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SCMP Reporter

NOTHING is shrouded in more mystery than insurance industry statistics and market share estimates in Hong Kong because nowhere are life insurers as tight-lipped about premium incomes and profit growth.

    Yet, American International Assurance's (AIA) leading status in the market is undisputed.

    Indeed, disputes and brawls have clouded the insurance market so heavily this year that it is easy to forget those well-established solid players who are running their businesses quietly and with a high level of professionalism.

    Commanding a 5,500-agency force, the company has emerged largely unscathed from the poaching wars waged by new entrants eager to built up a strong team.

    Red-hot competition for market share has only slightly dented its business. Premium growth in the past two years has slowed to 25 per cent, from a high of 35 per cent in the previous five years.

  'This year, we expect the growth to be a bit lower. The competition is very intense,' said Edmund Tse, president and chief executive of AIA and the executive vice-president of American International Group (AIG ), the parent company.

    Although this hotly-contested market is a battlefield for only 59 insurers - 40 pure life and 19 composite, numbers that have remained steady for the past two years - it is the number of active insurers that counts.

   New arrivals usually buy licences from existing dormant ones. Names such as Top Glory and CEF Life now frequently steal the limelight after a speedy entry that illustrates perfectly the aggressive attitude of most new companies.

    Being the market leader means prestige and pressure making AIA a natural target for challengers.

    However, AIA stands aloof, holding on to its long-cherished corporate philosophy. Having pride in a long history, a rare triple-A rated parent, a long-term commitment to the market and being dedicated to building a quality local staff have accompanied the company for 63 years, taking it to its present top position.

    'In insurance, the corporate image is very important. AIA confers a sound, financially solid impression to others,' Mr Tse said.

    This solidness comes also from its emphasis on quality service - that agents act more as trustees for customers, taking care of their needs, rather than sales representatives.

    'We are also prudent in our investment approach. No speculation,' he said. However, to stay on the leading edge of the industry and to fend off the aggressive competitors looming on the horizon, more is needed.

    'We have to strengthen ourselves,' Mr Tse said and warned that sometimes companies got so caught up in front-line battles that they forgot to look after their backyards.

    Cost efficiency is a major agenda item for AIA. Internal guidelines governing rigid control of operating cost are to be observed by every unit. He insists that lower operating costs can be translated into competitive product pricing.

     Technological development is a major contributor to cost cutting. 'We put millions of dollars into developing computer software. This is something the new entrants cannot afford. A critical mass is needed to achieve that cost efficiency,' Mr Tse said.

    Product innovation is another. 'We need more variations, new add-on features to our policies. For instance, an additional accident insurance element is added to policies sold to the younger generation,' he said.

    Developing niche markets would facilitate penetration - sectors such as the elderly, women and children.

     Apart from product mix, market strategies hold the key to sustained competitiveness. While AIA is still very much an agency-oriented life insurer, deriving 90 per cent of its business from agents, other distribution channels are being explored.

    Its two-year strategic alliance with the Standard Chartered Bank will be expanded, further tapping the bank's customer base. Direct marketing is conducted through the international credit card and charge card companies. Insurance brokers will be more active in procuring corporate accounts.

  Despite the ever-heightening competition, Mr Tse believes there is room for expansion. 'At present, only about 25 per cent of the population is insured. It is still a low figure compared with 40 per cent in Taiwan and almost 100 per cent in Japan.'     Besides, Mr Tse said AIA was used to accepting challenges from competitors due to its conspicuous market positions in other Asian countries, in particular Thailand and Taiwan, where the company has market shares of 55 per cent and 20 per cent, respectively.

    In Japan, where the domestic insurers rank among the biggest in the world, the company maintains the largest insurance operation among all foreign insurers, having a three per cent market share.

    Most notable of all this Asian network is the company's privileged licence to operate in China, almost the most coveted insurance market in Asia. So far it is the only foreign life insurer allowed to sell policies to mainland Chinese.

   However, this unique status was not achieved overnight.

    The company was founded in Shanghai in 1919 and opened its first office on American soil in 1926. Its chairman, Maurice Greenberg, visited China in 1975, before Sino-American relations were normalised.

    One rarely known anecdote is that the life insurer spent nine months in 1992 shuttling between Paris and Beijing, paid US$515,000 to a French collector to buy 10 bronze windows and donated them to the Chinese Government. The windows were precious antiques taken from the imperial garden about a century ago.

    Mr Tse, the architect of the whole incident, can still recall the Chinese official who said in tears: 'No foreign corporation had ever returned missing relics to us. They only took things away from us.'     Mr Tse refused to link this donation with the subsequent approval granted to conduct business in Shanghai, but in a country where guanxi (relationship) is a major business ethic, AIA's generosity has definitely scored high marks.

    Its Shanghai business, with 2,500 agents is growing at 20,000 new policies a month. The agency force is expected to increase to 4,000 next year. AIA is now eyeing other Chinese cities that will soon be opened to foreign insurers.

    Seldom mentioned is that the upscale twin-building complex, the Shanghai Centre, was an AIA property development project launched in 1985 and completed in 1989.

   Being the controlling shareholder now, the company is reaping handsome profit from the current shortage of office space in Shanghai. 'That is called vision and confidence,' Mr Tse said.

    Knowing the country, its traditions and the ways of doing business were the benefits of AIA's localisation policy which has proven so successful it has generated the envy of foreign competitors.



AIA a quiet achiever to beat off all challengers