President Xi Jinping recently addressed the Boao Forum for Asia with a message focused on opening the economy of China for further involvement with foreign businesses. The most important partner will be the United States, and despite recent tensions over trade tariffs, President Xi’s announcement is exciting because it signals greater openness and a desire for foreign companies to invest in China.
This news is important for foreign companies in the insurance industry, as foreign insurers are now welcome in China. This is an important development in China and Asia generally, because the insurance business is globally undergoing a rapid digital transformation. In China, we are seeing rapid industrial development because of this combination of foreign competition and digital change running in parallel.
As Reuters has documented, there is a further dimension to changes in the insurance industry in China. Not only are foreign companies now welcome, but many customers trust foreign insurers more than some local companies because of a regulatory crackdown on investment products that were marketed locally as insurance.
The current rules limit foreign holdings in Chinese insurance joint ventures to 50 percent. AIA is the only wholly owned foreign insurance firm in China as its operations were set up before the restrictions were introduced. The government in Beijing announced in 2017 that they would lift the ownership cap to 51 percent in 2020 and remove the limit completely in 2022, which would allow for further expansion.
Foreign insurers are already gearing up for the expected growth in business. In 2014, AIA had 15,000 insurance sales agents in China and now the figure is over 35,000. Most other foreign insurers are seeing similar growth with an expectation that the foreign insurance sector will increase headcount by around 40 percent this year alone.
The opportunity for foreign insurance companies to explore China before 2022 is clear:
- China wants foreign insurance companies to improve the way the insurance business works by increasing competition and letting customers choose which company (domestic or foreign) they want to use
- Digital disruption is changing the entire insurance industry and redefining customer expectations
- Recent regulatory issues with domestic insurers in China have made consumers feel greater trust for foreign brands
However, domestic brands are not sitting back and watching as the foreign brands take over. The largest local insurance giant, Ping An, is already exploring artificial intelligence, blockchain, and developing new insurance and banking solutions using Financial Technologies (FinTech). The foreign competition is now welcome, but they will need to present value, great customer service, and innovation to succeed in China.
Deep expertise in the insurance business will be essential to succeed in China, but also a knowledge of how to deliver a customer experience that can beat what the domestic companies offer and can keep up with FinTech innovation is also vital.
Let me know what you think about the foreign expansion of the insurance business in China by leaving a comment here, or get in touch with me directly via my LinkedIn profile if you would like to talk about designing CX for insurance companies in China.