Year 2007 - Critical Success Factors

cost like most of the foreign insurers. However, we may still face the keen competition from the existing agencies company in China. Accessibility The new intermediaries companies usually establish their footholds in the more developed areas like Beijing, Shanghai, Guangdong, Jiangsu, Shengzhen, Liaoning and Shandong. Up to the end of year 2007, 41.15% of the 2331 insurance intermediaries concentrated on the above seven areas. Only until March 2007 the first full-time insurance intermediary company was opened in Xizhong. It will take long time and great efforts to overcome the deep-rooted obstacles like language barriers, distance and accessibility to raise the market penetration rate in the China insurance market. Distribution Channels The big Chinese insurance companies were formerly state-owned enterprise with preferential status and connections in state-owned industries and other markets. In the age of market economy these companies may still have better accessibility to the distribution channels. Bureaucracy and the long process of government approvals (at different levels of governments and departments) limited the speed and scope of the efforts to set up effective distribution channels in the Chinese insurance market. Entry Barrier The CEPA IV has undoubtedly given a good access for the insurance agencies intermediaries. The 10 years of operating experience with the total asset of HK$500,000 has set the barrier to small companies to participate into the market. Moreover, the policy has not yet extended to the Hong Kong insurance brokerage companies. They can only apply for authorization in the Mainland if they meet the market access conditions, which include total assets of over US$200M; operational experience of at least 30 years and the establishment of a representative office in the Mainland for over 2 consecutive years.To enjoy more the policies, the insurance intermediaries have to work even harder to catch up or awaiting further liberalization of CEPA in future. Summary Despite the fact that the Hong Kong practitioners have to face a lot of issues like taxation barrier, languages, cultural differences, government policies and so on when they enter the China market, with the introduction of the CEPA IV liberalization policies, the insurance intermediaries from Hong Kong can grasp the chance to go into this new market with their comparative advantages. They can introduce modern management systems and management skills into the Chinese insurance market. Through competition, they can help the China counterparts to establish modern management systems and effective distribution channels, pushing the market to follow regulatory frameworks, compliance measures and to adopt the rule of law. Through this process, the CEPA IV will enable the China insurance market to be better prepared for the challenges of WTO implementation. In the short run, the policy will not attract a lot of our Hong Kong practitioners to enter the China market in a rush. However, by taking part into the policy, the insurance personnel from Hong Kong will play a role to contribute to the insurance market modernization in China in the years to come. Mr. Davey K. K. Lee Chairman of Professional Development Council, General Agents and Managers Association Reference: 1. China Daily: 〈 China’s insurance post 25% rise in 2007 premium revenues 〉 , 2008-Jan-26 chinadaily.net 2. Adviser vol 226 3. HK TDC: 〈 CEPA − Opportunities for Hong Kong 〉 , 2007-Aug-06, cepa.tdctrade.com 4. Chief Executive DonaldTsang: 〈 CEPA holds out potential for insurance 〉 , 2005-July-11,A speech at the opening ceremony of the 41stAnnual Seminar of the International Insurance Society. 5. 中國保鑑：〈 2007 年保險中介市場發展報告〉 , 2007-Dec-31 21 HONG KONG CHAMBER OF INSURANCE INTERMEDIARIES 2007 YEARBOOK 香港保險中介人商會二○○七年年刊