China Opens Auto Insurance Market To Foreign Underwriters
Friday’s Post 11.25.11 – The chairman of the Insurance Association of China says that China is most likely to open up its auto insurance market to foreign companies come next year. China is the world’s largest auto market and now allows mandatory auto insurance from its own insurance carriers. Chinese insurers including the PICC Property and Casualty Company, Ping , an auto insurer, among others, dominate the 200 billion Yen auto insurance market, which translates to $31.5 billion american dollars. Insurance regulators would open up the market as a way of boosting competition in the region. At a business event in Taipei, Jin Jianqiang mentioned to Reuters in an aside that foreign firms are only allowed to sell commercial car insurance, and that “we want to make it possible for them to do both commercial and mandatory insurance” similar to local auto insurance carriers. Jianqiang also mentioned that there is a good chance to also include insurance companies from nearby Taiwan as well. The introduction of foreign insurance providers in China offering mandatory coverage stands to improve competition essentially due to the insurance buying habits of car owners, who tend to buy both mandatory and commercial insurance from one provider. Foreign insurers may therefore compete with Chinese carriers more effectively in selling their policies. In China, commercial car insurance policies can cover various kinds of risks for the policyholder, but it is not compulsory to buy. Car owners looking for more coverage above their mandatory policy seek out commercial auto insurance carriers, or look for insurance companies that offer both under one roof. Some analysts, however, say that such changes would not have a significant impact on the Chinese insurance industry since there is already an established sales network and after sale services used by China’s own carriers.
Zeng Sufen, an analyst at Industrial Securities Co., says that there may not be any major impact in the short-term should China open the insurance market. Zeng also stated that “it takes time for foreign insurers to steal market share from big players”, who in this case are PICC and Ping An. As of now, there are 19 foreign insurers operating in China offering property and casualty insurance. These include RSA Insurance Group, Tokio Marine & Nichido Fire Insurance Company. Foreign insurers recorded over 4 billion Yuan, an equivalent of $675 million, in total premiums in the year 2010. This translated to only 1% of the total premiums collected by the 34 Chinese insurers. The move to open up the Chinese car insurance industry may be motivated by the losses that Chinese car insurers have made due to the high cost of selling mandatory policies, as reported by Chinese media.