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New opportunities for foreign insurance companies in China under the open policy From Deloitte Consulting

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As China further relaxes the access conditions for foreign-funded enterprises in the insurance industry, the competition pattern of China’s insurance market is changing. In 2019, the premium income of foreign-funded / Sino foreign joint venture insurance companies in China increased by 29.9% year on year, more than twice the growth rate of Chinese funded insurance companies (12.2%). The overall market share of foreign / joint venture insurance companies also increased by one percentage point year on year, reaching 7.2%.

Deloitte China today released the white paper “new opportunities for foreign insurance companies in China under the open policy”, which deeply analyzes and discusses the huge growth potential of China’s insurance market.

The new policy of opening to the outside world includes: no longer requiring foreign-funded insurance companies to enter the Chinese market to operate for more than 30 years; The restrictions on the proportion of foreign shares held by joint venture insurance companies were cancelled, and foreign insurance companies were allowed to hold 100 shares % Holding shares; Delete the management rules only for foreign-funded insurance enterprises, and adopt unified regulatory provisions.

Huang Yixuan, managing partner of Deloitte China insurance industry, said: “with the implementation of loose access policy, the market share of foreign insurance companies is expected to further increase. The entry of foreign-funded insurance companies into the Chinese market will enable domestic insurance companies to better learn from the market practice of international excellent insurance companies, further shape their advantages from the aspects of corporate governance, risk pricing and investment management, and narrow the gap with mature markets. “

The white paper points out that foreign-funded insurance companies have long faced two major constraints in carrying out business in China. First of all, foreign insurance companies need to meet a series of requirements before their insurance license applications can be accepted. It may take several years from the submission of the application to the final approval. After obtaining the insurance license, foreign insurance companies need to meet the regional regulatory requirements to carry out business in different regions of China. If you want to do business in more than 10 provinces and cities, you need at least 3 years – Five years to prepare. Secondly, for foreign-funded insurance companies that have not yet carried out business or established cooperative relationship in the Chinese market, if they want to build a direct sales and agent network covering multiple provinces and cities, it needs 3 years – Five years or even longer construction cycle and a large number of early investment.

Since the promulgation of the new deal, many foreign insurance companies have tried to become the main controlling party by increasing their shares in the existing joint ventures. In addition, some foreign-funded insurance companies establish wholly foreign-owned or foreign holding insurance institutions through acquisition, joint venture and strategic cooperation. Although it is still early to assess the impact of the new deal on the application and approval of insurance license, 15 of the 36 important issues approved by the CIRC in 2019 are related to foreign-funded insurance companies.

Chen Shangli, chief partner of Deloitte China financial services financial consulting, said: “under the new policy of opening up, foreign insurance companies will have the opportunity to reconsider their business model in China. How to grasp the new policy dividend should be considered by many foreign insurance companies. At the same time, it is worth noting that domestic insurance companies often have more complex ownership structure. This increases the difficulty of acquisition and requires the acquirer to carry out consultation and due diligence with shareholders of all parties as soon as possible. “

Chen Shangli added: “through joint venture / cooperation with China’s excellent insurance technology companies, foreign insurance companies can quickly obtain millions or even tens of millions of customer data, deeply understand customer needs, develop customized products and carry out precision marketing.”

Meanwhile, novel coronavirus pneumonia affected the sales of online insurance. The epidemic is accelerating the transformation of the business model of traditional insurance companies, which will promote more cooperation between foreign insurance companies and technology platforms.

Huang Yixuan concluded: “I believe that the next three to five years will be a critical period for foreign-funded insurance companies to enter China. It is not only the promulgation and implementation of the new deal, but also many small and medium-sized insurance companies are facing operational pressure to seek new investment and business breakthroughs, which will bring more market opportunities to foreign-funded insurance companies.”

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