Asia-Pacific | Autumn 2006
Asia-Pacific | March 2008
Asia-Pacific | May 2007
Industry statistics Welcome to the fourth edition of Watson Wyatt’s quarterly newsletter
covering developments in the Chinese insurance market. This edition
Market update covers news reported up to the end of March 2008.
Two major developments in this edition are additional licenses for new
New entrants companies, and the uncertainty surrounding the latest policy on closer
Potential entrants bank-insurer alliances.
We understand that the applications for a dozen insurance licenses are
Corporate development currently on the desks of the insurance regulator. Although no names
of prominent foreign companies are included, more entrants into the
Regulatory update market will further promote competition, and will place more pressure
on the current challenge for existing companies of recruiting and
retaining office and sales staff.
Bank investment in insurer
Micro-insurance The new regulation (in fact it is an MOU jointly signed by the banking
and insurance regulators) to allow commercial banks to take equity
Insurance product pricing interest of more than 20% in existing insurance companies is regarded
Insurance investment as the most important development in the past quarter. The top four
Cross selling domestic banks have all announced their intention to move into this
Distribution With most of the growth generated by foreign and joint venture life
companies in 2007 coming from bancassurance, the move to allow
commercial banks to form their own insurance business is predicted to
Agency have a major impact on current relationships and business levels.
At this stage, the China Insurance Regulatory Commission (“CIRC”)
Telemarketing has not yet finalized the full details on the above mentioned rules, and
Broker we will continue to report on this development over the coming months.
We hope you continue to find the newsletter interesting and informative.
Products We would particularly like to receive your feedback on how we can
improve this document over time to increase its value to you.
Personnel changes Watson Wyatt Insurance and Financial Services Practice, China
INDUSTRY STATISTICS GWP for health insurance reached companies, hospitals and policy
RMB38.4 billion, an increase of holders.
First quarter 2008 2.39%. GWP for accident
insurance reached RMB19.0 billion, Potential entrants
China’s insurance industry generated an increase of 17.4%.
gross written premium of RMB297.91 Applications for a dozen new
billion in the first quarter of 2008, an Most of the life insurance growth came insurance companies are being
increase of 51.6% as compared with from the sales of universal life and processed by the CIRC. These
the same period in 2007, according to unit-linked products. companies include Li’an Life, Guo Rui
the China Insurance Regulatory Life, Bang Cheng Life, Tian Bao Life,
Commission (“CIRC”). Of the RMB494.9 billion GWP Dekang Life, Hengtai Life, Centennial
generated by life insurance Life, as well as Zhong An Insurance
This included RMB213.06 billion for companies (which includes parts of and Zhong Jin Insurance.
life insurance, an increase of accident and health business),
62.1%, and RMB64.15 billion for universal life contributed RMB84.6 Many of these new companies will be
general insurance, an increase of billion, an increase of 113.4% jointly sponsored by State-owned and
24.6%. compared with a year ago, and private enterprises, a major departure
representing 17.1% of life GWP. from previous practices.
The CIRC also reported that in the
first quarter of 2008, health Unit-linked products generated Li’an Life, sponsored mostly by
insurance generated GWP of GWP of RMB39.4 billion, an State-owned and private
RMB15.14 billion, an increase of increase of 558.4% compared with enterprises based in Jiangsu
66.3%. GWP for accident a year ago, representing 7.9% of Province, has a registered capital
insurance reached RMB5.56 billion, life GWP. of RMB600 million.
an increase of 26.3%.
Total market share of universal life Zhong’an Insurance will have
The growth rate of life insurance is and unit-linked products was registered capital of RMB535
43 percentage points higher than a 25.0% in 2007, compared with million, and one of its major
year ago, mostly due to the 10.1% in 2006. Universal and unit- shareholders is Ningbo United.
booming of unit-linked business, linked products contributed to
which generated GWP of RMB22.5 87.3% of the overall growth of life Centennial Life will be sponsored
billion, or six times that of a year business. by Oriental Asset Management and
ago. a number of companies based in
MARKET UPDATE Dalian in the northeast. If
In the first two months of 2008, the successful, Oriental AMC will
market share of foreign and joint New entrants become the second AMC to
venture companies was 5.72%. venture into life insurance, after
down from the 8% for 2007. Taiwan Life has gained regulatory Cinda’s sponsor of Happy Life.
Foreign companies were led by approval to set up its joint venture in
AIA, Cigna-CMC and Aviva-Cofco. Xiamen, Fujiang Province. The CIRC has announced that a number of
Skandia-BSAM, which relies Chinese partner, Xiamen C&D, and commercial banks have forwarded
exclusively on unit-linked product Taiwan Life each contributed half of their applications to invest in existing
sales, dropped to 14th and 16th in the total of RMB240 million registered life insurance companies. CIRC
overall ranking of foreign and joint capital. Earlier, Taiwan Life held Chairman Wu Dingfu said that “five to
venture companies in January and negotiations with Southern Airlines and six” commercial banks will be
February. The company ranked 8th Changhong Electronics on setting up approved this year for this pilot
in gross premium in 2007. life joint ventures. It is likely that the program. (See “Regulation” for
company will have some of its back detailed policy explanations.)
Whole year 2007 office functions in Shanghai.
Bank of Communications President
Earlier, CIRC reported that in the WellPoint, the largest U.S. health Jiang Chaoliang announced that
whole year of 2007, the insurance insurer and parent company of Anthem entering insurance business is “the key
industry generated gross written Insurance Companies, has established development strategy” for the fifth
premium of RMB703.6 billion, an the Anthem Insurance Companies largest bank in China in 2008. Jiang is
increase of 25% compared with 2006. Beijing Representative Office, in its confident that the Bank of
move to establish working Communications will be among the
GWP for life insurance business relationships with Chinese insurance first batch of commercial banks to gain
reached RMB446.4 billion, an companies. The application to set up regulatory approval.
increase of 24.5% compared with the representative office was approved
the same period in 2006. by CIRC in August 2007. WellPoint ICBC also announced that it has
and Swiss Re have respectively been finished selecting its insurance partner,
GWP for general insurance stood approved to set up their own health and its investment in insurance could
at RMB199.8 billion, a year-on-year insurance consulting companies in be completed before the end of this
growth of 32.6%. China to provide third party year. The media reported that there
administration services for insurance are possibilities that ICBC and China
International Insurance Holdings headquarters from the Shanghai 50% of Fortis Asset Management,
(“CIIH”) might be working to jointly operation. whose name will be changed to Ping
control Taiping Life, with Fortis, An Fortis Investment. Ping An
Taiping’s existing shareholder, Aviva-Cofco has obtained purchased 4.18% of Fortis in
reducing its stake. approval to open Xianmen November 2007 and has since
Branch. increased its shareholding to 4.99%.
China Construction Bank has also
United Metlife has been
expressed its intention to take control Ping An Life has increased its agency
approved to set up Zhejiang
of Happy Life. Happy Life, which force from 205,437 in 2006 to 301,801
opened for business in November at the end of 2007. Agency
2007, is 55% owned by Cinda Asset Samsung Air China Life has productivity per month has also risen
Management, which in the 1990s was increased its registered capital by from RMB4,733 to RMB5,316, with 13-
formed to take over the bad loans from RMB300 million to a total of RMB500 month persistency ratio moving up
China Construction Bank. million. from 89.0% in 2006 to 90.4% in 2007.
Average number of policies sold per
Bank of China Chairman Xiao Gang Skandia-BSAM has also increased its agent has reached to 1.3.
has announced that the bank’s aim is registered capital by RMB100 million
to become a financial holding company to a total of RMB420 million. China Pacific Insurance Group
that comprises banking, fund insisted that its IPO plan in Hong Kong
management, securities and insurance. Corporate developments has not been delayed. A number of
Xiao said that the bank expects to set individual and institutional investors
up a new life insurance subsidiary or China Life has reported its 2007 gross have reportedly expressed interest in
purchase equity in an existing life premium rose 12.5% to RMB111.89 investing in the Hong Kong IPO,
insurance company in 2008. Whether billion and investment income grew by including sovereign wealth fund Abu
regulations will allow this to happen 68% to RMB78.25 billion. The Dhabi Investment. The company
remains unclear. company has grown its agency force generated RMB20.7 billion in life and
to approximately 638,000, and the total non-life gross premiums in the first two
Expansion number of bank outlets selling China months of 2008.
Life products has grown to about
There have been a number of branch 90,000. Bohai Insurance has been successful
approvals and openings for new in turning itself quickly into a national
domestic and joint venture companies China Life (Group) is reportedly in company. The company announced
in recent months, including: touch with Agricultural Bank of China that it has opened 21 branches by mid-
(“ABC”) and China Development Bank March, with 155 sub-branches and
Happy Life has been approved with the prospect of becoming a field offices. There are additional 83
to set up branches in Shanghai strategic investor in either of these two branches of various levels that are
and Anhui and Shanxi Provinces. entities. China Development Bank is being prepared. The company’s
considered as a favorite. Earlier national coverage is expected to be
Taiping Life has been approved reports suggest that China Life has completed by the end of this year.
to prepare for the setup of its
interest in taking 20% ownership of
branch in Inner Mongolia.
ABC before the latter goes for public Taikang Life has overtaken New
listing. China Life to become the fourth largest
Yingda Taihe has been
approved to establish Shanxi and life insurance company in China. In
Fujian Branches. China Life, in a clear strategic move, 2007, Taikang’s gross written premium
grew its unit-linked business by only reached RMB34.3 billion, an increase
Sunshine Life will be planning 3% in 2007, in sharp contrast with of 65%. A major growth engine has
new branches in Zhejiang, many of the major market players. been the sale of unit-linked products,
Guangdong, Shanxi, Hubei, The weighting of first year regular which generated RMB700 million
Hunan and Shandong Provinces premium stood at 92.5%. gross written premium, representing
and in the city of Chongqing. 55% of bancassurance business.
Ping An Insurance plans to inject
Huatai Life has been approved additional capital to all of its nine Taikang Life has completed its
to set up Guangxi Branch. subsidiaries in 2008, including Ping An national consolidation of underwriting
Life, Ping An Insurance, Shenzhen and claims administration, with major
Guohua Life has been approved Ping An Bank, Ping An Asset benefits in risk control, standardization
to set up Zhejiang and Beijing and efficiency. The company started
Management, Ping An Trust, and Ping
An Securities. It also plans to apply to to centralize its underwriting business
set up a mutual fund company. from November 2007.
AEGON-CNOOC has opened its
Guangdong Branch. The
company has already increased Ping An Insurance (Group) has PICC Group is moving closer to listing
its registered capital by RMB100 signed a memorandum of itself on the stock market. The
million to RMB900 million. understanding with the Fortis Group in company is reportedly conducting an
setting up partnerships in global asset internal feasibility study on the issue.
Allianz China Life has been management business. Ping An will PICC Property and Casualty is already
approved to set up a Shanghai invest Euro2.15 billion to purchase
branch, separating its
listed in the Hong Kong Stock to finish national expansion by the end REGULATORY UPDATE
Exchange. . of 2010, and aims to be among the top
10 life insurance companies in the Bank investments in
Minsheng Life expects to generate nation by that time. insurers
gross premium exceeding RMB5
billion in 2008 and to become The number of foreign non-life
China’s insurance and banking
profitable for the first time. The companies authorized to conduct
regulators, the CIRC and CBRC,
company reported that the weighting of commercial auto insurance has
published a joint Memorandum of
its regular premium business increased to eight. Aioi of Japan,
Understanding on January 22 on
represented 22.35% of its gross GroupAMA of France and Hyundai
furthering the insurance and banking
premium in 2007, and its 13-month Insurance of Korea have been recently
cooperation and cross-sector
persistency ratio reached 77%. approved for this business, joining the
regulation. Commercial banks will be
ranks of AIU, Allianz, Winterthur
allowed, on a pilot program basis, to
Ping An Life has launched “Ping An (AXA), Tokio Marine, and Mitsui
invest in existing life insurance
VIP Club” as part of its initiative to Sumitomo.
companies. The current commercial
promote customer loyalty. The
banking law does not allow banks to
company currently has more than 40 Willis Insurance Broker has been
invest more than 20% in insurance
million customers, and the VIP Club promoting its China Turbo Plan – a
companies. CIRC, in conversations
will be used as the platform to provide three-year business development,
with the media afterwards, stressed
what the company describes as “long investment and human resources plan
that the new policy only applies to
term incentive planning and value that aims to improve the company’s
banking investments in existing life
added services”. market position. Willis generated
insurance companies, and not in
income in excess of RMB90 million in
respect of banks aiming to set up new
The CIRC has published, for the first 2007, a growth of 24%. A major
life entities. However, at least one of
time, the statistics on enterprise strategic option for Willis is to
the major banks has indicated its
annuity business in 2007. The total purchase equity stakes in existing
intention to start a new insurance
assets under management for broker or agency companies. Willis
enterprise annuities by pension currently operates a 51/49 joint
companies stood at RMB8.4 billion in venture with Pudong Insurance Broker
On March 31, 2008, CIRC circulated
2007, and Ping An was the market in Shanghai.
the second draft of Administration of
leader in all three major areas: fee
Equity Ownership of Insurance
income, asset size and investment Sino-Life Insurance has moved its
Companies. This is a draft for peer
performance., with market shares at registration location from Shanghai to
review. In comparison with the earlier
57.1%, 59.3% and 63.3% respectively. Shenzhen. China Life (Overseas)
draft issued about a year ago, this
Shanghai represents 20% of China’s moved its registration location to
draft further relaxed qualification
enterprise annuity market, although Shenzhen and was granted a reward
requirements for domestic investors in
more than 80% of companies in of RMB20 million by the Shenzhen
investing in insurance company equity
Shanghai still do not have enterprise Government.
stakes, but requirements for overseas
investors remain unchanged: assets at
China Reinsurance Group has set up
above US$2 billion, three consecutive
Taiping Life produced its highest its representative office in London in a
years of profitability, long term credit
levels of net profit ever in 2007 (at major step described by the company
rating at above A. Detailed solvency
HK$1,018.06 million), with its towards becoming an international
requirements, as previously listed,
performance mainly attributable to player. China Re received an injection
have been taken out. The new
strong premium growth (at of US$4 billion in April 2007 by the
regulation also eliminated three-year
HK$16,245.25 million) and improved State-owned Central Huijin Company.
non-tradable restrictions of shares.
returns on investment assets, Its total assets are close to RMB90
The most important change is as
particularly from China’s A share billion.
follows: the previous draft stipulated
market, according to China Insurance
that a legal entity investor (except
International Holdings. Key premium Sunlife Everbright Life registered
State Council approved insurance
drivers during the year included 604% growth in new business from its
groups and insurance companies)
regular premium and unit-link premium agency channel in January 2008, with
cannot own in excess of 20% of an
sold through individual agents and gross premium reaching RMB190
"insurance company". The new draft
bancassurance. million, leading all joint venture
replaced the word "insurance
companies in the same period. The
company" with "financial institution".
Hua’an Insurance is set to expand its company’s gross premium grew by
The change is believed to permit
“chain store” concept in 2008. In 2007, 214% in 2007.
commercial banks to own more than
the company recruited 2,291 staff for
20% of an "insurance company", but
168 field offices. Hua’an regards its Tian’an Insurance has applied to set
not more than 20% of the "financial
self-owned franchise-style “chain store up its own asset management
institution" which owns an insurance
field office platform” as its major company. About 20% of its gross
differentiator. income in 2007, at RMB7.4 billion,
came from investment gains.
Huaxia Life has finalized its three year Micro-insurance
strategic plan. The company expects
CIRC is set to publish its first guideline Cross selling The number of insurance agents
on the promotion of microinsurance. reached 2.01 million at the end of 2007,
The regulator has been encouraging CIRC plans to publish new rules on an increase of 29.3% compared with
qualified life insurance companies to cross selling of life and non-life the end of 2006. This includes 1.77
partner up with banks and postal insurance products for companies not million life agents, an increase of
offices to test microinsurance pilots affiliated with the same insurance 28.4%.
across the country. group. CIRC lifted its ban on cross
selling for insurance group companies, Life insurance agents generated
Particular attention will be on and the major beneficiaries have been gross premium of RMB319.4 billion
promoting low premium protection China Life, PICC and Ping An. Ping in 2007, up 20.5% compared with
products targeting low income An is reportedly generating the most the same period last year.
population. revenue from cross selling.
Life agents generated total
The regulator will also adjust the DISTRIBUTION commissions of RMB39.5 billion in
qualifications for sideline agency 2007, with average commission per
companies in taking on Business written by insurance person of RMB22,400 per annum.
microinsurance business. intermediaries (banks and postal
offices, as well as brokers and The number of life agents working
The regulator also encourages agencies, etc.) reached RMB579.3 for independent brokers reached
local CIRC offices, insurance billion in 2007, an increase of 29.4%, approximately 60,000 in 2007, a
associations and life companies to representing 82.3% of gross written dramatic increase of 18,500 compared
conduct feasibility studies on premium for the industry. with 2006. It is believed that most of
microinsurance pricing. the increased manpower has been
Shandong Insurance Association has from existing life companies. It is also
China Life reported that it identified five major mis-selling reported, however, that independent
generated RMB1.2 billion in behaviours that have the most serious agents performed better than tied
microinsurance premium in 2007 in impact on sales compliance, including: agents in manpower growth, premium
its pilot run. growth, income growth, per capita
Failing to explain in detail the productivity (two times) and per capita
Life insurance pricing contents of insurance contracts to income (1.6 times).
policy holders, including exclusions,
CIRC is encouraging the claims settlement, grace period, A joint survey by the CIRC and LIMRA
commercialisation of life insurance and definition. of insurance agents in Beijing,
pricing and has started to run pilot Shanghai, Guangdong and Sichuan
programs for selected product Exaggerating product returns, indicated that 76% of insurance agents
categories in certain regions. especially those for participating were satisfied with their career
and investment products, without development and 74% were satisfied
A major overhaul is believed to be mentioning investment risks and with the company they work for. The
on the 2.5% minimum interest rates unpredictability. survey, which was conducted in June
for life policies, which has been in 2007 and included more than 5,600
force for nine years. A series of Confusing bancassurance products insurance agents from 20 different
interest rate hikes and inflation with bank’s financial planning insurance companies, also showed
have intensified the need for such products, with the impression that that the average annual income of
changes. customers will be able to get back insurance agents was RMB52,000, or
their money when needed. 1.89 times the average income in
China Life was approved in March these locations.
to sell its new simplified Less than truthful contents of
microinsurance policies, with brochures and other publications Bancassurance
crediting rates as high as 3.3%, in on product and investment returns
Hebei, Jiangsu and Henan by individual agents, while only The number of bank branches selling
provinces. insurance provincial branches are bancassurance products grew by a net
usually authorized to publish 2.1% to 77,149 in 2007. The number
Insurance investment product brochures. of postal offices that sell insurance
products grew by 1.9% to 18,853
CIRC is set to expand insurance Misleading policy holders to hide during the same period.
investment pilot programs in certain facts or conditions that are
infrastructure and equity investment in not insurable, or insurance agents The combined market share for banks
2008. The regulator is also conducting signing insurance contracts for and postal offices as well as travel
feasibility studies in insurance their customers, which lead to agencies, auto dealer, and railway
investment in derivatives as well as potential contract disputes or other sales offices was 31.9%.
other financial vehicles. CIRC also legal problems.
encourages domestic companies to Standard Chartered (China) has
purchase equity stakes in overseas Agency predicted that its bancassurance fee
companies. income will represent more than 30%
of its total income from financial
planning business by 2011. The bank regional arrangement for the broker medical consultation by top rated
launched bancassurance in August and it is expected to help Generali to institutions based in North America.
2007 and currently sells six further penetrate the Dongguan market.
bancassurance products from Citic- CN Insure has also signed a PERSONNEL CHANGES
Prudential and Allianz China Life. comprehensive strategic cooperative
agreement with Ping An Life. CN Corporate
China Construction Bank has started Insure reportedly promised to generate
to sell a mutual fund product RMB60 million in gross premium for Wang Yi has resigned from his
manufactured by Ping An Asset Ping An, the largest of any deal position as President and CEO of
Management Company. This is between a broker and a life company. PICC Property and Casualty. His
China’s first mutual fund product replacement is yet to be announced.
manufactured by an affiliate of a life PRODUCTS
insurance company. Its initial charge Tan Kar Hor has been appointed the
of 1% is similar to fund products China Life has launched its major unit CEO of Citic-Prudential Life Insurance.
offered by commercial banks. linked product “China Life Yufeng Unit
Linked Insurance” and has planned to Alan Wood has been appointed the
Skandia-BSAM Life has launched a target selected regions with mature CEO of China Life CMG.
high-end investment product with market acceptance. The product
minimum investment at RMB3 million. includes four investment accounts and Brandon Caneer has been appointed
Most unit-linked products in the market carries accidental insurance with to take charge of alternative
carry a minimum investment of maximum coverage that equals to distribution for AIG’s businesses in
RMB10,000. Skandia said that the 205% of account value. China Life’s Chinese mainland and Taiwan. He
individual account cash value of 6% of launch was timed at what it believes also acts as the Deputy CEO of
its current unit-linked product the near bottom of China’s equity Nanshan Life in Taiwan.
customers already exceed RMB3 market. Previously, China Life had left
million each. By the end of 2007, 21 the unit linked market to its domestic Chen Fang has taken on the role of
insurance companies were selling unit- competitors and foreign companies. CEO for Dazhong Insurance.
linked products with the total number
of investment accounts exceeding 130. Great Wall Life has launched what it Gong Zhirong has been appointed the
described as a universal health care CEO of Cathay Life.
Telemarketing product which combines critical illness
insurance with medical insurance. The Li Peng has been approved to be the
Tianping Auto Insurance has been policy covers critical illness, death and chief actuary for Samsung Air China
approved to sell auto policies through dismemberment until the policy holder Life.
telemarketing. The approval follows turns 66 years old, after which it
those by the CIRC for Ping An P&C covers both medical, critical illness as Zhao Jianxin has been approved to be
and Continent Insurance. The well as dismemberment. the chief actuary for Minsheng Life.
telemarketing operations of these
insurers are based in Shanghai. Auto Heng An Standard Life has launched a Bobby Bo has been named the chief
insurance represented 53% of non-life composite child protection plan, which actuary of Dragon Life.
insurance premium in Shanghai in covers accident, medical and
2007, or RMB12.4 billion, a growth education that could be customized to John Atherton has been appointed the
rate of 20.1% from 2006 levels. the different needs of policy holders. chief actuary for Heng An Standard
These policies also carry the features Life.
of participating as well as unit-linked
Insurance brokers products.
China Life has taken a 49% stake in a Huaxia Life’s new critical illness
newly formed insurance broker China
product has introduced the concept of
Life Safety Insurance Broker. Its
payment for second claims, which
partner is China Coal International.
covers no fewer than 22 critical
The registered capital is RMB15
illnesses. The policy covers 35
million. China Coal International is the
different critical illnesses in three broad
leading company in coal project groups, and the critical illness covered
engineering. Owning insurance
by the second claim cannot be in the
brokers is no longer new to insurance
same group as the first claim.
manufacturers. New China Life was
the first to obtain a broker license in
AIU has introduced a new health and
2003. PICC also owns three broker
accident insurance plan targeting white
licenses, in Beijing, Shanghai and collar females. The company
describes the major feature of the new
product as its low price (a monthly
CN Insure, the Nasdaq listed broker
payment of RMB11 for sum insured of
company, has reached a regional deal
RMB100,000 for a 24-year-old woman)
with Generali China Life in Dongguan,
and free long-distance access to
Guangdong Province. This is the first
Watson Wyatt’s insurance and financial services practice in China is based in Shanghai and is managed
by Michael Ross for life insurance, Verne Baker for non-life insurance and Nan Wang for distribution
Michael Ross – Head of Life Insurance Consulting, China Region
Verne Baker – Head of General Insurance Consulting, Asia Pacific
Nan Wang – Director, Distribution Practice
Watson Wyatt Consultancy (Shanghai) Ltd
11/F Floor, Kerry Center
1515 West Nanjing Road
Shanghai, 200040 China
Tel: (8621) 5298 6888
Fax: (8621) 5298 5161
Watson Wyatt is present in seven locations in Greater China, including Beijing, Shanghai, Shenzhen,
Guangzhou, Wuhan, Hong Kong and Taipei.
The Chinese Insurance Market newsletter has been prepared by Watson Wyatt for general information
purposes only and does not constitute professional advice. The information, opinions and projections
contained in this newsletter are derived from various sources and have not been independently verified by
Watson Wyatt. If you require professional advice or require any further information, please contact any of
the above named individuals. Errors and omissions excepted.