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China Insurance ready to expand opening



I.the insurance industry is the pioneer of financial industry opening

When entering the WTO, the insurance industry is an open, open depth of the financial sector, by the end of the transition period of 2004, in addition to foreign investment in the life insurance companies not more than 50%, foreign-owned insurance companies can not operate part of the policy of insurance, other restrictions on the general release. So far, the insurance industry is still the most open in the financial sector. In 2017, foreign banks accounted for less than 2% of the market, while the market share of foreign insurance companies was 5.9% and total assets accounted for 6.1%.

Most of the world's top 500 insurers have entered the Chinese market. The openness of the insurance industry is embodied not only in market share, but also in the national treatment of shareholding and operation. In the banking sector, a single offshore financial institution holding a Chinese financial institution shall not exceed 20%, and the proportion of the foreign shareholding of the same Chinese bank shall not exceed 25%, which is much higher than the policy barriers of the insurance industry.
At the same time, in the business, China's current restrictions on foreign banks are still more, including the establishment of network conditions, business scope restrictions, operating procedures and so on, and the insurance industry has basically achieved national treatment.
In the process of opening to the outside, the advanced management experience of foreign insurance companies has been widely introduced in China's insurance industry, personal agents, bank insurance, telephone sales and other models have been learning, for the industry to become bigger and stronger to provide an important support.

2. International comparison shows that China's insurance industry has been opening to the outside world has achieved good results 

Opening brings progress, our open door will open more and more, and economic theory points out that openness is also a double-edged sword. Economists such as Gonner and Hechman point out that in an open economy, developing countries will have both the echo effect and the diffusion effect, which will attract the production factors of slower developing countries and widen the economic gap, while the latter will promote the slower developing countries. Under the spontaneous action of market mechanism, the echo effect will be higher than the diffusion effect, and the gap between countries will continue to increase.
Therefore, it is necessary for China to emphasize the overall planning, scientific residents′demands opening-up strategy, weaken the echo effect and enhance the diffusion effect. The United States, Singapore and other countries in the financial industry in the process of openness is to adhere to the "open protectionism" principle, pay attention to the balance between openness and protection. In the environment of the increasing assets ratio of foreign banks in the United States, the Law on strengthening supervision of foreign banks was promulgated in 1991, and the foreign banks were strictly supervised. The United States Patriot Act was enacted in 2001 to integrate financial services into the economic sectors of the country's critical infrastructure.
The foreign Investment and National Security Act was adopted in 2007 to expand the key areas of national security, and in April 2008 stricter "regulations on mergers and acquisitions of foreigners" were introduced, and the security firewalls in the financial industry were built up. The opening up of the financial sector in Argentina and Japan has more negative overtones, Argentina accelerated financial liberalisation in the late 90, when foreign capital had controlled 52% of Argentine banks in 1997, leading to a weakening of Argentina's grip on the financial sector, followed by a financial crisis in Argentina and a social unrest that led to economic turmoil. Japan began financial liberalisation in the late 80, after signing the Plaza agreement, the bubble quickly expanded and burst into a "lost decade", after Japan began to open up the financial sector in the 90, the implementation of the "Big Bang" reform, while strengthening financial regulation, but under the macroeconomic pressure, the financial system innovation has limited effect,
Japan's financial institutions have been bankrupt and the tide of restructuring, Japan's insurance industry, recovery and adjustment is also more difficult.
The experience of Japan and Argentina shows that passive and unbalanced open mode will bring negative impact on macro-economy, and financial opening needs to be matched with economic development stage, and strengthen financial supervision in parallel, grasp the rhythm and initiative of reform and opening-up, and ensure the stability and security of financial system. Recalling the 17-year history since its entry into WTO, China's insurance industry, as the pioneer of opening to the outside, with a limited share price, in exchange for advanced management technology and rapid growth of the industry, for our country in the open trial and error, exploration experience, adjustment policy provides a valuable space, It also proves that China's financial subject has the ability to absorb international advanced experience and transform into its own productivity, which can be regarded as the successful model of China's opening-up. From this perspective, the opening of the insurance industry has far-reaching impact on the development of the whole financial industry and the open development of the real economy.

3. The impact of foreign insurance on the market why not imagine so big 

As can be seen from the figure below, although the foreign insurance companies in the market share of a small improvement, but benefited from the overall development of China's insurance market, in absolute terms to achieve rapid growth. 2017 its premium scale is 6.3 times times 2005, the annual compound growth rate reached 16.5%, far higher than the developed countries insurance market growth.
Foreign insurance companies have not only promoted the supply of insurance market in China, but also shared the development dividend of the emerging insurance market. However, the competitive pressure of foreign insurance companies is limited, not only the share is stagnant, the profit is also heavy, especially in the insurance industry performance more obvious. 2017, 21 foreign-owned insurance companies have 10 losses, 21 companies overall loss of 103 million.
The reasons behind its operating pressure can be summed up in the following points: First, its sales and service network is relatively inadequate, restricting the development of the main business. Foreign banks were also faced with the problem of serious shortages, but through high-end personal business to make up for a certain gap.
But when the foreign insurance company enters, our country populace's understanding to the insurance is not sufficient, the high-end demand is difficult to develop, the short term cannot find the breach. Second, the Chinese market is not deep understanding.
Foreign shareholders are generally good at risk control and sound management, but the Chinese consumption habits, popular customs and so do not understand, the Western business model can not be copied in the Chinese market, failed to keep up with the "Happy Rodeo" rhythm. Third, the operation of the concept of the lack of running-in.
There are some differences between the management idea and the managerial style of the foreign shareholder and the Chinese shareholder, especially in some personal insurance joint ventures, the shareholding ratio of Chinese and foreign shareholders is 55 open, which is the worst share structure, which leads to more internal friction and less efficiency. Four is the level of some foreign insurance companies, affecting the market reaction speed.
For example, some business decisions need to be audited through the Asia-Pacific headquarters, head office and even parent company, which can easily miss market opportunities. Five is the scale effect has not yet played. Insurance is an industry with obvious scale effect, the scale of foreign insurance companies is difficult to expand for a long time, which brings the profit pressure directly.
2014-2015, the history of insurance, the United States and Asian insurance companies announced the withdrawal of auto insurance business, become the epitome of the burden of foreign car insurance.
4. International data show that the insurance industry in China is still in its infancy, and the future foreign investment will expand vigorously 

Although the foreign insurance company encounters the bottleneck in our country, but will not give up China this huge potential market. China's insurance depth is currently about 4.3%, about half to three-fifths of the developed countries, the insurance density is only one-tenth or even lower in developed countries.
Overall, China's insurance market is still in the initial stage. According to the global data, with the increase of GDP per capita, the depth of insurance and the density of insurance show an S-shaped development curve, which coincides with the theory of industry life cycle.
At a time when GDP per capita reaches $20,000 trillion to $30,000 trillion, the industry is growing, and the depth and density of insurance will accelerate. China is currently at the bottom of this s-shaped curve, in the industry life cycle is immature period, the insurance penetration rate is still climbing slowly. On the one hand, it shows that there is still a large amount of insurance demand not released, on the other hand, our insurance industry needs to upgrade the insurance supply continuously to meet the growing insurance demand of the people.
2017 China's GDP per capita just over 8800 U.S. dollars, growth rate of 6.3%, if according to this growth forecast, in 2030, China's per capita GDP will reach about 20,000 U.S. dollars, then will enter the growth period, the insurance penetration rate will accelerate the promotion. After the trade war, China's financial sector opened up to speed up implementation, has been from the United Kingdom, Japan, Singapore's commercial banks and the French and German insurance agencies expressed the intention, but did not come from the United States insurance agencies. The United States is still the world's largest insurance market, but in the current trend, the future of China's insurance market beyond the United States is not impossible, the process will produce a trillion-dollar level of increase.
The lack of an American presence in the first batch of applicants is hard to conclude, but if the US insurance industry loses its chance to further open up the Chinese market, the price is enormous.
The opening up of the insurance industry is not only the problem of the trade itself, but also the formulation and consideration of the national strategy, insurance, as a pioneer of maneuvers in the international scope of our country, will certainly play a more important role in the future.

5. The insurance industry is ready to "bring in" and speed up "going out" 

With the deepening of the opening of the insurance industry, the shackles of foreign capital will be gradually solved, which brings more challenges, but China's insurance industry and the accession to the WTO are not the same, ready for full opening.
In the business philosophy, operation mode, technology application, brand impact, customer maintenance and so on, the local insurance companies have a competitive edge with foreign investors, foreign investors want to further breakthrough in the Red Sea market and local companies are not the best, more need to find and explore the blue sea market. While forcing local insurance companies to innovate by increasing the competitive pressure, the comprehensive opening of insurance will also help to solve the problem of improving the supply capacity of insurance. For example, the higher the level of economic development generally, the higher the rate of insurance penetration, but in the forefront of China's economy in Jiangsu, Shandong, Zhejiang and other fields, its insurance depth is not as good as in Shaanxi, Xinjiang, Gansu, Ningxia and other fields, to a certain extent show that the traditional insurance supply can not meet the economic development of new insurance needs.

As the opening continues to deepen, the industry will encourage market innovation and development, enhance the insurance supply capacity and enlarge the insurance market. The bigger challenge for local insurers is to "go out". At present the insurance industry "goes out" the degree is still relatively not high, mainly follows the internationalization rhythm of the underwriting enterprise, provides the corresponding insurance service. Compared with Allianz, Axa, AIG and other insurance groups with global service network and large-scale overseas income, the internationalization of our insurance subject is far from enough, exposing the short board of global insurance supply ability.
This intensified opening to the outside world also enables our insurance industry to experience the sense of participating in global competition better. The overseas expansion of the international insurance giant often has a history of decades or even centuries, for example, Allianz opened an overseas branch in London in 1893 and, by the end of 1998, set up an Allianz Volkswagen life insurance Company in China, having spent 105 years in the middle. Therefore, the insurance industry "go out" also need long-term cultivation, "all the way" and other national strategies for the insurance enterprises to accelerate the "go out" to provide an unprecedented good opportunity, China's insurance industry needs to adopt a diversified approach to establish a global service network, both for "going out" of Chinese enterprises to provide personalized
We should also explore the establishment and acquisition of overseas entities to provide a comparative advantage of insurance services for enterprises and people in different countries. From the perspective of history, the development of the insurance industry represents the growth of the national strength to a great extent. China's National insurance industry from the hard to start in the fire, to learn the international insurance business technology, and then open the door to compete bravely, behind the Chinese nation's great rejuvenation of the process.
With the development of new pattern construction, China's insurance industry will continue to innovate, steadily to the world, expand the discourse power in the global insurance market, and escort our country to participate in international economic cooperation and competition. 

Source: Tiger Finance 2018-06-16

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