Foreign Capital Encouraged to Establish Insurance Agency

Foreign capital is encouraged to establish large insurance agencies and insurance sales firms in China, according to proposals the China Insurance Regulatory Commission (CIRC), the top Chinese insurance regulator, released on the reform and perfection of insurance salespersons' management mechanism recently.

Foreign capital actually has been allowed to buy into insurance agencies in the market for a long period of time and compared to insurance agencies, it seems to show more interest in buying into insurance brokers there. "There are not so many differences between the operation scopes of insurance agencies and insurance brokers in the country and the major reason why it prefers to buy into insurance brokers should be that the CIRC has worked out a list of clear standards for it to buy into the latter," said an industry observer. "With the release of the aforesaid proposals, it will cast eye on insurance agencies gradually. But considering its prudential attitude on the field, there is little possibility for it to establish insurance agencies within a short period of time."

In addition, insurers in the market are encouraged to establish exclusive insurance agencies and insurance sales firms. That is to say through inking an exclusive contract, an insurer let a selected insurance agency become its exclusive insurance agency. Besides formal labor contract, the insurance agency should provide its employees with base salary and social security fund.

However, insurers in the market seem to show little enthusiasm on the proposal. Ping An Life Insurance Company of China, Ltd. said in an interview that it had not considered establishing such an institution or making the existing agents its formal employees. Sheng Ruisheng, spokesman for Ping An Insurance (Group) Company of China, Ltd. (SEHK: 601318 and SEHK: 2318), reiterated later that Ping An Life's agent team operated well, so there was no need for it to consider the problem.

Actually a pilot on exclusive insurance agencies was launched by the CIRC as early as 2004 and in July that year, New China Life Insurance Co., Ltd. established two such institutions and made over 1,800 insurance agents formal employees of the latter in the meantime. However, the two insurance agencies perform not well and under such an environment, other insurers keep a more prudential attitude toward the issue.

"As long as large insurers in the country take the lead, the small- and medium-sized ones will take the risk to establish exclusive insurance agencies," added the industry observer.