When Zhang Xixi, a 25-year-old staffer at an online financial company in China’s southern province of Guangdong, decided last year to buy personal insurance for the first time, he was swamped with options. Local insurers rushed to offer him products with attractive financial returns. In the end, he decided on a simpler, “more reliable” product sold by the unit of a U.S. life insurer.
Customers like Zhang are helping foreign insurers quickly gain market share in China, aided by a regulatory crackdown on short-term investments packaged as insurance that has hurt many of their local rivals.
The growth of China’s middle class and their rising wages have meant more people are looking for insurance, said Asia-focused AIA’s regional chief executive, John Cai, who leads the company in China and some Southeast Asian markets.
“We have the differentiated strategy by focussing on selling protection products ... and we reaped the benefit of that,” he said, referring to a 60 percent jump last year in the Hong Kong-based company’s value of new business in China, up from a growth rate of 54 percent in 2016. Foreign insurers, including AIA Group, Aviva and Prudential have been in China for decades, but their collective market share is still below 10 percent as a result of regulatory restrictions and limited awareness about insurance as coverage rather than an investment.
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.
Beijing said last year it planned to lift the ownership cap to 51 percent for foreign insurance joint ventures in 2020 and remove the limit completely two years later, which would allow for further expansion.
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