China's Life Insurance Agencies Set to Overtake Motor in Intermediary Market

Intense market competition in the Chinese motor insurance agency sector is creating opportunities for the life insurance agency market, which is expected to overtake motor to become the biggest component of the insurance intermediary industry, according to one intermediary.

According to HuaKang Financial, the regular premium business will be "continuously bringing renewal premium income to life insurance agencies, providing higher embedded values to those companies."

"In view of the expanding market competition among domestic motor insurance agencies, life insurance agencies are increasingly becoming the 'blue ocean' [potential market] of sustainable development of insurance intermediaries," the intermediary said in a statement.

Total premium income generated from insurance intermediary channels, comprising four main sectors -- agencies, brokers, agents and concurrent insurance intermediaries like banks and post offices -- reached 587.48 billion yuan (US$86.16 billion) in the first half of 2010, up 12.32% year-on-year, accounting for 73.45% of the country's total premium income, according to the China Insurance Regulatory Commission.

In this year's first half, the Chinese insurance intermediary industry realized total business income of 46.6 billion yuan, up 1.71% year-on-year, said the regulator.

Among the total premium income, insurance agencies accounted for 18.83 billion yuan, up 22.76% year-on-year; brokers accounted for 12.79 billion yuan, up 13.61%; and reinsurance premiums generated from insurance brokers amounted to 377 million yuan.

Insurance adjusters reported adjusting losses amounting to 11.62 billion yuan, up 16.8% year-on-year, noted the CIRC.

Among insurance agencies, HuaKang Financial generated income of more than 92.97 million yuan, accounting for 3.93% of the total while maintaining its leading position in the sector.

The business income ranking of domestic insurance agencies, with combined premiums of new policies and renewal polices generated from both life and property insurance businesses, has shown that "life insurance agencies with regular premiums as core businesses have overtaken most motor insurance agencies, becoming the mainstream of the market in China," said HuaKang in a statement.

Although the CIRC has reported HuaKang's business income in the first half period as 92.97 million yuan, the actual figure was "two times higher" as the official figure had only included the company's six national licensed branches, while income of "over 200 million yuan generated from its other 16 branches and sub-branches was not included," said Lin Huaqing, marketing director of HuaKang, in a statement.

Guangzhou-based HuaKang is the first and the largest life insurance agency in China. The company earlier said it aims to increase its market share to 30% after consolidating its 17 subsidiaries, while it looks to float its shares by 2011 (BestWire, Feb. 16, 2010).

As of June 30, 2010, China had 2,538 insurance intermediary institutions, 156,000 concurrent insurance agencies and more than 3.02 million insurance sales agents, according to the CIRC.

Of the total intermediary institutions, 1,856 are insurance agencies, 381 are brokers and 301 are adjusters, accounting for 73.13%, 15.01% and 11.86% of the market, respectively.

Among the four main insurance intermediary channels, the Chinese regulator said the growth of sales agents slowed, while concurrent insurance businesses with bancassurance as a core channel has reported a strong growth trend.

Total registered capital of domestic insurance intermediary institutions reached more than 7.54 billion yuan, up 10.44% from the correspondent period of 2009; while total assets reached 10.43 billion yuan, up 5.9% year-on-year, noted the CIRC.

During the first half of this year, the CIRC said it strengthened its investigations of domestic insurance intermediaries and increased penalties for fraud cases and misconduct of management.

As at Aug. 25, the CIRC has penalized 121 executives from provincial and regional insurance regulatory bureaus. The regulator also penalized 51 insurers and 62 insurance intermediaries, and transferred 13 cases to legal authorities.