FPA in China: 9 Answers on the Role of Insurance in China

Insurance in all its forms and its role in the lives of Chinese are quite fascinating. To get a better understanding on how the Chinese see the role of Insurance, here is what I learned in discussions with our Chinese financial planner counterparts during the FPA in China tour (see more coverage on AdvisorOne’s FPA in China home page).

1. How have insurance companies that are home based outside of China found the business climate in China? 
   The opportunities here are very good; however, there is a go-slow approach on behalf of the Chinese government. The growth in this sector has to be managed so the people don’t get taken advantage of. More regulations will be needed in the future to protect the people.
2. What type of insurance coverage is the most popular?  
   Homeowner’s insurance is the number one Insurance product sold in China as the Chinese are very big purchasers of real estate.
3. How are Insurance products distributed to the Chinese?
   Mainly through the banking Industry. The bank is paid the commission and the bank officer is paid a salary with production bonus opportunities.
4. Do the Chinese have access to annuity products?
   Yes they do have access to annuities, and as an incentive to purchase these products, which in turn creates more available dollars for the society, the annuities grow tax free. There is talk of the government taxing the growth in the future.
5. Do disability insurance and long term care insurance (LTC) products exist in China?
   Disability plans exist but on a very limited benefit payout. Usually it is only for 3 to 6 months of benefits and then nothing. As for LTC, there are currently no products available. However, the country is taking a good look at this product as a way to deal with the high cost of caring for the aging population.
6. Is life insurance a product that is selling very well?
   The answer is yes, there are sales of life insurance, but there is some reluctance by the population to discuss the
   death/dying issue, so the bank sales officers do get push back on this issue.
7. What about elder care? Do Chinese families hire outside help to care for their elders?
   Some have, but others still take their parents into their homes and care for them. Some families, who have wealth, choose to just pay money to have outside people provide the caregiver service. This is why long term care insurance (LTC) has much potential in China.
8. With the ageing of the population, what are the top disease issues that this age group currently faces?
   There is a huge rise in diabetes, heart disease, obesity and cancer. The almost 350 million people who smoke are beginning to cause high medical services utilization.
9. Is there a safety net like the United States Social Security system in China, and if not, how are the Chinese preparing for retirement?
   There is no social security system in China, which is one of the main reasons why the Chinese save on average 30% of their income. The average retirement age is 50 to 55 for female workers and 55 to 60 for male workers. Management workers in private companies retire at age 60. Life expectancy is now about age 73 for males and age 77 for females.

China is awakening to a good deal of the same financial and personal family issues that we in the U.S. are facing. As this society looks for solutions, they are looking at the Insurance Industry for support. That means tremendous opportunity to meet the need for financial planning and products.