respondents were asked to Predicted staff turnover rate in 2010
turnover rate be in 2010? report on the level of turnover they
experienced in 2009, and then to
predict what it might be in 2010.
Percentage
20 to 29
The 2009 chart shows that nine
10 to 19
companies were below 10% and a
further 11 companies were between 0 to 9
10% and 20%. As a result only eight

companies in 2009 had a turnover
rate greater than 20%. Only one
of the eight reporting property and
casualty companies was greater than Nine companies were above 20%; 19 companies
below 20% of which 5 companies below 10%
10% in 2009. Based on responses from 28 companies
Predictions for 2010 show an

increase in turnover rates.
Annual staff turnover rate in 2009
Only five companies forecast
turnover below 10% in 2010.
Fourteen of the 28 reporting
Percentage
companies fall into the 10% to
30 to 39
20% range, while nine companies
expect to be above 20%. While 13 20 to 29
companies expect turnover rates 10 to 19
to rise in 2010, ten companies 0 to 9

believe they will stay the same and
five companies predict they will
fall. The latter group are companies
that have experienced significant Eight companies were above 20%; 21 companies
below 20% of which 9 companies below 10%
change over the last year either Based on responses from 29 companies
through a strategic or shareholding
realignment.

Q Which staff functions have the The two most in demand staff However, a number of responses in
highest hiring priority in 2010? functions in 2010 are the same as the ‘other’ category may account for
Can you rank the “Top 3”? 2009. They relate to retail sales the decline in the sales management
agents and corporate salespeople. function. Respondents preferred to
use terms such as:
A number of other support
• sub-branch management
functions also rank high – legal
and compliance, underwriting, • bancassurance head
actuarial skills, operations and
• agency management and training
risk management. Both legal
and compliance and actuarial • distribution management and
experienced a significant increase channel heads
over 2009.
• bank sales management
Investment management and sales Earlier in the report the significant
management have retreated in terms importance and on-going
of priority. requirement to recruit new agents
means that recruiting is also deemed
an important function.
Insurance agents-retail
Insurance salespeople-corporate
Legal/compliance
Underwriting
Actuarial 2010
Operations
2009
Risk management
Other
Investment management
Finance
Product design
Sales management
Capital management/treasury
Accounting
Tax/transfer pricing
0 5 10 15 20 25 30
Score
and 29 companies in 2009 which have been prorated

Risk management

Q What are the major sources The primary source of fraud for Life companies
of fraud in your organisation? the life companies is the broker/
Please rank the following in intermediary channel. 50
order of greatest risk.
This is consistent with the findings in
40
both 2009 and 2008. This is followed
by suppliers/providers and then
policyholders. 30
Score
In 2009, policyholder ranked ahead
of suppliers/providers. 20
10
rs
er
es
af
rie
er
de
th
at
st
id
ia
ic
ol
v
al
ed
nd
ro
yh
rn
rm
/P
Sy
lic
te
rs
te
In
Po
lie
In
s/
pp
er
Su
ok
Br
The leading source of fraud is Property and casualty companies

also broker/intermediaries for the
property and casualty companies. 30
This is followed by policyholders and
internal staff. 25
20
Score 15
10
0
s
rs
ff
s
rie
er
a
de
st
d
ia
ol
vi
al
ed
ro
yh
rn
rm
/P
ic
te
rs
l
te
In
Po
lie
In
s/
pp
er
Su
ok
Br
Based on responses from 10 P&C companies

Q Do you believe the Chinese The majority of insurance Don’t know
insurance companies’ risk companies do not believe that Yes
management systems are the risk management systems of
sufficiently robust? their domestic counterparts are
sufficiently robust.
The foreign insurers qualified this

opinion on a number of different
levels.
They differentiated between the

very large insurers who they believe No
had quite robust systems and were
much more critical of the smaller and Based on responses from 31 companies
more recently incorporated domestic
companies.
In what one company referred to as

the Tier 3 level, it was felt that they
are very aggressive on marketing,
were attracting unprofitable business
and had weak risk management.
Paradoxically, one foreign life insurer

noted that some foreign companies
are not as good as some domestic
companies on operational risk and
compliance.

Competition and positioning

Q How much market share will Eleven out of 20 life insurers that Life companies
the foreign life companies take provided an estimate of the market
up by 2013? share of the foreign life insurance 4
companies by 2013 suggested it
would reside between 4% and 6%.
The market share in the first half of 3
2010 was 5.1%, a level which the

foreign insurers have held for the
Number of 2
last two years. As a result, more companies
than half of the group does not
expect movement in market share
1
over the next three years.
Several companies predict modest
increases from 8% to 10% while one 0
3% 4% 5% 6% 7% 8% 9% 10% 15%
company anticipates a large jump to Expected market share percentage by 2013
15%. Based on responses from 20 Life companies
In 2009, market share predictions

were more optimistic. At that time
eight companies predicted 8% or
higher by 2012. In 2010, only five
companies predict 8% or higher by
2013, which indicates a lowering in
expectations.
Q How much market share Ten companies provided an estimate Property and casualty companies
will the foreign property and of their market share. Four opted
casualty companies take up for 1.5% by 2013 and four other 4
by 2013? companies predicted it would climb
up to 2% to 4%.
3
The market share in the first half of
2010 was 1%.
Market share for the foreign Number of 2
companies
property and casualty companies
peaked at 1.2% in 2005.
1
In 2009, eight companies predicted
a 2% market share while one
company thought it might rise
0
to 4%. In 2010, four companies less than 1.0% 1.5% 2.0% 2.5% 3.0%
predicted a 2% to 3% market share 1%
Expected market share percentage by 2013
by 2013. The property and casualty Based on responses from 10 P&C companies
participants therefore, in sync with
the life participants, also believe
that while premiums, employment,
policyholders and networks will
continue to expand, they will not
keep pace with the overall market’s
Foreign insurance companies in China 2010 expansion.
Q In your opinion, which For both life and property and chose the new start up financial
institutions represent the most casualty companies, the domestic institutions. These new players have
significant competitive threat to insurance companies represent launched very aggressive marketing,
your organisation over the next the greatest competitive threat. pricing and distribution strategies.
five years? Similarly, the second greatest
competitive threat posed to both As the article on the following page
types of companies are other foreign indicates, under the new accounting
insurance companies. standards, the market share of China
Life will rise to over 40% from 36.2%
In third position for the life while China Pacific Life and New
companies are the new bank China Life will increase to around
insurance subsidiaries. This may be 9% each. Under the new rules, the
because they are at a nascent stage market shares of Ping An Insurance
of development. The property and and Taikang Life Insurance are
casualty companies scored niche expected to fall to around 11% and
players above the bank subsidiaries. 5% respectively.
Finally, some of the life insurers
50
40
30
Score
20 Life
P&C
10
0
ni tic
ar dy
ns
tim he
er
rie
er
th
tio
pa es
Ba r m rea
st t
t
e
ay
es
ke
ia
fir g
O
m eig om om
itu
e rin
id
pl
a l
bs
st
th te
he
yo rs
co or e c d d
in
n
su
in re
ic
or e
u
nc e
p
g su
N
ra lish
nk
t f rs
t-u
tin in
ke re
ar
su b
ar su
pe n
in sta
St
m in
E
n
ig
F
re
Fo

New Accounting Standards to Widen Share Gap of Life Insurers
China Insurance Regulatory Commission (CIRC), the top Chinese insurance
regulator, is set to unveil premium revenue life insurers in China gained last
year under the new accounting standards.
According to the new standards, premium insurers in the market captured in

2009 will consist of premium revenue and premium deposits; and premium
deposits indicate the part they obtained via universal life insurance and
investment-linked insurance investment accounts. Under the standards, their
overall premium revenue size will drop, but the net profit and net assets will
only be slightly affected as adjustments in reserve items will offset the impact
the new standards may deliver on their net profit and net assets, said a senior
official with the CIRC.
The premium affirmation ratio for them will be different due to different
products they focus on but the average for last year is estimated by industry
observers at about 83%. In detail, under the new accounting standards, the
market share of the nation’s biggest life insurer China Life Insurance Co., Ltd.
in domestic life insurance sector last year will rise to over 40 percent from 36.2
percent, followed by China Pacific Life Insurance Co., Ltd., the life insurance
unit of China Pacific Insurance (Group) Co., Ltd., and New China Life Insurance
Co., Ltd., with the shares each inching up by one percent to about nine
percent.
Whereas, that captured by Ping An Life Insurance Company of China, Ltd.,

the life insurance of Ping An Insurance (Group) Company of China, Ltd, and
Taikang Life Insurance Co., Ltd. will dropped to about 11 percent and five
percent from 16 percent and eight percent, respectively.
“China Life, which focuses on participating insurance, will benefit much from
the new standards as almost all revenue it gained from such insurance will be
counted in its premium revenue,” said some securities brokers, “its net assets
for 2009 is expected to be lifted by 40 percent to 60 percent, with the net profit
to be raised by about 30 percent, too. The net profit of Ping An is predicted to
surge about 20 percent and that of CPIC will climb, too.
Driven by the new accounting standards, life insurers in the market attach
more importance to participating insurance this year, with the premium
revenue obtained from such insurance surging 53 percent year on year in the
first quarter of 2010 and accounting for 75.5 percent of the total they captured
during the three months, up six percentage points from the end of last year.
Source: www.insurancenewsnet.com, 1 June 2010

Q How many foreign insurance The respondents predicted a modest Those who predicted a noticeable
companies will be operating in increase in the number of new rise in foreign companies suggested
the Chinese market in 2013? foreign insurance companies over the entrance of more Taiwanese,
the next three years. Fifteen of the 31 Japanese and Korean companies.
companies forecasted about 50-59 Some of the companies mentioned
companies in total. Ten companies included Sony Life, US Prudential,
predicted an overall reduction Korean Life, XL Insurance, etc.
through consolidation and market
withdrawal, while six predicted more
significant increases.
Predicted a significant
increase
Predicted a reduction
70 to 79
60 to 69
50 to 59
40 to 49
30 to 39
Predicted a modest increase
2010
2009 80 or more
2008
70 to 79
2007
60 to 69
50 to 59
40 to 49
30 to 39
20 to 29
Based on responses from 31 companies in 2010,

29 companies in 2009, 26 companies in 2008

Q Might there be consolidation? While the majority of respondents 2010
predicted more new entrants, almost 2009
all of them (91%) predicted that the 2008
market will experience consolidation.
2007
One scenario envisaged foreign 91%

life insurers being permitted by the Yes
Yes
CIRC to acquire smaller life insurers
that had grown too quickly and had
developed problems. This would
serve the dual purpose of solving a
domestic problem and at the same
time allowing the foreign insurers to Based on responses from 23 companies
move forward. in 2010, 29 companies in 2009, 23 companies
WellPoint scouts for JV partner

WellPoint Inc, the US largest health benefits provider by membership volume, is scouting for a joint venture partner to set
up a health insurance firm in China, the company’s top executive said on Tuesday. Angela Braly, WellPoint’s president
and CEO, came to China for discussions with potential partners and the industry regulator, but she declined to disclose
their names.
“The joint-venture partner should have the same vision as us but need not necessarily be an insurance company,” said
Braly. “If everything moves on smoothly, we are targeting 2011 for offering health insurance services through the venture.”
The company set up its Beijing representative office in 2007, and established a third-party administrator in Shanghai in
2008. Though the China Insurance Regulatory Commission (CIRC) encourages insurers to have a stake in quality medical
service providers to better prevent potential risks, WellPoint does not intend to go down that route, said John Domeika,
president and CEO of WellPoint China.
As China’s health reforms move forward, private health insurance is increasingly becoming an important complement to
government insurance programs, thereby offering a huge market for foreign insurers.
DKV Deutsche Krankenversicherung AG, a German-based private health insurer, in 2004 took a 19.9 percent take in the
country’s first health insurer, the PICC Health Insurance Co.
South African health insurer Discovery Group last December signed a deal with Ping An Health Insurance Co., Ltd. to
purchase a 24.99 percent stake in its health insurer subsidiary.
“Compared with other players, we attach more attention to communications with patients and health service providers,
thus offering them better access to quality services at a more affordable price,” said Braly.
China’s health insurance premiums totaled 10.95 billion yuan ($1.6 billion) in the first two months of this year, according to
the CIRC, the industry watchdog. The figure represented an increase of 34 percent over the same period last year.
Source: China Daily, 14 April 2010

China’s Bancassurance Market Needs Better Partnership Development
According to the report “Bancassurance in China: Reaching the Next Level,” by Boston Consulting Group and Swiss
Re, banks are already the dominant sales channel for life insurance in China and are driving the country’s rapid growth
in premium volume. The report said China’s regulators are working on bancassurance reform in order to promote better
integration of banks and insurers, as wholly exclusive bancassurance partnerships have not yet appeared in China.
In November, the China Banking Regulatory Commission published rules allowing for equity participation of banks
in insurance companies. Both Boston Consulting and Swiss Re believe this initiative of regulatory change will “guide
China’s market in the direction of mature bancassurance markets like Europe and the United States.”
However, the consultants said the current Chinese bancassurance market structure, with banks selling multiple insurance
brands, has “reached its peak,” while the “breadth and sophistication” of currently available products and the overall
quality of customer service “lag far behind” bancassurance activities in many other countries.
Before the new policy was introduced in November, China’s banking and insurance regulators had already allowed banks
to sell multiple brands of insurance, but the consultants said this situation has resulted in banks often selling relatively
“unsophisticated” savings-type products in an “untargeted” way, which a structure they called “many-to-many.” Another
problem that has blocked insurers from developing better-tailored products and services for the bank channel is that
there is little incentive for insurers to train banking staffs in product details and advanced sales techniques to sell their
competitors’ products, said the report. The report said insurers already pay generous commissions to banks for “shelf
space,” damaging their own profitability and ability to invest in product innovation. In the long run, the many-to-many
model is “not sustainable,” the report said.
“The Lack of product diversity and sales know-how resulting from the current system is starting to impact demand for
insurance products sold through banks,” noted the report. Although overall insurance penetration in China is still low, the
consultants expect both domestic life and nonlife premiums to “continue to grow annually by double digits” with support
from broader macro trends.
The growth of bancassurers will be weakened or taken over by other insurance distributors, such as agents and brokers,
if they are unable to take a larger market share by “upgrading product lines, increasing customer service and brand
loyalty through money and time management investments. Through a partnership, banks can “dramatically” increase
cross-selling potential and fee revenue, earning attractive margins from a whole new range of products, while insurers
can “solidify” their brand reputation and customer loyalty when most consumers are still uncommitted with a relatively
low insurance penetration and limited competitor offerings, said the report. A partnership can also allow insurers quick
access to widespread bank branch networks, especially in provinces where insurance penetration is low relative to the
banking infrastructure in China. Meanwhile, joining forces with a local bank may help insurers “speed up” the licensing
process in new areas, according to the consultants.
Extracts from the story “China’s Bancassurance Market Needs Better Partnership Development”.
Source: www.insurancenet.com, 22 December 2009

Q Can you rate the magnitude of Respondents were asked to score One company suggested that if the
the competitive threat of the how threatening the entrance of move had the full support of the
banks entering the insurance bank-owned insurance companies regulators (CIRC and CBRC), then
market over the next three are to the market. the threat would be nine out of 10.
years? If on the other hand, there is no
support, the threat would only be
Life companies three out of 10.
The level of threat for the life
companies remains very similar to In contrast, one life company
that of 2009. In 2009, 11 companies described bancassurance as a
scored the threat as seven or huge threat and that the banks were
greater, while in 2010, 12 companies expanding rapidly. One life insurer
assigned scores of seven or took a more extreme position.
greater. In both 2010 and 2009, five They said that banks do not know
companies scored five out of five and how to produce insurance and the
three companies scored below five. move would be a disaster. They
recommended that the banks should
The life insurers held contrasting stay with distribution where they
positions on the magnitude of the command attractive commissions.
threat. One large insurer commented This company suggested that
that it would take Bank of China 20 insurance companies should
years to compete directly. Another consider bank ownership.
said that not all banks will choose to
set up manufacturing capabilities.
2010
5
2009
Number 4
of companies
0
10 9 8 7 6 5 4 3 2 1
increasing threat from banks

in 2010 and 19 Life companies in 2009

Q Can you rate the magnitude of Property and casualty companies The property and casualty
the competitive threat of the companies believed the banks could
The threat level appears to be
banks entering the insurance pose a threat in select lines such as
lowered for the property and casualty
market over the next three auto, travel and health. However,
companies and the scores have
years? (continued) in general, there was a need to sell
dropped since 2009. In 2010, three
property and casualty insurance.
companies scored seven or above;
whereas in 2009, six companies fell
One property and casualty company
into this category.
suggested that the joint effort of
Ping An Insurance and Ping An Bank
In 2010, six companies were five or
would represent a good case study.
below. In 2009 three companies were
below five.
2010
2009
Number 2
of companies
0
10 9 8 7 6 5 4 3 2 1
increasing threat from banks
Based on responses from 9 P&C

companies in both 2010 and 2009

Q How would you characterise Foreign parents’ commitment to Life companies foreign partner’s
the commitment of your their Chinese joint ventures remains commitment
foreign parent to the Chinese steadfast. In 2010, 17 of the 20
market in comparison to other life companies that answered this 12
markets around the world on question scored the commitment as

a scale of one to 10 where one eight out of 10 or above.
represents no commitment and 10
10 is an extremely aggressive Nine companies attributed the
commitment to the market? maximum score of 10 out of 10. That
maximum score matches the level 8
recorded in 2009 but remains below
that in 2008.
6
One company commented that
there was tremendous focus on Number
of companies 2010
China, from the very top of the
4 2009
company. Three life companies
also recorded more modest levels 2008
of commitment. For the first time a
score of five was submitted. 2
0
10 9 8 7 6 5

in 2010 and 2009 and 19 companies in
2008
Looking forward to 2013, the Life companies foreign partner’s

commitment rises to even higher commitment in 2013 vs. 2010
levels. 10
Ten companies anticipated a

maximum commitment level while 8
those scoring nine out of 10, rise
by two more companies to six. This
means that 16 of the 20 respondents
6
anticipate commitment levels of nine
or above by 2013. Number
of companies 2013
4 2010
0
10 9 8 7 6 5

When it comes to the commitment Life companies domestic partner’s
of the domestic partners to the commitment 2010 vs. 2008
joint venture life companies, six
companies were allocated the 8
maximum score of 10 out of 10.
7
One company awarded its
domestic partner nine out of 10 6
while seven companies scored
eight out of 10. Strong commitment 5
levels were therefore attributed to
14 companies. Number 4
of companies 2010
In 2010, one company was 3 2009

assigned a lukewarm commitment 2008
of five out of 10 while one 2
company scored the minimum one
out of 10. 1
0
10 9 8 7 6 5 4 3 2 1
Q Do the objectives and goals of Comments from individual life Based on responses from 19 companies
your Chinese partner contrast companies ranged from “they are in 2010, 18 companies in 2009 and 8
companies in 2008
that of your own company? very aligned” and “they are more
Can you explain? ambitious than us” to “they have
no idea about insurance” and “they
want quick earnings while we want
steady growth.”
Several respondents commented

that the new accounting standards
may improve relationships between
domestic and foreign partners.
This viewpoint is based on the

grounds that the new standards
will improve short term profit
performance.

Q How would you characterise In 2009, only one property and Property and casualty companies’
the commitment of your parent casualty company assigned the commitment
company to the Chinese market maximum score of 10. Three more 4
in comparison to other markets companies joined this company in
around the world on a scale of 2010.
one to 10?
This was followed by three 3
companies at eight out of 10, two
companies at seven out of 10 and
just one at six out of 10.
Number 2
of companies 2010
The increased level of
commitment by three companies 2009
to 10 out of 10 in 2010 represents 2008
a very positive development. 1
0
10 9 8 7 6 5 4

in 2010, 9 companies in 2009 and 8
companies in 2008
In 2013, four of the same property Property and casualty companies’

and casualty companies stay with foreign partner’s commitment in
the maximum score while three 2013 vs. 2010
companies move up to nine out of
4
10.
Furthermore, three companies move

into the eight out of 10 space leaving
3
no companies at the lower scores.
By 2013, all 10 companies anticipated

that they would be at a level of
Number 2
eight out of 10 or above. of companies
2013
2010
1
0
10 9 8 7 6 5 4

for 2010 and 2013

Life
Q In your opinion, how serious a To gauge the concerns that 8 P&C
problem on a scale of one to the foreign insurers have in the

7
10, where 10 represents the distribution and selling of insurance
maximum, are the following products, they were asked to 6
issues at the retail level? consider the magnitude of problems 5
associated with the following Score out
three issues: of 10 4
Lack of expertise 2
The level of expertise demonstrated 1

by sales staff appeared to be an
0
issue in the agency, bank and Agencies Banks Brokers Telemarketing
telemarketing channels. Less
evidence of this is seen in the broker Lack of expertise by staff in selling
channel, particularly on the property particular products
and casualty side.
8 Life
P&C
7
Mis-selling of products
6
Agency and bank channels recorded
scores of six or above on the 5
index for mis-selling. The score Score out
of 10 4
approached eight for agents for
property and casualty, and banks for 3
life products.
2
1
Distribution control
0
The enforcement of controls appears Agencies Banks Brokers Telemarketing
most challenging for life products in Based on responses from 31 companies
the bank channel. The more tightly- Mis-selling of certain products
managed telemarketing channel
recorded a score below five. Overall, 8 Life
the telemarketing channel, perhaps 7
P&C
because staff adhere to a right script
and are supervised, recorded the 6
lowest scores. 5
Score out
of 10 4
0
Agencies Banks Brokers Telemarketing

Enforcement of controls in the distribution channels
Products and
market segments

Q Which product areas do you Life Products Property and Casualty Products
see as becoming increasingly
important in the Chinese Individual level Individual level
insurance industry in the next
three years? At the individual level, respondents • Travel insurance, including direct
predicted an increase in demand channels such as the internet
for the following products. One
• Personal accident insurance
company stressed that the CIRC
was actively promoting protection • Homeowner insurance
products.
• Auto insurance
• Participating products (“par”
products where the policyholder Wholesale level
participates in the risk alongside
the insurance provider) • Speciality liability insurance
• Investment-linked products with • Environmental liability insurance

guarantees (this was considered difficult to do
in China)
• Health insurance, innovative
health products, critical illness • Suite of insurance products
and major medical targeting the expatriate
community through a wholesale
• Traditional insurance products channel
• Many different forms of retirement • D & O products
products
• Other liability products
• Simple commoditised products
sold through direct channels • Marine insurance
• Universal life products • Property insurance (although

currently dominated by domestic
companies with over competitive
Wholesale level
pricing)
At the wholesale level the following
products were mentioned:
• Group medical insurance
• Derivatives and other alternative
investment classes
• Group annuities
• Supplementary medical
• Various pension-related products

Q What innovations have the The respondents were asked
foreign insurers brought to the to mention new products and
market? innovations that the foreign insurers
have brought to the China market.
Many foreign insurers have been
in the market seven years or more
and as the domestic insurance
companies lift their game, it is
interesting to reflect on the past
contributions of the foreign insurers.
The life insurers believe they have

provided the following innovations:
• The agency system
(first attributed to AIA)
• Telemarketing and direct
marketing to consumers
• Universal life products
• Unit linked products
• Variable annuities
• Risk management
• Corporate governance
• Dynamic solvency testing (DST)
The property and casualty insurers

nominated the following products:
• D & O insurance
• Environmental liability
• Product liability
• Risk management
• IPO insurance
• Professional indemnity
• Financial kidnap and extortion
insurance

China’s liability insurance
China’s liability insurance market
market is viewed by
Challenges: Low demand and high acquisition costs
participants as a potential
growth area There are two major roadblocks to liability insurance development in China.
One is the low insurance demand from society at large, given the low
awareness of insurance and non-litigious nature of Chinese society.
The other is the limitation of insurers’ distribution channels which results in
overly high acquisition costs when selling liability products to many individual
customers.
It is difficult for insurers’ own sales forces to sell liability products because
selling these products require higher technical skills and take more time to
explain. As a result, sales people tend not to devote resources to selling
liability products as it is easier and faster to sell simple motor insurance for
potentially more premiums.
However, if there is strong government support, normally a local scheme or

pool will be organised by the government to ensure extensive participation of
insureds. A public bidding process will be used to select insurer participants
who would be guaranteed a certain premium volume as an incentive for taking
part in this process.
Hence, the stronger the government’s push, the better the development of a
liability insurance product. Under the current circumstances, this is the most
cost-effective way to develop liability business.
In summary, in order to develop new incomes from liability business, an insurer

needs to work on two ends of the spectrum: one is to continuously create new
products to differentiate itself from its competitors; and the other is to leverage
government policies so as to capture liability business with the potential to
grow scale in a cost-effective way.
Source: www.swissre.com, Feifei Ford, Swiss Re, Beijing, October 2009

Q Will the global financial crisis Both the life and property and 2010
have an impact on the roll-out casualty companies continue to
of certain financial products in believe that the global financial crisis Life companies
11 Yes and 10 No
China? has impacted the roll-out of new
products. In comparison to 2009, the
property and casualty companies’
belief seems to have strengthened.
No
Commenting on the nature of the

impact, the life companies made the
following observations:
Yes
• Unit-linked products have been P&C companies

7 Yes and 3 No
affected. In other markets,
products have been designed to Based on responses from
hedge the downside risk. This will 31 companies
eventually be permitted in China
• Foreign players have stopped
selling unprofitable products
• If there had been no crisis, we 2009
would be offering variable annuity
products with guarantees in No Life companies
Shanghai and Beijing 11 Yes and 9 No
• Prior to the crisis, the CIRC

thought foreign companies had
more experience and insight – Yes
this has changed

• The decline in exports has
affected cargo insurance and P&C companies
5 Yes and 4 No
product liability insurance
Based on responses from
• Several property and casualty 29 companies
companies also believe the
economic slowdown has
influenced the number of IPOs
and this in turn has influenced
insurance lines such as D & O
• Finally, a property and casualty
company acknowledged that they
had just started to offer credit
insurance, and sales had been
adversely affected by the global
financial crisis

Q How successful has your Seven different markets were claim only modest success in seven
foreign life insurance company identified. If the participating foreign different market segments. While
been in penetrating the insurance companies had been five of the seven segments display
following markets in the last active in a particular market, they increased scores when compared to
year? scored their perceived levels of 2009, in most cases these increases
success on a scale of one to five have been marginal.
where one was “very unsuccessful”
and five was “very successful”. The most successful segments in
Scores exceeding three implies 2010 were in order of importance: life
participants felt they have been insurance protection, life insurance
generally successful in that particular traditional (i.e. savings based) and
market. personal accident. The success
score that increased most was the
The chart indicates that the life marketing of protection products.
insurance companies continue to
Life insurance
-Traditional (20)
4
Group-Accident & Health (14) 3 Life insurance-ILP (19)
Group-Life (16) Life insurance

-Protection (20)
Personal accident (18) Health insurance (18)

2010
2009
Figures in brackets represent the number of respondents in 2010

Q How important are the To identify the markets that the The scores are notably higher when
following markets for your foreign insurance companies believe it comes to the importance of these
foreign life insurance company will be of greatest importance seven segments over the next three
over the next three years? over the next three years, the 19 years. All segments fall outside the
participants ranked the following average score of three out of five.
seven markets on a scale of one to Both the traditional life insurance
five. A score of one indicates little or category and the protection only
no importance while a score of five category score above four out of
can be considered very important. five.
Average scores should exceed three In 2009, health insurance and

for the market to be considered personal accident scored above four
important. but fell back to 3.7 and 3.5 in 2010.
Life insurance-Traditional (20)
Group-Accident & Health (18) 3 Life insurance-ILP (20)
Life insurance
-Protection (20)
Group-Life (18)
2013
Personal accident (19) Health insurance (19)

Q How successful has your There have been some notable shifts There have also been significant
foreign property and casualty in a number of product lines for the areas of improvement in lines such
insurance company been property and casualty insurers in as group accident and health and
in penetrating the following 2010 versus 2009. health insurance. Homeowners
markets in the last year? insurance and personal accident
Areas where higher levels of as in 2009, continue to display low
success are evident are D & O (4.5), levels of success.
products liability (4.2), cargo and
transportation (3.8) and professional
indemnity (3.5).
D&O (4) Health insurance (2)

4
Personal accident (2)
3
Professional indemnity (4) Auto insurance (4)
2
1
Public liability (5) Enterprise property (7)
Products liability (5) Homeowners (6)
Employers liability (7) Cargo, Transportation (9)
Group Accident & Health (3) 2010

2009

Q How important are the The chart below displays just how The chart provides strong evidence
following markets for your important each of the 12 lines of that the property and casualty
foreign property and casualty business will be by 2013. With the insurers intend to push forward
insurance company over the exception of homeowners insurance, aggressively on a series of different
next three years? all the lines recorded values above personal and commercial lines.
3.5 out of five.
Seven lines scored above four. They

were health insurance (5), cargo and
transportation (4.6), D & O (4.25),
group accident and health (4.2),
personal accident (4), public liability
(4) and professional indemnity (4).
Health insurance (2)
D&O (4) 4
Personal accident (7)
3
Professional indemnity (4)
2 Auto insurance (8)
Public liability (8)

Enterprise property (8)
Products liability (8) Homeowners (9)
Cargo, Transportation (10)

Employers liability (9)
Group Accident & Health (5)

2013

Market expansion

Q What is your insurance The 21 life companies identified With a bank partner
company’s primary method of organic growth as their first choice Organic growth
expansion in China? with two exceptions. Both companies
that made this selection have bank
partners.
As expected they hope that their

alliance with their bank partners will
accelerate future growth.
In 2009 all 20 life companies selected

organic growth as their primary
expansion option.
21 Life companies
The 10 property and casualty Acquisition Organic growth

companies also overwhelmingly
selected the organic growth option.
The two exceptions chose acquisition

as their primary means of future
growth.
In 2009 five companies selected the

organic growth option.

10 P&C companies

Q What is your estimate of the In 2010, four companies anticipate maintain this sales momentum.
annual growth in premiums of growth above 100% and one of Another seven companies are in the
your business in life insurance these plans to continue growing 30% to 45% range.
for 2010 and over the next three annually by 100% and two of three
years? companies predict 2013 growth of Visual comparison with 2009 shows
50%. At the opposite end of the that two companies anticipate
scale, only two life companies expect growth above 100%. Ten companies
growth below 20% in 2010. expected 2009 growth of 20% or
lower. Four companies were in the
Five companies fall in the 50% to 50% to 70% range and just two
70% range in 2010 and expect to companies in the 30% to 45% range.
400% in 2010
2010 and 25% in 2013 2009
200% in 2010
and 50% in 2013
140 140
1 at 200/200
130 130 and 1 at 400/100
Expected annual growth rate in 2010
120 120
110 110
100 100
90 90
80 80
70 70
1 at 50% in 2010
60 and unknown in 2013 60
50 Two at 50/50 50
40 Two at 40/40 40
30 Three at 30/25 30
20 20
10 10
0 0
0 10 20 30 40 50 60 70 80 90 100110120130140 0 10 20 30 40 50 60 70 80 90 100110120130140
Expected annual growth rate in 2013 Expected annual growth rate in 2012
Based on responses of 21 Life companies Based on responses of 20 Life companies

Q What is your estimate of the At an industry wide level, the
annual growth in premiums of respondents predicted lower levels
the life insurance industry for of growth. The highest anticipated
2010 and over the next three growth for the industry in 2010
years? was 50% and this dropped to 30%
industry growth by 2013.
Many companies predicted in the

region of 20/20, 20% in 2010 and
20% annual growth in 2013.
140
130
120
110
100
90
80
70
60
50
40
30
2 companies at 25/25
20 7 companies at 20/20
10 4 companies at 15/15
0
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140
Based on responses of 21 Life companies

Q What is your estimate of the As in previous reports the predictions Predictions for 2013 appear to have
annual growth in premiums of for premium growth in the property improved slightly this year versus
your business in property and and casualty market are well below those made in last year’s report for
casualty insurance for 2010 and those in the life insurance market. 2012. For instance, in 2009 four
over the next three years? companies predicted 2009/2012
In 2010, only one company predicted
growth of 15/15. In 2010 an equal
growth above 40% at 100%. The
number predicted 20/20. Two
same respondent anticipated 2013
companies came up with the highest
growth to continue at 100%.
level of growth for 2010 at 25%
Several companies selected on- and by 2013 only one respondent
going growth of 20%, 30% or 40%. predicted growth as high as 25%.
This was very much in line with
predictions made last year for 2009.
2010 2009
140 140
130 130
120 120
110 110
100 100
90 90
80 80
70 70
60 60
50 50
40 40
30 30
20 20
10 10
0 0
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140
Expected annual growth rate in 2013 Expected annual growth rate in 2012
Based on responses of 8 P&C companies Based on responses of 8 P&C companies

Q What is your estimate of the Four of the 10 property and casualty
annual growth in premiums companies believe that the industry
of the property and casualty will grow at 20% per annum in both
insurance industry for 2010 and 2010 and 2013.
over the next three years?
A further three participants believe
industry growth will fall below 20%
in 2010.
Only two companies predicted
industry growth of 25% in 2010.
Again industry level projections
fall below individual company
projections.
140
130
120
110
100
90
80
70
60
50
40
4 companies at 20/20
30
20
10
0
0 10 20 30 40 50 60 70 80 90 100 110 120 130 140
Based on responses of 10 P&C companies

Q Has there been a change in Pursuit of new sales continues to Life companies
emphasis in the industry in be the goal of the majority of life
2010 away from sales growth? companies. Thirteen companies
endorsed this approach.
Several respondents, however, No Yes

acknowledged that there has been
13 life companies said
a shift away from unprofitable no change away
business. One large insurer from sales growth
commented that sales growth came
first, followed by profitability and
then risk.
One foreign insurer noted that the

foreign companies tend to be more Based on responses from
influenced by profitability than their 21 Life companies
domestic counterparts.
Given that many joint venture life

insurers have now been in the
market for seven years by which
time they promised breakeven, there
has been an increased emphasis on
profits.
On the property and casualty side, Property and casualty companies

seven companies also believed that
profits had become more important
than sales. Several respondents
mentioned the aggressive pursuit by
domestic companies of the auto- No Yes
insurance business which is deemed
to be unprofitable. 7 P&C companies
said yes a change
away from
sales growth

10 P&C companies

Regulation

Q How significant will the change, Both the life and property and 11
Life companies
in terms of regulation of the casualty companies believe that 2010
10
foreign insurance companies there will be significant or very
2009
in China, be as a result of the significant changes to regulation. On 9
global financial crisis? the life company side, 11 companies 8
P&C companies
indicated significant and four
2010
companies very significant for 2010 7
(nine and six in 6
2009
2009) and on the property Number

of companies 5
and casualty side, six
companies said significant 4
and three very significant (four and
3
three in 2009).
2
None of the respondents believed
that going forward regulatory change 1
would be considered as insignificant.
0
Commenting on the likelihood of
nt
nt
nt
nt
l
tra
ca
ca
ca
ca
eu
ifi
change, one life company noted that
ifi
ifi
ifi
gn
gn
N
gn
gn
Si
si
si
si
the sector was highly controlled,

in
In
yr
Ve
yr
Ve
while another suggested that the

regulator will always instill more Based on responses from 31 companies in 2010
regulations.
On a similar theme, a property and
casualty company stated that there
had been 700 new regulations last
year and that their company was
required to respond to the vast
majority of these new regulations.
The company also indicated that the
CIRC’s introduction of “cash before
cover” had been very detailed and
required initiation of a new IT project.
Another property and casualty
company said that while the CIRC
was expected to make significant
regulatory changes, this should be
seen as a positive development.

Q In which areas do you The respondents volunteered a host
anticipate tighter regulation on of suggestions on the scope of future
foreign insurance companies? regulations.
Life companies
• Sales practices, sales
supervision
• Appointment of senior
management
• Product design
• Pricing
• Risk management
• Compliance
• Distribution regulation
• Governance, independence of
directors
• Investment class restrictions
• Solvency
• Branch inspections

• Consumer protection
• Branch approvals
• Profitability
• Restrictions on intermediaries
• Senior management
examinations in Chinese, face to
face interviews and reviews of
qualifications

Q Have there been disagreements Nine companies indicated that they Business tax
between your insurance had disagreements with the Tax
company and the Tax Bureau? Bureau on business tax.
No comment 2010 Yes
This included seven life companies 2009

and two property and casualty
companies.
Nine companies
have had
The life companies commented that disagreements
there was a long standing argument
about business tax and agents, and
one company specifically referred to
disagreement on business tax and No
unit linked products.
In 2009 five companies cited and 29 companies in 2009
disagreements on business tax.
Five companies indicated that they Income tax

had disagreements over income
tax, although one of these related to
personal income tax of an employee No comment 2010 Yes
and another to expatriate costs. 2009
In 2009, minor disagreements were

recorded for both withholding tax
Five companies
and other tax issues. In 2010 no have had No
disagreements were voiced by disagreements
respondents and these charts have
been omitted this year.
Overall, the respondents complained

about delays in receiving tax
refunds and mentioned different and 29 companies in 2009
interpretations of tax rules in
different cities. Several respondents
commented that they were unsure
how the new accounting standards
would affect tax calculations.

Q Are there tax rules you would Life companies continue to believe Life companies
like to see changed? that changes in the tax rules
would benefit business. However,
No comment 2010
the consensus suggests that any
meaningful changes will not take 2009
No
place in the next three years.
Recommendations by life No comment

17 life companies
Yes
would like
companies included: No
tax changes
• Tax incentives for pension
annuities and life insurance
products
• Elimination of the business tax
• Acceleration of refunds by the tax Based on responses from 21 companies in 2010
bureau
• Tax incentives on investment
products in general
Given the future challenges in the
Chinese pension market as the
population ages, most respondents
highly recommended the introduction
of a “traditional 401K” type plan.
These plans allow workers to save
for retirement and have their savings
invested while deferring incomes
taxes on the savings and earnings 2010
until the time of withdrawal. No comment 2009 Yes
Recommendations by the property

4 P&C companies
and casualty companies included: would like
tax changes
Three of the property and casualty
companies commented on high
levels of personal taxation and
suggested that there should be
No
“senior management” tax incentives
to locate in Pudong, Shanghai.
and nine companies in 2009
Several companies recommended
that special tax incentives should be
designed to help Shanghai develop
as a global financial centre and
compete more effectively with Hong
Kong and Singapore.

Q In your opinion has there been There is strong evidence of a 2010
a relaxation over the last 12 relaxation regarding the new
months in the granting of new branch licenses in 2010. Nine of 2009
licenses? the 31 respondents disagreed with
the statement that there was a
slowdown. This contrasted with 2009
No
when all 29 respondents held this Yes
opinion.
The respondents maintained that the

slowdown which was widely applied
in 2009 had begun to loosen up by
November 2009. Based on responses from 31 companies
One life company suggested that the
CIRC is in the process of drafting
new regulations regarding new
operating licenses.
Another life companies said that new

licenses were now being granted
but acquiring pre-operation approval
and scheduling inspections were still
slow.

companies contended that there
had been an improvement and that
the CIRC was under pressure not
to be as restrictive on geographic
expansion, given the small market
share held by the property and
casualty companies.

Q Would you like to see the 50% In 2009 the life companies No comment
ownership restriction removed? unanimously supported the removal
of 50% ownership restriction. No
In 2010, four companies

paradoxically indicated that they
16 Life companies
No comment
thought the 50% restriction should would like ownership Yes

remain in place. The reason restriction
abolished
behind this position is competitive
advantage.
Three companies were comfortable

with their partners and believed they
were positioned advantageously. Based on responses from 21 Life companies
One company is satisfied with its in 2010 and 20 Life companies in 2009
shareholding weighting and again

does not seek an industry wide
change.
The participants continue to believe

that a relaxation of shareholding
rules is at least five years away and
that 10 years may be more realistic.
Six companies believe that it may be
more than 10 years in the future.
2010
Next 3 years
2009
Next 5 years
Next 10 years
Beyond 10 years
0 1 2 3 4 5 6 7
Number of companies
Based on responses from 19 life companies in 2010

and 20 life companies in 2009

Q Can you comment on solvency The new CIRC regulations in 2008
issues and how they are and revisions to the Insurance Law in
affecting your company? 2009 have resulted in a much stricter
control of solvency management.
Furthermore, in April 2010, the CIRC
issued a circular requiring companies
to submit reports on solvency and
capital supplements.
“The next step in regulating
While a number of respondents
insurers’ solvency...is maintained that they had very
through imposing more adequate levels of capital, they
stringent regulatory indicated the CIRC’s new rules
measures against insurers would require capital injections for
which have (inadequate) some foreign companies. Several
mentioned the CIRC’s classification
solvency (levels)...and to into A, B, C and D companies based
strengthen our auditing on their solvency ratio.
and analysis on insurance
companies’ reports on their One participant suggested that
solvency...” there were 11 companies on the C/D
list although the list has not been
published by the CIRC.
Wu Dingfu, Chairman CIRC
January 2010
Another participant contended that
companies that fell in the 100% to
150% band were being asked to
make capital injections and that a
level above 150% was required to
secure network expansion approval.
Solvency appeared to be less of an

issue for the foreign property and
casualty companies. One company,
however, drew attention to their
domestic counterparts’ pursuit of
sales, using the example of 60% to
70% commission rates in the auto-
insurance market.

Q Can you comment on the future This report documents the high levels One life insurer commented that
of the agency system in China? of agent turnover and the significant the agency system is impeded by
hiring goals of a number of foreign the tax structure. Agents must pay
life insurance companies. their business tax and personal
income tax and because they are
As a result, it would not be not employees they cannot enjoy
unexpected for the foreign insurers to company benefit schemes.
have reservations about the agency
system and its future viability. The looming presence of the
banks and the already dominant
The majority of participants role of bancassurance adds to the
acknowledge that the present uncertainty across the sector.
agency system is highly inefficient,
expensive and time consuming. They As a result some life insurers
recognise that bancassurance is a may be stepping up their agency
powerful channel that may further infrastructure in self-defence against
increase in importance and they the potential threat posed by the
understand the continuing transition banks.
to a more direct marketing approach
including the internet. The CIRC reported that the number
of insurance agents reach 2.9 million
Despite these limitations, a solid in 2009. This total includes 2.58
core of participants hold a firm belief million life agents and 330,000 non-
in the future of agents. One large life agents.
life insurer commented “this is the
way forward, performance levels Another commented that the
will improve.” This sentiment was current regulatory environment
echoed by a number of other world works against agents. By placing
class players. They believe in the a cap on commissions the agents’
adage that “insurance is sold not remuneration is restricted.
bought.”
The property and casualty
These opinions are qualified by respondents noted that the agency
saying it will take a long time to system remains relatively under-
occur and that regulations and the developed.
domestic partner arrangements work
against the transition. Domestic
partners seek a faster return on their
capital and are frustrated by the slow
build up through agent distribution.

Peer review

Q Can you name the top three A simple scoring method awarded terms of success (performance,
foreign insurance companies in three points to first place, two presence and momentum) as
terms of success (performance, points to second and one point opposed to mere size.
presence, momentum, etc.) to third place. This allowed the
across a variety of different foreign insurance companies to be They were not permitted to rank
markets? ranked based on a total score. In their own institution. Often foreign
the 2010 survey they were permitted insurance companies would choose
to rank both domestic and foreign just to indicate first or second
companies. This year ranking was places.
restricted to foreign companies only.
These rankings are based on the
Foreign insurance companies were views given by the senior executives
asked not to record an opinion in the foreign insurance companies.
unless they were active in that In contrast to previous surveys,
segment and were comfortable in the rankings included domestic
providing an accurate ranking in companies.
Life insurance — Traditional First Second Third Score

savings
AIA 8 2 1 29
Manulife-Sinochem 6 1 4 24
CITIC-Prudential Life 1 5 13
Aviva-COFCO 3 2 8
Huatai Life 1 1 4
Allianz Life 1 2 4
Sun Life Everbright Life 1 2
Based on 16 foreign insurance companies

Life insurance — First Second Third Score
Investment-linked
CITIC-Prudential Life 5 15
Allianz Life 2 1 2 10
MetLife 2 1 1 9
Aviva-COFCO 2 1 8
AIA 1 2 7
Skandia Guodian 1 1 2 7
AEGON 2 4
Huatai Life 1 3
Manulife-Sinochem 1 3
ING 1 2
AXA-Minmetals 1 1
Life insurance — Protection First Second Third Score

AIA 5 4 23
Manulife-Sinochem 7 1 23
Aviva-COFCO 3 1 7
MetLife 1 1 5
Allianz Life 1 1 4
AXA-Minmetals 1 2
Huatai Life 1 1

Health insurance First Second Third Score
AIA 6 3 24
CITIC-Prudential Life 1 1 2 7
Aviva-COFCO 1 1 1 6
Allianz Life 1 1 5
Generali 1 1 3
Chartis (AIG) 1 3
Chubb 1 3
AXA-Minmetals 1 2
CIGNA 1 2
AXA Winterthur 1 2
Huatai Life 1 1
Royal & Sun Alliance 1 1
Personal accident insurance First Second Third Score

AIA 7 3 27
CIGNA 5 15
Chartis (AIG) 4 12
Aviva-COFCO 3 6
MetLife 1 1 1 6
Allianz Life 1 2 5
AXA Winterthur 2 4
Huatai Life 1 1
AXA-Minmetals 1 1
Generali 1 1

Auto insurance First Second Third Score
Liberty Mutual 3 9
Tokio Marine 1 3
Samsung Fire & Marine 1 2
Homeowner insurance First Second Third Score

Chartis (AIG) 1 3
Chubb 1 3
Zurich 1 3
AXA Winterthur 1 2
Enterprise property insurance First Second Third Score

Chartis (AIG) 2 1 1 9
Zurich 1 2 7
Tokio Marine 1 1 5
Generali 1 3
Chubb 1 3
Royal & Sun Alliance 1 1 3
Mitsui Sumitomo 1 1
Based on six foreign insurance companies
Cargo, transportation insurance First Second Third Score

Tokio Marine 5 1 17
Mitsui Sumitomo 2 2 1 11
Chartis (AIG) 1 3 1 10
Chubb 1 1
Based on eight foreign insurance companies

Group life First Second Third Score
Generali 9 2 2 33
AIA 4 3 18
Aviva-COFCO 1 2 7
AXA-Minmetals 1 3
Cathay Life 1 1
Heng An Standard 1 1
Group accident and health First Second Third Score

Generali 4 3 1 19
AIA 5 1 1 18
Aviva-COFCO 3 2 13
Chartis (AIG) 4 12
AXA-Minmetals 1 3
Chubb 1 3
Cathay Life 1 1

Customer relationships First Second Third Score
AIA 6 1 19
Allianz Life 1 1 5
Chartis (AIG) 1 1 5
Mitsui Sumitomo 2 4
Samsung Fire & Marine 1 1 4
Aviva-COFCO 1 3
AXA-Minmetals 1 3
Chubb 1 3
Tokio Marine 1 3
Zurich 1 3
Huatai Life 1 1
Geographic expansion First Second Third Score

Aviva-COFCO 2 1 1 9
Chartis (AIG) 3 9
AIA 2 6
Samsung Fire & Marine 2 6
Allianz Life 5 5
Huatai Life 1 1 5
Liberty Mutual 1 1 5
Mitsui Sumitomo 1 1 5
Sompo Japan 1 1 5
Sun Life Everbright Life 1 1 4
AEGON 1 3
Tokio Marine 1 1 3
Generali 1 2
MetLife 1 2

Innovation First Second Third Score
Chartis (AIG) 5 15
Aviva-COFCO 2 1 2 10
AIA 2 1 8
MetLife 2 1 8
Allianz Life 1 1 5
CIGNA 1 1 5
Chubb 1 1 5
Huatai 1 2
Generali 1 2
Manulife 1 1
Distribution effectiveness First Second Third Score

CIGNA 6 1 1 21
AIA 4 3 1 19
Chartis (AIG) 4 12
Aviva-COFCO 1 1 2 7
MetLife 1 2 7
Huatai Life 1 3
Generali 1 1 3
Tokio Marine 1 3
AEGON 1 2
Allianz Life 1 2
Mitsui Sumitomo 1 2
Zurich 1 1

Marketing strategies First Second Third Score
Chartis (AIG) 6 18
AIA 3 1 10
Aviva-COFCO 3 9
CIGNA 2 1 1 9
Zurich 1 2 7
MetLife 1 1 5
Allianz Life 1 2 5
Generali 1 1
Technically competent staff First Second Third Score

AIA 10 1 32
Chartis (AIG) 4 12
Zurich 2 6
Aviva-COFCO 1 1 5
AXA-Minmetals 1 1 4
Allianz Life 1 3
Generali 1 2
Chubb 1 2
CIGNA 1 1

Brand awareness First Second Third Score
AIA 16 48
Chartis (AIG) 6 18
CITIC-Prudential Life 1 2 1 8
Huatai Life 2 4
Aviva-COFCO 1 2 4
Tokio Marine 1 3
Allianz Life 1 1 3
Pacific Antai 1 2
Chubb 1 2
Mitsui Sumitomo 1 2
Generali 1 1
Corporate social responsibility First Second Third Score

Allianz Life 2 1 7
AIA 1 3
AXA-Minmetals 1 3
Zurich 1 3
Aviva 1 2
Based on five foreign insurance companies

Appendices

Appendices
Methodology 100
Participants 101
Premium income for domestic life insurance companies, June 2010 102
Premium income for foreign life insurance companies, June 2010 103
Premium income for domestic property and casualty insurance companies, June 2010 104
Premium income for foreign property and casualty insurance companies, June 2010 105
Background comments on participants 106
American Chamber of Commerce in China White Paper – Insurance Section 2010 112

Methodology
Previous experience has shown that personal interviews with senior

executives using a standard questionnaire offers the best research approach.
The questionnaire contained 50 questions and was completed during
interviews of approximately one hour. The author conducted interviews in
April and May 2010 in Beijing, Chengdu, Chongqing, Guangzhou, Hong Kong
and Shanghai.
Responses have not been attributed in this report to individual foreign

insurance companies. On occasion separate results have been shown for life
companies and property and casualty companies.
At times, individual foreign insurance companies declined to answer

particular questions or were unable to provide sufficiently accurate data. This
is noted where applicable.
The time commitment, cooperation and support by all the foreign insurance
companies in this survey was outstanding.
About the author

Dr Brian Metcalfe is an Associate Professor in the Business School at
Brock University, Ontario, Canada. He has a doctorate in financial services
marketing and has researched and produced over 40 reports, such as this
one, on behalf of PricewaterhouseCoopers in 11 different countries including
Australia, Canada, China, India, Japan and South Africa.
Previous reports have examined strategic and emerging issues in corporate,

investment and private banking, life and property and casualty insurance,
insurance broking and wealth management.
In April 2010, he authored the fourth report on Foreign Banks in China.
He has consulted for a wide range of organisations, including Royal Bank of

Canada, Bank of Nova Scotia, Barclays Bank, Sun Life Insurance Company,
Equitable Life of Canada and several major consulting firms.
He has taught an executive management course entitled “Financial Services

Marketing” at the Graduate School of Business, University of Cape Town.

Participants
Life insurance companies City Country of foreign partner

AEGON-CNOOC Life Insurance Co., Ltd. Shanghai Netherlands
American International Assurance Co., Ltd. Shanghai USA
Allianz China Life Insurance Co., Ltd. Shanghai Germany
Aviva-COFCO Life Insurance Co., Ltd. Shanghai Britain
AXA-Minmetals Assurance Co., Ltd. Shanghai France
CIGNA & CMC Life Insurance Co., Ltd. Shenzhen USA
CITIC-Prudential Life Insurance Co., Ltd. Guangzhou Britain
Generali China Life Insurance Co., Ltd. Beijing Italy
Great Eastern Life Assurance China Co., Ltd. Chongqing Singapore
Haier New York Life Insurance Co., Ltd. Shanghai USA
Heng An Standard Life Insurance Co., Ltd. Tianjin Britain
HSBC Life Insurance Co., Ltd. Shanghai Britain
Huatai Life Insurance Co., Ltd. Beijing USA
Manulife-Sinochem Life Insurance Co., Ltd. Shanghai Canada
John Hancock Tianan Life Insurance Co., Ltd. Shanghai Canada
United MetLife Insurance Co., Ltd. Shanghai USA
Nissay-SVA Life Insurance Co., Ltd. Shanghai Japan
Pacific-Antai Life Insurance Co., Ltd. Shanghai Netherlands
Samsung Air China Life Insurance Co., Ltd. Shanghai Korea
Sino-US MetLife Insurance Co., Ltd. Beijing USA
Sun Life Everbright Life Insurance Co., Ltd. Tianjin Canada
Property and casualty insurance companies City Country of foreign partner

Allianz Insurance Company Guangzhou Germany
AXA General Insurance China Ltd. Shanghai France
Chartis Insurance Shanghai USA
Liberty Mutual Insurance Co., Ltd. Chongqing USA
Chubb Insurance Shanghai USA
Mitsui Sumitomo Insurance Co., Ltd. Shanghai Japan
Royal & Sun Alliance Insurance Co., Ltd. Shanghai Britain
Sompo Japan Insurance (China) Co., Ltd. Dalian Japan
Tokio Marine & Nichido Fire Insurance Co., Ltd. Shanghai Japan
Zurich Insurance Company Beijing Switzerland

Premium income for domestic life insurance companies, June 2010
Company Name Premium Income

Jan-June 2010
(RMB million)
China Life 192,999.14
Ping An Life 90,496.34
New China Life 54,625.85
CIPC 52,305.72
Taikang Life 51,485.89
PICC Life 45,790.57
Taiping Life 19,100.45
Sunshine 7,396.04
China Life (old business) 6,623.52
Sino Life 6,503.57
PICC Health 5,808.49
Minsheng Life 4,171.78
Union Life 3,498.49
Happy Life 3,067.71
Dragon Life 2,631.91
Ping An Annuity 2,548.52
Guohua Life 2,547.31
Jiahe Life 2,385.04
Huaxia Life 1,939.54
Yingda Taihe Life 1,604.14
Sinatay Life 1,171.98
Greatwall Life 1,122.89
China Post Life 454.33
Aeon Life 229.91
John Hancock Tianan Life 182.20
Ping An Health 79.59
Kunlun Health 70.90
Reward 1.16
Source: CIRC

Premium income for foreign life insurance companies, June 2010

Jan-June 2010
(RMB million)
Generali China Life 4,051.56
AIA 3,865.59
Huatai Life 3,741.10
Sun Life Everbright Life 2,949.60
Aviva-COFCO Life 2,791.14
CITIC-Prudential Life 2,691.32
CIGNA & CMC Life 1,281.83
Sino-US MetLife 1,090.94
AEGON-CNOOC Life 956.39
Manulife-Sinochem Life 871.31
Allianz China Life 829.73
United MetLife 706.50
Heng An Standard Life 669.07
ING Capital Life 614.08
AXA-Minmetals 517.30
Pacific-Antai Life 484.06
Skandia-BSAM Life 427.13
Cathay Life 351.46
BoComm Life* 323.46
Great Eastern Life (China) 301.00
Haier New York Life 210.32
Samsung Air China Life 152.05
Sino-French Life 123.81
Nissay-Greatwall Life 99.69
King Dragon Life 70.13
HSBC Life 51.06
Shin Kong - HNA Life 41.51
Source: CIRC

Premium income for domestic property and casualty insurance companies, June 2010

Jan-June 2010
(RMB million)
PICC 81,406.39
Ping An 29,975.38
CIPC 27,042.31
China United Property 10,030.12
CICC (China Continent Property & 6,838.86
Casualty Insurance)
Sunshine Property & Casualty 5,593.16
China Life Property & Casualty 5,582.40
Tianan 5,160.41
Sinosure 4,266.67
ABCC 3,731.83
Yong An Property 3,297.65
Alltrust 3,096.02
Taiping 2,670.03
Sinosafe 2,122.40
Du-bang 1,921.89
Tianping Auto 1,738.69
Anhua Agricultural 1,670.05
Bank of China 1,197.85
Yingda Taihe Property 1,078.60
Dazhong 877.18
Chang An Property & Liability 815.16
Min An 794.45
Sunlight Agricultural Mutual 715.55
Ancheng Property & Casualty 693.77
Bohai Property 524.97
Anxin Agricultural 395.70
Dinghe 391.76
Zheshang 385.24
Guoyuan Agricultural 377.02
ZKing 153.31
China Huanong Property & Casualty 106.63
Cinda 31.82
China-Coal 0.00
Source: CIRC

Premium income for foreign property and casualty insurance companies, June 2010

Jan-June 2010
(RMB million)
Chartis (AIG) 514.67
Mitsui Sumitomo 224.33
Tokio Marine & Nichido Fire 212.62
Samsung Fire & Marine 175.04
Liberty Mutual Chongqing 159.54
Allianz Life 155.59
Zurich 123.05
Winterthur 91.35
Generali China 90.54
Royal & Sun Alliance 85.90
Sompo Japan 77.21
Chubb 70.47
Hyundai (China) 58.85
Cathay 24.47
Groupama SA Chengdu 19.94
Aioi 19.30
LIG 16.57
NIPPONKOA 12.85
Source: CIRC

Background comments on participants
Foreign insurance company Background comments††

AEGON-CNOOC Life Established in May 2002 and headquartered in Shanghai, AEGON-CNOOC Life Insurance Co.,
Insurance Co., Ltd. Ltd. is a 50/50 joint venture between AEGON Group and China National Offshore Oil Corporation
(CNOOC).
700 employees
Its current registered capital is RMB 1.63 million. AEGON-CNOOC started its life insurance
www.aegon-cnooc.com business in Shanghai, China in May 2003. By 2010 it operates in 10 provincial level areas in
China. In December 2009 a new company logo was introduced.
Allianz China Life Insurance Allianz China Life Insurance Co., Ltd. (previously named as Allianz Dazhong Life Insurance Co.,)
Co., Ltd. Ltd., was the first European life insurance joint venture established in China. It officially opened
in Shanghai on 25 January 1999. The company is jointly invested by the German financial
1,000 employees conglomerate Allianz AG and CITIC Trust & Investment Co., Ltd. of China. In September 2009,
Allianz China increased its registered capital to RMB 2 billion. The company has established
www.allianz.com.cn eight branches with over 60 sales service centres, and cooperates with more than 10 bank
partners.
American International American International Assurance Co., Ltd. (AIA), a wholly-owned subsidiary of American
Assurance Co., Ltd. International Group, Inc. (AIG), has been serving Asia for over 75 years since its inception in
1931 in Shanghai. In 1992, AIA was the first foreign organisation to be granted an insurance
2,600 employees license in China. Headquartered in Hong Kong, AIA has branch offices, subsidiaries and
affiliated companies in China in the following cities, Beijing, Jiangsu, Guangdong, Shanghai and
www1.aia.com.cn Shenzhen. In 2003 AIG companies acquired a 9.9% stake in PICC P&C’s outstanding share
capital at its Initial Public Offering in Hong Kong, and reached a co-operative agreement with
PICC P&C to develop the accident and health insurance market in China.
Aviva-COFCO Life Aviva-COFCO Life Insurance Co., Ltd. (ACL) is a joint venture between AVIVA PLC and COFCO
Insurance Co., Ltd. Group group, the largest oil and food importer and exporter in China and a leading food manufacturer.
ACL commenced operation in Guangzhou in January 2003. By 2010, ACL’s business had
1,300 employees expanded into 10 provinces and 40 major cities. Its current registered capital is about RMB 2.1
billion.
www.aviva-cofco.com.cn
AXA-Minmetals Assurance AXA-Minmetals Assurance Co., Ltd. is a joint venture of AXA Group and China Minmetals
Co., Ltd. Group. It was the first Sino-French insurance company in China and also the first life insurer
to be approved by the China Insurance Regulatory Commission (CIRC) after the CIRC was
500 employees established. The company was established in Shanghai in June 1999. In September 2009, its
registered capital was increased to RMB 1.205 billion.
www.axa-minmetals.com.cn
CIGNA & CMC Life CIGNA was the first American insurance company granted by the Qing Dynasty government
Insurance Co., Ltd. and entered the Chinese market in 1897. The joint venture was established in August 2003 in
Shenzhen, Guangdong Province. It is the first Chinese life insurance company not to use agents
2,000 employees and brokers. Instead, telemarketing is the preferred distribution channel. It has a registered
capital of RMB 360 million.
www.cigna-cmc.com
††
The background comments were taken from the CIRC and the respective foreign insurance companies’ websites in June 2010

Foreign insurance
company Background comments††
CITIC-Prudential Life CITIC-Prudential Life Insurance Co., Ltd. was the first Sino-British joint venture life insurance company
Insurance Co., Ltd. when it was established in Guangzhou in October 2000. CITIC-PRU is jointly owned by China
International Trust and Investment Corporation and Prudential UK PLC. CITIC-PRU has a registered
1,440 employees capital of RMB 2.115 billion, in which CITIC and Prudential PLC each hold 50%. By the end of 2009, its
business had expanded to 11 provincial areas and 31 cities.
www.citic-prudential.
com.cn
Generali China Life Generali China Life Insurance Co., Ltd. is a joint venture between Assicurazioni Generali S.p.A.
Insurance Co., Ltd. (Generali) and China National Petroleum Corporation (CNPC). The company was approved by the China
Insurance Regulatory Commission on 15 January 2002.
1,120 employees
It was the first Sino-foreign joint venture insurance company approved for operation by the Chinese
www.generalichina.com authorities after China joined the World Trade Organisation. In February 2006, the company moved its
headquarters from Guangzhou to Beijing. In December 2008, the company increased its registered
capital from RMB 1.9 to 2.7 billion. As a result, it has the largest registered capital and assets under
management among all foreign life insurance companies in China.
Great Eastern Life Established in 1908, Great Eastern Life Assurance is the oldest and most established life insurance
Insurance Co., Ltd. company in Singapore and Malaysia. It is a fully-owned subsidiary of Great Eastern Holdings Ltd,
the largest life insurance group in Singapore and Malaysia with about S$50.9 billion in assets. Great
200 employees Eastern is a subsidiary of OCBC Bank.
www.lifeisgreat.com.cn Set up in February 2003 by the Chongqing Government, Chongqing Land Properties Group is a state-
owned enterprise under the Chongqing People’s Municipal Government, and is the only foreign life
insurance company headquartered in western China. The company offers life, health, accidental death
& dismemberment insurances for both individuals and groups to the Chinese market. Each partner
contributed 50 percent to its registered capital of RMB 1 billion.
Haier New York Life Haier New York Life Insurance Co., Ltd., established in 2002 in Shanghai, is a joint venture company
Insurance Co., Ltd. partnership between the Haier Investment and Development Co., Ltd. (under the Haier Group of
Qingdao), and New York Life International, with a registered capital of RMB 800 million.
450 employees
It provides its customers with a comprehensive range of life insurance products and services and
www.hnylic.cn operates in 15 cities.
Heng An Standard Heng An Standard Life Insurance Co., Ltd. (HASL) is a joint venture life insurance company established
Life Insurance in 2003 by Standard Life plc and Tianjin TEDA Investment Holding Co., Ltd. with headquarters in
Co., Ltd. Tianjin.
850 employees By June 2010, the registered capital of HASL is RMB 1.652 billion, of which each shareholder owns
50%. (HASL has operating offices in Beijing, Guangdong, Henan, Jiangsu, Liaoning, Qingdao,
www.hengansl.com Sandong, Sichuan and Tianjin.)
††

Foreign insurance
HSBC Life Insurance In the third quarter of 2009, HSBC Insurance (Asia) Ltd. launched a jointly held insurance company
Co., Ltd. with Beijing-based National Trust, which is a privately held trust company to offer asset management,
investment banking, wealth management and direct investment in China.
240 employees
HSBC Insurance and National Trust each holds 50 per cent and it has a registered capital of RMB 500
www.insurance. million, funded equally by both shareholders. Headquartered in Shanghai, the joint venture is granted to
asiapacific.hsbc.com operate Life, Health and Personal Accident insurance and re-insurance.
Huatai Life Insurance Huatai Life Insurance Co., Ltd. is the first nationwide life insurance company in China incorporated by a
Co., Ltd. property and casualty insurance company. Its parent company, Huatai Insurance, is the first nationwide
joint-stock property insurance company in China which American based ACE Group is the biggest
1500 employees shareholder. Huatai Life formally commenced its business in 2005. Headquartered in Beijing, the
business scope of Huatai Life includes life insurance, health insurance, accidental injury insurance etc.,
www.huatailife.com and related reinsurance business and insurance assets management.
Manulife-Sinochem Manulife-Sinochem Life Insurance Co., Ltd. is the first joint venture established in China. It was created
Life Insurance by Manulife (International) Ltd. and the Sinochem Group in November 1996. Based in Shanghai, the
Co., Ltd. joint venture has RMB 1.6 billion registered capital, with 51 percent of ownership belonging to Manulife
and 49 percent belongs to Sinochem.
11,000 employees
The company has business in nine provincial areas and over 42 cities. It was the Life Insurance Partner
www.manulife- in China providing relevant services to the Beijing 2008 Olympic Games.
sinochem.com
United MetLife United MetLife Insurance Co., Ltd. offers life insurance and savings products to individuals in Shanghai,
Insurance Co., Ltd. Nanjing, Hangzhou, Ningbo and Wuxi. In 2004 Travellers Life & Annuity, formerly a subsidiary of
Citigroup Inc, gained approval from the CIRC to set up a life insurance joint venture with Shanghai
800 employees Alliance Investment Co., Ltd. — an investment company funded by the State-Owned Assets
Supervision and the Administration Commission of the Shanghai Municipal Government.
www.metlife.net.cn
In 2005 MetLife acquired Travellers Life & Annuity from Citigroup. The insurer is now called United
MetLife. Each of the shareholders holds 50 percent of the company, which has RMB 1 billion registered
capital. United MetLife is the first foreign insurance company granted to sell investment linked
products.
Pacific-Antai Life Pacific-Antai Life Insurance Co., Ltd. (PALIC), is a joint venture between China Pacific Insurance (Group)
Insurance Co., Ltd. Co., Ltd. and ING Group N.V. It was established in October 1998 in Shanghai and now has a registered
capital of RMB 800 million
500 employees
The company now has 22 sales and service centres in Shanghai, Guangdong and Jiangsu province.
www.cpic-ing.com.cn By the end of 2009, the company has a gross premium income of RMB 9.8 billion.
††

Foreign insurance
Samsung Air China Samsung Air China Life Insurance Co., Ltd. is a joint venture between China National Aviation Holding
Life Insurance Co., and the South Korean company Samsung Life Insurance Co., Ltd. The company was licensed in
Co., Ltd. May 2005 in Beijing. Its current registered capital is RMB 500 million.
200 employees
www.samsung-
airchinalife.com.cn
Sino-French Life Sino-French Life Insurance Co., Ltd. is a joint venture between stated owned China Post and French
Insurance Co., Ltd. based CNP Assurance. The company was founded in December 2005 in Beijing, with a registered
capital of RMB 200 million equally held by the two partners. The premium income of the Sino-French
60 employees Life was RMB 270 million in 2009.
www.sfli.com.cn
Sino-US MetLife Sino-US MetLife Insurance Co., Ltd. began its operation in March of 2004. At the time of establishment,
Insurance Co., Ltd. it was a joint venture between US Metropolitan Life Insurance Company and Capital Airports Holding
Company of China. In February 2010, the latter sold its shares to Shanghai Alliance Investment Ltd.,
430 employees which is the domestic partner of United MetLife Insurance Co., Ltd.
www.metlife.com.cn Although now owned by the same domestic and foreign partners of United MetLife, Sino-US MetLife
Insurance Co., Ltd. is a Beijing-based insurance company and is still currently operating under the
original company name. The current registered capital is RMB 800 million at each partner holds 50
percent.
Skandia-BSAM Life Skandia-BSAM Life Insurance Co., Ltd. was established as the first life insurance joint venture
Insurance Co., Ltd. company headquartered in Beijing in January 2004 by Skandia Insurance Co., Ltd., now a member of
the Old Mutual Group, and Beijing State-Owned Assets Management Co., Ltd.
300 employees
In March 2010, Guodian Capital Holding Co., Ltd., a subsidiary of China Guodian, acquired all shares
www.skandia-bsam.cn from the domestic partner. Its registered capital is RMB 520 million and each partner holds 50 percent
respectively.
Sun Life Everbright Sun Life Everbright Life Insurance Co., Ltd. is a joint venture between Canada’s Sun Life Financial
Life Insurance Group with China’s Everbright Group. It opened for business in Tianjin in April of 2002. In June 2004
Co., Ltd. the joint venture established a branch in Beijing. In November 2009, each of the shareholders increased
registered capital of RMB 150 million, which brought the total from 1.2 billion to 1.5 billion. It now has
1000 employees branches in seven provincial areas.
www.sunlife-
everbright.com
††

Foreign insurance
Allianz Insurance Allianz Insurance Company Guangzhou Branch commenced operations in February 2003, as Allianz
Company Group’s first non-life insurance operation in China. It offers a series of insurance services including
property, liability, marine, engineering, motor and domestic credit insurance, as well as short-term
32 employees health insurance and accident insurance, for domestic and foreign clients within the province of
Guangdong including Shenzhen. Meanwhile, Allianz is focusing on business expansion and enhancing
www.allianz.cn its service network in Guangdong province.
In July 2010, it gained approval from the CIRC for transforming the company from a branch into a
subsidiary with a status of independent position of legal person. This is the precondition for out-
branching in other provinces and municipalities outside of Guangdong.
AXA General AXA acquired 100% of Winterthur Group in June 2006.

Insurance Company
China Ltd. Winterthur obtained an insurance license to operate a full foreign owned branch in Shanghai in 1997.
Its business operation is confined to general non-life insurance business targeting solely foreign-funded
120 employees enterprises, Sino-foreign joint cooperative ventures, etc.
www.axa-ins.com.cn
Chartis Insurance Former AIG General Insurance China Ltd. Re-branded to the current English name in July 2009 globally
Company China Ltd. while the registered Chinese name remained unchanged.
1,000 employees In September 1992, AIG was first granted an insurance license to operate property insurance
businesses in Shanghai. In 2007, AIG was approved to have fully owned subsidiary in China, with
www.chartisinsurance. branch offices in Beijing, Shanghai, Guangdong Province and the city of Shenzhen.
com.cn
Chubb Insurance Chubb has operated in China since September 2000 through the establishment of the Shanghai branch
(China) Co., Ltd. of its operating insurer, Federal Insurance Company. In 2008, Chubb converted Federal Insurance
Company Shanghai branch into a wholly foreign owned company with the approval of the CIRC. It has
80 employees a registered capital of RMB 220 million.
www.chubb.com.cn
Groupama SA Groupama SA Chengdu Branch was established in October 2004 and signed a cooperation agreement
with the Agricultural Bank of China. As the first wholly foreign-owned non-life insurer in Sichuan
169 employees Province, its business includes property, health, commercial motor, cargo and personal accident
insurance by 2010. It also became one of the pilot insurance companies for political agricultural
www.groupama.com.cn insurance in Sichuan in 2007.
††
The background comments were taken from the CIRC and the respective foreign insurance companies’ websites in June 2010.

Foreign insurance
Liberty Mutual In November 2003, the CIRC granted Liberty Mutual Insurance Company permission to begin
Insurance Co., Ltd. conducting business in the city of Chongqing. While the largest line of business is motor (on the
commercial side), the company provides an array of other property and casualty products such as fire,
100 employees cargo, liabilities, homeowners, and personal accident insurance.
www.libertymutual. In July 2007, the former Liberty Mutual Chongqing Branch was granted to transform into a wholly
com.cn foreign owned subsidiary in China, and renamed to Liberty Insurance Co., Ltd. In February 2010,
Liberty increased its registered capital to RMB 355 million. Liberty is the only foreign property insurance
company based in Chongqing. It has a branch is Beijing and is preparing for another one in city of
Hangzhou.
Mitsui Sumitomo Created from a merger in 2001. Mitsui Sumitomo Shanghai Branch was established in May 2001, and
Insurance (China) became the second 100% Japanese-owned insurance company in China. In September 2007, the
Co., Ltd. Shanghai branch was incorporated to Mitsui Sumitomo Insurance (China) Co., Ltd (MSI China), a fully
invested subsidiary if MSI Group.
270 employees
MSI China has a capital of RMB 500 million. Its main business includes Property & Casualty Insurance,
www.ms-ins.com.cn Short-term Health Insurance, Personal Accident Insurance, and the Reinsurance of the insurance
above. MSI China established its Guangdong Branch in August, 2008 as the first Japanese insurance
branch in Guangdong Province. In addition, its second branch opened in Beijing in January 2010.
Sun Alliance Royal & Sun Alliance’s (RAS) links with China go back to 1853 when it first operated in Shanghai. In
Insurance (China) Ltd. 1992, Royal & Sun Alliance returned to China and opened a representative office in Beijing, becoming
the first European insurer to set up an office in China. In April 1998, the Chinese Premier of the State
110 employees Council announced during his visit to the UK that Royal & Sun Alliance would be the first British
insurance company to be granted an operating license in China. On 8 October 1998, Royal & Sun
www.rsagroup.com.cn Alliance Insurance PLC Shanghai branch was officially opened by the British Prime Minister.
RSA was granted to convert into a wholly owned subsidiary in 2007. Sun Alliance Insurance (China)
Limited was formally authorised & launched on March 2008 and capitalised at RMB 500 million, with its
Head Office in Shanghai. Now it has a branch in Beijing opened in October 2009.
Tokio Marine As the first Japanese insurance company in China, Tokio Marine & Nichido Fire Insurance Co., (China)
& Nichido Fire Ltd. (TMNF) was authorised to open a branch in Shanghai in September 1994. In July 2008, the
Insurance Co., Shanghai branch got its approval to restructure into a wholly owned subsidiary.
(China) Ltd.
TMNF China is especially good at Cargo and Transportation insurance, which ranked number one in the
250 employees Shanghai market by the end of 2007 with a market share of 17.8%.
www.tokiomarine.com.cn
Zurich Insurance In October 2005, Zurich received the approval from the CIRC to prepare the general insurance branch
Company in Beijing. In May 2006, Zurich obtained the operation approval from the CIRC to open a general
insurance branch with a registered capital of RMB 200 million. Zurich Insurance Company Beijing
120 employees Branch focuses on serving corporate customers, including foreign customers with activities in China
and large and medium sized enterprises in China, particularly those with business overseas.
www.zurich.com.cn
††

American Chamber of Commerce in China White Paper – Insurance Section 2010
China’s insurance market has Significant Developments

maintained steady growth and
On 1 October 2009, the new
become the world’s sixth largest
Insurance Law came into effect. It
market. This is partly attributable to
creates favourable conditions for the
positive structural changes, improved
development of the industry through
market order, better risk control
expanded scopes of business and
and a progressive legal framework
investment channels for insurance
under the direction of the China
companies, improved conduct
Insurance Regulatory Commission
requirements for market participants
(CIRC). US insurers have continued
and strengthened consumer
confidence in and commitment to
protection. US insurance companies
the China market and have increased
welcome the new Insurance Law and
investment, continued best practices
believe China’s insurance industry
transfers to their China operations
will benefit as the new Law helps
and made other developmental
to level the playing field. AmCham-
contributions to the insurance
China commends the CIRC for
industry.
inviting public comments on the
Insurance Law and corresponding
However, market access issues
administrative rules’ revision
continue to restrict US and
processes. AmCham-China looks
other foreign insurers in most
forward to further engagement with
cities, limiting the scope of their
the CIRC.
geographical expansion, investment
options and product offerings. These
Throughout 2009, the CIRC
barriers continue to deny Chinese
continued to direct the industry
consumers and society the full
towards profit-driven growth
benefits of a robust and competitive
through balanced structure and
insurance industry, preventing
rational market conduct. It devoted
individuals from effectively insuring
significant supervisory resources
their health and property, and
to intensify enforcement against
companies from more efficiently
irregularities, investigating thousands
managing their risk. Although the
of cases and penalising offenders,
insurance industry grew 39 percent
even at senior levels.
from 2007 to 2008, foreign insurers’
market share actually shrank from six
Starting in January 2009, the
to four percent over the same period.
CIRC also introduced a risk-based
supervisory approach, which
As insurance plays an increasingly
classifies insurers into four groups
important role in China, all insurance
based on performance indicators
companies, including those with
in solvency, corporate governance,
US investment, actively contribute.
fund utilisation and operations, each
A level playing field is critical, as a
resulting in different supervisory
fair and open business environment
actions. While both approaches
benefits consumers and the long-
may work well with current market
term interests of the industry.
conditions, in the long run, the risk-

based approach will more efficiently longer waits before receiving

use regulatory resources and impose approval to establish branches.
less onerous regulatory burden on
prudent firms. Chinese-invested insurance
companies, even if newly
established, characteristically
Specific Issues receive multiple branch approvals
International insurance companies concurrently on the same day
want to compete fairly in the or within days of each other.
China market. Although they are Conversely, foreign-invested
allowed market entry, their ability to insurance companies rarely, if ever,
compete fully is hampered, to the receive multiple branch approvals
detriment of Chinese consumers. An concurrently.
overwhelming number of American
and other foreign insurers operating Moreover, the central-level
in China are registered in China and CIRC often reserves for its own
are therefore Chinese companies; examination and approval matters
yet, they still face regulatory involving the establishment of sub-
discrimination. Currently, insurance branches by wholly foreign-owned
industry competition is restricted in and Chinese-foreign joint venture
the areas below. (JV) insurance companies. This has
triggered delay concerns among
Geographical Barriers foreign insurers regarding the sub-
branch approval process. It also
Branch Office and Sub-branch impedes the expansion of foreign-
Office invested insurance companies to
The establishment of branches and the central and western regions of
sub-branches is critical to market China where the need for capital
expansion in a country as large as and economic development is
China. Yet, as described in the 2009 greatest. As the new Insurance Law
White Paper, there is a persistent becomes effective, AmCham-China
pattern of unequal treatment. urges even and uniform application
of the Insurance Law for branch
Article 81 of the new Insurance establishment by foreign companies.
Law provides that the insurance
regulatory authority under the State A separate barrier to geographic
Council shall examine applications expansion in the Administrative
to establish a branch and render a Measures on Insurance Company
decision whether or not to approve Management is the requirement
within 60 days of the receipt of that an insurance company have
application materials. Qualified no record of penalties imposed
foreign insurers experience much during the previous two years.
Some AmCham-China companies

have been penalised for minor In September 2009, the CIRC

infractions and are thus prohibited issued a revised draft rule for public
from establishing branches and sub- comment. It states that “two or
branches for two years at a time. We more insurance companies (defined
believe that such prohibition should as companies with less than 25
apply only to serious violations, lest percent equity holding by foreign
responsible insurance companies be investors), if controlled by the same
restricted from offering their products entity or mutually controlled, shall
to consumers in some localities. not enter into business of the same
competitive nature or of a conflict of
interest.” The definition of “control”
Investment Barriers remains vague and it is unclear
Equity Cap on Life JVs if foreign companies can make
dual investments in two domestic
Freedom to capitalize the business companies without “control.”
and reap resulting profits encourages AmCham-China recommends that for
insurance companies to invest and the sake of clarity and transparency,
grow their businesses, as is true the CIRC explain its current rules
in other industries. The 50 percent and confirm that dual investments
cap on foreign-invested personal by foreign insurers are permissible
insurance companies is a major within reasonable parameters.
disincentive for foreign insurers
to invest, introduce advanced Foreign Currency Conversion
products and otherwise serve the
China market. All too often, their US insurance companies have
partners are either unwilling to make committed to the China market and
additional investments needed to are increasing China operations
expand the business, or are mere investment for growth and solvency
rent-seekers awaiting an opportunity purposes. However, when foreign
to cash out without contributing funds are wired in, they have to stay
beyond the initial share of the JV’s in designated bank accounts until
registered capital. they are converted into renminbi
(RMB). During this “parking period”,
Dual Investment the funds are subject to great
currency exposure as the RMB has
In a late 2007 draft rule governing tended to appreciate over time.
management of equity in insurance Moreover, the process of converting
companies, the CIRC barred foreign foreign currency into RMB is usually
insurers from simultaneously lengthy and the approved amount of
investing in multiple entities in China conversion is often uncertain. This
engaged in the same business. The process, in addition to creating an
rule was never formally enacted, unstable environment for foreign
but its spirit seems to be in effect, insurers, also restricts foreign
as no foreign companies have been insurers’ ability to pay claims to
approved for dual investments since Chinese clients in RMB in a timely
2008. manner. AmCham-China therefore

suggests that for the sake of Political Risk Insurance (PRI)

creating a predictable investment
PRI enhances foreign trade
environment for foreign insurers,
and investment by protecting
the procedure for foreign currency
companies from financial losses
conversion be expedited and made
caused by events that are political
more transparent.
in nature, (i.e., acts or events such
as government expropriation or
Product Barriers nationalisation in a foreign country
Mandatory Third Party Liability where the company operates). Such
Insurance for Auto (MTPL) coverage is increasingly important as
Chinese companies follow the “Go
Currently, foreign insurers are not Out” overseas trade and investment
allowed to write MTPL coverage. This policy, particularly in countries with
restriction has effectively blocked less mature governance systems that
foreign firms from China’s auto are susceptible to sudden changes in
insurance market, which accounts law or policy.
for 70 percent of the property
and casualty (P&C) market. MTPL In China, however, the only PRI
has received tremendous public provider is a government monopoly
attention, sometimes controversial, (Sinosure) sometimes acting in
since its inception. As MTPL moves cooperation with multilateral
into its third year, underwriting development institutions. The barrier
losses have arisen in many provincial to market entry for all private insurers
markets. The underwriting losses in harms Chinese traders and exporters
the auto insurance segment have by limiting the availability and range
impacted the overall P&C sector. of PRI alternatives. Although several
foreign companies have extensive
By comparison, the US private experience and worldwide networks
passenger auto segment has been to serve their PRI customers, they
profitable over the past 10 years, cannot make their capabilities
attributable to superior risk control, available to Chinese customers.
pricing and data management
skills. These are standard practices Limitations on International
in mature markets, but have yet Brokers
to be utilised in China. Opening
MTPLwill attract foreign companies Under current rules, international
and encourage them to bring best brokers are limited to large-scale
practices to China to improve the commercial risks. This restriction has
performance of MTPL and the auto effectively blocked foreign brokers
insurance market as a whole. Such from other lines of business such as
improvements will benefit industry small and medium-sized enterprises
and consumers in the long run. (SME), which contribute 60 percent
of China’s GDP. SMEs are largely
underserved by insurance because

SMEs have low risk awareness and Recommendations

insurers have high distribution costs.
• Ensure uniform enforcement of
International brokers can bridge
the new Insurance Law and allow
the gap with their broad experience
foreign insurance companies
and risk management expertise. In
to enjoy national treatment by
addition, international brokers will
granting new branch licenses on a
provide strong support for SMEs
concurrent basis
going overseas by using their global
networks. • Remove requirements for foreign
insurance companies to establish
Enterprise Annuities JVs in order to enter the personal
insurance market, or at the very
AmCham-China applauds the
least, remove the current 50
Chinese government for beginning
percent equity cap
to include enterprise annuities
as supplemental coverage in • Permit foreign insurance
the social insurance policy companies to make dual
framework. We note, however, investments in entities in the same
that the qualification process is line of business within reasonable
rather opaque and complicated, parameters (to be clearly defined)
discouraging international companies
• Open MTPL and PRI to foreign
from participating in this under-
P&C carriers
served market. As a consequence,
enterprise annuities are likely to • Allow international brokers to
expand more slowly and in a more provide brokerage services to
limited range of products from less Chinese SMEs
experienced providers than if the
• Expedite and increase the
process is made less complicated
transparency of the process of
and more transparent.
converting foreign currency into
RMB

Partners in success

About PricewaterhouseCoopers
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Financial Services
The ongoing transformation of the PwC China has been at the forefront • China Insurance Journal
financial services industry, through in working with foreign insurance (May 2010)
the key drivers of technology and companies in mainland China to
• The Chinese Insurance Market:
insurance, is dramatic and complex. move into new markets, introduce
Is this the last, best chance for
As legal barriers fall between the new types of products and comply
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— Insurance summary
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(February 2010)
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PricewaterhouseCoopers has also • Insurance Digest (January 2010)
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• Countdown to Solvency II
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Insurance Banking & Capital Markets Investment Management

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Insurance
Foreign insurance
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September 2010
Foreign insurance companies in China

September 2010
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Insurance

Foreign insurance companies in China

Shu-Yen Liu Peter Whalley

1 “PricewaterhouseCoopers” refers to the network of member firms of

Foreign insurance companies in China 2010

Foreign insurance companies in China 2010

What counts as a foreign insurer?

Foreign insurance companies in China 2010

Market share remains stagnant Significant shifts in expectations

Although individual company growth The foreign insurers see their

Foreign insurance companies in China 2010

Foreign insurance companies in China 2010

Foreign insurance companies in China 2010

About half of the respondents

Foreign insurance companies in China 2010

A summary of peer ranking (top

First Second Third

Life insurance — Traditional savings AIA Manulife-Sinochem CITIC-Prudential Life

Life insurance — Investment-linked CITIC-Prudential Life Allianz Life MetLife

Life insurance — Protection AIA Manulife-Sinochem Aviva-COFCO

Health insurance AIA Manulife-Sinochem CITIC-Prudential Life

Personal accident insurance AIA CIGNA Chartis (AIG)

Homeowner insurance Chartis (AIG) Chubb Zurich

Enterprise property insurance Chartis (AIG) Zurich Tokio Marine

Cargo, transportation insurance Tokio Marine Mitsui Sumitomo Chartis (AIG)

Group life Generali AIA Aviva-COFCO

Group accident and health Generali AIA Aviva-COFCO

Customer relationships AIA Manulife-Sinochem Allianz Life

Geographic expansion Manulife-Sinochem CITIC-Prudential Life Aviva-COFCO

Innovation Chartis (AIG) Aviva-COFCO AIA

Distribution effectiveness CIGNA AIA Manulife-Sinochem

Marketing strategies Chartis (AIG) AIA Aviva-COFCO

Technically competent staff AIA Manulife-Sinochem Chartis (AIG)

Brand awareness AIA Chartis (AIG) CITIC-Prudential Life

Corporate social responsibility Allianz Life AIA AXA-Minmetals

Foreign insurance companies in China 2010

Foreign insurance companies in China 2010

Projected growth in Number of employees three year projection of 6.7%. Two

The 59.8% projected increase is The number of non-PRC employees

Five companies expect their number Two property and casualty

Foreign insurance companies in China 2010

Number of agents Eight property and casualty

Foreign insurance companies in China 2010

Assets under management On the next page, the actual market

rising complaints among foreign between 2006 to 2008, fell to 1.1%

“China will further open its insurance

Source: www.dowjones.com, 25 June 2010

Foreign insurance companies in China 2010

In 2009, 70% said it was intensely

Life insurance — Protection In last year’s report, it was

activity in this area, it is clear that

Foreign insurance companies in China 2010

Note: Based on responses from 19 companies

Most companies have made either

Foreign insurance companies in China 2010

Note: Based on responses from 16 companies

Group accident and health A similar pattern is found with group

Over 70% of respondents now

significant or fundamental changes.

Note: Based on responses from 21 companies

Homeowner insurance In 2009, five companies responded Intensive 11.1%

contended competition was light.

Note: Based on responses from nine companies