Year 2007 - Critical Success Factors

The fast growing Insurance Market in China China’s total premium revenues reached RMB 703.6 billion (US$96.4 billion) in 2007, from RMB 564.1 billion the year before. “Insurance has been one of China’s fastest growing industries in the last five years, with an annual growth of 18.2 percent,” said Mr.Wu Dingfu, head of the China Insurance Regulatory Commission. “Last year was the best year ever for the insurance industry.” Chinese insurance revenues are expected to surpass one trillion yuan by 2010, with insurance assets reaching five trillion yuan, according to the country’s 11th Five Year Plan (2006-2010). However, even with such impressive growth, China’s insurance penetration rate, at around 3% of GDP, remains low by international standards. Increasing affluence, a growing public awareness of insurance, and greater attention to risk management by Mainland corporations means that the demand for insurance service on the Mainland is set to grow at a very fast rate. Naturally, this will offer new opportunities for the insurance industry. In the early phrase of the CEPA, it offered opportunities for Hong Kong insurers and professionals. The CEPA IV &V opened the gate for Hong Kong insurance companies to send experienced insurance intermediaries and management teams to China to establish new operations in the fast growing market. Successful factors of Hong Kong Insurance Intermediaries To grasp the opportunities in the fast growing insurance industry in China, the insurance intermediaries have got their own advantage. The insurance intermediaries in Hong Kong have solid experiences in the management and operations in marketing, distribution, agency management and various aspects of the insurance industry. These are valuable assets for the Mainland insurance companies. The Hong Kong Insurance industry has maintained the double digits growth in the past decade. The industry as a whole has continued to grow in 2006. According to the latest statistics, the industry total gross premium grew by 13.7% to HK$156 billion, representing 10.6% of the Hong Kong Gross Domestic Product. However, according to the statistics as at 31 Dec 2007 provided by the Insurance Agents Registration Board (“IARB”), there were only 2,150 insurance agencies, 28,892 individual agents and 24,398 responsible officers registered with the IARB. Moreover, there were 508 authorized insurance brokers as at 31 Dec 2007. The number of registered intermediaries has dropped significantly when compared in 1997. The insurance intermediaries become more regulated with the proper control from the Insurance Authority and other professional bodies in the industry. The insurance intermediaries have still got ample space for expansion. Up to 31, Dec 2007, there were 2,331 insurance intermediaries companies in China. Of which, the insurance agency companies account for 1,755 (75%) and insurance brokers stand for 13% of 322. In 2007, all insurance intermediaries had contributed more than RMB 579.34 billion with 29.39% growth when compared with the year 2006.The insurance agency companies and brokers had accounted for 2.71% and 2.37% in market share respectively. The current China market distribution will provide great opportunity for company with professional distribution channels. With the introduction of the CEPA IV, the Hong Kong experienced insurance intermediaries would raise the level of management skills and level of professionalism in the insurance intermediaries and companies in China.They shall help to build up professional management systems to the insurance industry in the Mainland through the following successful factors: Professionalism According to the China Insurance Regulatory Commission, complaints lodges by policyholders against insurance agents and intermediaries involves misconducts like: misrepresentation, non-disclosure of material information, distribution of unauthorized materials, misappropriation of premium and forgery of documents. The well-trained insurance intermediaries from Hong Kong are guided by established systems, procedures, rules and regulations that have been practicing for years in Hong Kong. With the raised level of consumer rights and legal protection of the policyholders, the China insurance market is moving towards the way of professionalism. As the CEPA requires for at least 10 years operating 19 HONG KONG CHAMBER OF INSURANCE INTERMEDIARIES 2007 YEARBOOK 香港保險中介人商會二○○七年年刊