Foreign insurance companies continue to find China a tough market to operate in. Its highly regulated environment and the rising influence of domestic players are forcing foreign insurers to re-look their business models and re-examine their positions. The findings were revealed in the fourth PricewaterhouseCoopers Foreign Insurance Companies in China survey.
The 31 foreign insurers that participated in this year's survey dramatically lowered their expectations of any increase in market share for 2010, and for the next three years. Life companies expect their share of the Chinese insurance market to continue to hover at the current level of 5% in 2013, while the slice of the pie for property and casualty insurers is expected to remain at around 1% in three years time.
"Foreign insurance companies operating in China have tried in vain to gain traction and increase their market share. Established domestic insurers and the aggressive geographic expansion of the smaller insurers are giving the foreign players a run for their money. Because of the stiff competition, some foreign partners are considering diluting their shareholdings, and looking towards domesticating their operations," says Peter Whalley, PwC's Insurance Industry Leader for Hong Kong.
The foreign players also expressed concern over the direction of bancassurance as more banks enter the insurance space. While some are re-assessing their future distribution channels, others are hoping to ride the bancassurance wave by leveraging on their partnerships with the banks.
"In the post-financial crisis era, many European insurers have been forced to re-examine their China positions. Other foreign players that have been in the market long enough and have failed to generate satisfactory profits are also taking a long, hard look at the future feasibility of their relationships with the local partners," says Shu-Yen Liu, PwC's Actuarial Practice Leader for China.
Nonetheless, despite the challenges, foreign insurers are not about to quit the Chinese market. Their commitment to China remains strong, and in some cases, is increasing. "The foreign insurance companies see China as an underinsured market with huge upside potential. In fact, companies are on a hiring spree again as staff turnover are expected to return to pre-crisis levels," says Whalley.
Demand for insurance products is also forecast to increase by 2013, and projections for premium growth are optimistic. China may be a challenging market, but the overall sentiment of foreign insurers is one of cautious optimism.
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