Market tightens for foreign insurers
Foreign insurance companies operating on the mainland have had very little success so far because of tight regulation and competition from domestic giants, a survey has found.
The 28 foreign insurers told the fifth annual survey of PricewaterhouseCoopers that regulations, recruitment problems and tough competition from domestic players were their main challenges.
'It hasn't got any easier for foreign insurance companies to operate in China since our report a year ago,' said Peter Whalley, PwC's insurance practice leader for Hong Kong.
The 18 foreign life insurers on the mainland had only 3.7 per cent of the market in the first nine months of this year, compared with 5.6 per cent last year and the peak of 8.9 per cent in 2005. This year, the 10 overseas general insurers had a mere 1.1 per cent market share, the same as in the last two years and slightly down from the peak of 1.3 per cent in 2005.
The figures indicate the mainland has the smallest foreign insurance presence in Asia. Foreign insurers occupy more than half the market in Hong Kong, Malaysia and Singapore.
Whalley said certain new rules have made it more difficult for foreign insurers - for example, a stipulation that that any bank branch can only sell three insurance companies' products across the counter.
'While this may benefit companies with a good partnership with banks, others, particularly the smaller ones, may lose out,' Whalley said.
This is also why some foreign insurers changed their mainland joint-venture partners from non-bank institutions to local banks as the latter can sell products through their established networks. ING, for example, has teamed with Bank of Beijing, which took over a stake held earlier by Beijing Capital.
PwC predicts the problems facing foreign insurers are unlikely to ease in the next three years although a new rule introduced in May allowing them to expand their product range may help increase the pie for foreign general insurance companies.
Despite the many difficulties, however, foreign insurance companies continue to see the mainland as an attractive market for the growth opportunities it presents. Swiss Re forecasts the life premium market will grow 8.3 per cent, and general insurance premium 9.2 per cent, by 2020. In contrast, growth in Japan is expected to be only about 2 per cent growth in the same period.
'The relatively low market share of foreign insurers in China is both a challenge and a significant opportunity,' said Tom Ling, PwC insurance practice leader for China. 'Premiums are experiencing high levels of growth with low levels of market penetration, showing why China is such an attractive market.'