[The Future of Insurance Seen from China] Vast Chinese Non-Life Insurance Market, Find the 'Niche' Between High Barriers

Explosive Annual Growth in Chinese Market
Foreign Firms Hold Only 1% Share
Attention to Detail Key in Whale Battles
Samsung, KB, Hyundai Compete with Services

[Beijing, Nanjing, Shanghai (China)=Asia Economy Reporter Park Ji-hwan] China resembles a massive construction site. Wherever you go in major Chinese cities like Beijing, Nanjing, and Shanghai, skyscrapers over 60 to 70 floors rise like mushrooms after rain. In the empty lots between them, ultra-high-rise buildings under construction are preparing to showcase their grandeur. This indicates the vast potential for development.

The insurance industry is no different. China's insurance market has shown explosive growth every year. The market size, which was 3.0959 trillion yuan (515.4674 trillion KRW) in 2016, grew by 22.8% to 3.8017 trillion yuan (632.9831 trillion KRW) in 2018. Last year, as of November cumulative, premium income reached 3.9621 trillion yuan (660 trillion KRW), making it the second largest market in the world after the United States. The non-life insurance market also surpassed 1 trillion yuan (166.5 trillion KRW) for the first time in 2017 and currently stands at 1.18 trillion yuan (approximately 200 trillion KRW).

China is still considered a market with immense growth potential. Looking at the insurance penetration rate, which is the total premium income relative to gross domestic product (GDP), China stands at 3.7%, much lower than the global average of 6.3%. This is incomparable to the saturated domestic insurance market, which has already exceeded 10%. This means there is still a large demand for insurance subscriptions.

In China's non-life insurance industry, the presence of domestic companies as well as foreign insurers is very weak. Among a total of 88 non-life insurers, the market share of 22 foreign companies remains in the 1% range. Although foreign insurers account for 25% of the number of companies, their sales proportion is far from sufficient. Officials from foreign non-life insurers operating in China explained the reasons for their struggles, saying, "China is a huge and diverse market with 1.3 billion people and many opportunities, but the pace of change is fast and competition is fierce. Also, variables that follow government directions are significant."

Domestic insurers such as Samsung Fire & Marine Insurance, Hyundai Marine & Fire Insurance, and KB Insurance, which have entered the Chinese market, also faced difficulties due to invisible regulations by Chinese authorities aimed at controlling foreign insurers in the early stages of their entry. They also experienced running around extensively to find 17 key guanxi (關係, personal connections) unique to China to overcome these challenges.

The biggest difficulty cited is the sales methods of local Chinese companies. A representative from a domestic insurer's Chinese branch said, "Unlike us, the Chinese insurance market has relatively low loss ratios but extremely high commissions. Commissions can reach 40-50% of premiums, which foreign companies cannot match, but Chinese companies engage in 'cutting their own flesh' low-rate competition to secure market share."

Above all, the fact that the top three companies?People's Insurance Company of China (PICC), Ping An Insurance, and Pacific Insurance?hold two-thirds of the market, and Chinese companies occupy over 90% of the market share, is also a factor making it difficult for foreign financial firms to establish themselves. Although it is difficult to change the atmosphere instantly, domestic insurers are actively making moves to assert their presence. The key is niche markets. Since fighting like a giant dinosaur is like 'throwing eggs at rocks,' the strategy is to target areas that large insurers overlook with meticulousness as a weapon.

The most notable is Samsung Fire & Marine Insurance. Samsung Fire, which was the first Korean non-life insurer to enter the Chinese market in 1995, is focusing on expanding automobile insurance. While its main customers remain Korean companies, it continues efforts to increase the proportion of local customers. Through direct sales, Samsung Fire achieved a 1% market share in the Shanghai automobile insurance market. Gil Kyung-seop, head of Samsung Fire's China branch, emphasized, "By analyzing customer complaint types of Chinese insurers and proactively correcting them, we are on the verge of achieving 60 billion KRW in sales in the 4 trillion KRW Shanghai automobile insurance market."

KB Insurance shines in customer service management. This aligns with the Chinese financial authorities' shift from growth-focused strategies to qualitative management. KB Insurance's China branch received an 'AA' rating in the 2018 customer service evaluation conducted by the China Banking and Insurance Regulatory Commission. This is the only case among foreign insurers operating in China. Across the entire Chinese non-life insurance industry, only six companies have received the 'AA' rating. Kim Hyun, head of KB Insurance's China branch, explained, "Across the Chinese industry, the wind of change is blowing from speed to quality. The authorities are emphasizing consumer protection and overall social safety management."

Hyundai Marine & Fire Insurance's China branch is focusing on expanding its user base through platforms. It is increasing sales channels by linking personal insurance products such as travel insurance, leisure insurance, and aviation accident insurance with mobile apps in China and through its own and third-party affiliate channel platforms like company websites. As a result, online sales revenue increased by 69% year-on-year last year. Kim Tae-hoon, head of Hyundai Marine & Fire Insurance's China branch, said, "Platform-linked sales through WeChat, China's equivalent of KakaoTalk, have started to show results by enabling local Chinese to subscribe to insurance."

This content was produced with the assistance of AI translation services.