Opening seen for insurers
CHINA seems willing to open up its insurance industry to both domestic and foreign competitors, but changes are not likely until regulations are passed, according to a senior executive of Cigna Worldwide Inc.
''There is a clear acknowledgment in the market that competition is going to increase. There is also a very real understanding that that will mean substantial change in the way insurance is done in China,'' said Edward Hanway, president of Cigna.
He was speaking after a week of meetings with officials of the People's Insurance Co of China and the central People's Bank of China.
''Without committing themselves to any clear timetable, Chinese officials indicated they wanted eventually to license more foreign companies. They wanted to open up the insurance market in the coastal areas and economic zones first,'' Mr Hanway said.
''They also expect a significant increase in the number of Chinese insurance companies operating in the market, which is currently dominated by the People's Insurance Co.'' The only other Chinese competitors are the Shenzhen-based Ping An Co and China Pacific of Shanghai. A number of foreign insurance companies have representative offices in China, but only one, AIG of the United States, has a licence to operate.
But officials made clear the market was not likely to be opened up until new insurance regulations were completed, probably at the end of this year or early next.
''The growth of the need for insurance here is truly impressive,'' said Mr Hanway. ''The need for insurance is growing dramatically. The awareness of that need on the part of the customers and new companies being formed seems to be reasonably good and the potential of this market for commercial insurance as well as eventually individual insurance looks quite strong.'' Foreign participation would be advantageous in a number of respects, by helping to expand the limited pool of talent to operate the insurance business, bringing in new technology, and introducing new products.
Mr Hanway said the industry would also require a substantial increase in capital to handle the growth of business.
''The opportunities are quite strong and that fact has not been lost on both Chinese investors and the international insurance market as well,'' he said.
''I've also heard a willingness on the part of many of the people we have talked to in the People's Bank, and others, to encourage competition. And we certainly support that movement and would like to see the opening of this market as quickly as possible.'' In developing the market, it would be important for the new competitors to focus on areas of business where they had adequate experience and knowledge to be able to underwrite the business effectively, Mr Hanway said.
Key growth areas would include marine, property and eventually life insurance.
''The insurance market generally speaking is behind other industries in terms of foreign participation and the opening of the market to foreign capital,'' Mr Hanway said.
As mainland companies became more international in their scope, the country's insurance market ''needs to be at international standards so that they can work effectively with those companies as their insurance-buying needs change''.
''And unless their own market is brought up to international standards, they won't be able to do that as effectively,'' he said.
Cigna operated in China as early as 1897 and had several offices until 1949. The company is now considering establishing a permanent presence in China.
''Our priorities are to establish a presence here, although we've made no final decision yet,'' Mr Hanway said.