According to a recent Society of Actuaries (SOA) study, the Chinese life insurance market is on fire. In 2010, life insurance premiums in China rang in at a cool $142,792 million, representing a 28.1 percent spike in sales since 2006. In a country where talk of death is taboo, life insurance sales are growing at an impressive rate.
Moreover, the market’s youngest segment — people 25 to 34 years of age — are driving that growth. Only 17 percent of those surveyed ages 25 to 29 were not interested in life insurance, with 31 percent of that segment buying life insurance for either short-term needs or long-term coverage. For respondents ages 30-34, the interest level goes up to 64 percent purchasing life coverage.
That’s in sharp contrast to the market in the US. According to a 2013 Ernst & Young life-annuity market outlook, the average amount of money spent on life insurance in US households has dropped by half in the last decade. Most notably, younger people simply aren’t buying life insurance. Moreover, the report states that despite the premium growth keeping pace with inflation over the past 45 years, growth in the number of policies sold in that period is zero.
The reasons could be many. Wenli Yuan, senior analyst with Celent, Hong Kong, says the economy and social environment in China is driving interest in life insurance. According to Yuan, China’s increased urbanization has resulted in the increase of consumer income. Also, Yuan adds, China’s population is aging and “the social security system is not complete, so consumer’s demand for the product that can help them saving for retirement is increasing,” she says. Likewise, China’s current Medicare system, undergoing reform, and higher demand for medical insurance is increasing interest in the life market.
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There is a desire among the Chinese population to find savings vehicles. “Some life insurance products are marketed as an investment tool,” says Yuan. Treated as single-premium investment-type products, life insurance appeals to buyers.
Still, the current sales environment in China shouldn’t be interpreted to imply that life insurance holds more value in the Asian markets than in the states. Phil Richards, chairman and CEO of North Star Resource Group, Minneapolis, was an adjunct professor at Beijing University and lectured at Shanghai University for Finance and Economics. A frequent visitor to Asia, he doesn’t believe there’s a higher importance placed on life insurance, but rather a rapidly changing culture with enough expendable cash to make the market viable. Dr. Walter Zultowski agrees. Zultowski, principal at WZ Research + Consulting and lead researcher of the SOA study, says what’s happening with the country and culture, along with some significant economic growth, is driving the life insurance market. As a result, the middle class market is prospering, which he says hasn’t been the case traditionally.
Also, there’s a change in attitude toward the idea of death. No longer an off-limits subject among China’s younger population, death is now part of the sales script. With more Chinese consumers valuing the death benefit — seventy percent of those surveyed agreed that purchasing death benefit life insurance is more important now than in the past – the Chinese life insurance market becomes that much more lucrative.
That subtle change has allowed for a shift not only in how the product is viewed, but also in how it is marketed. Most life insurance policies sold in the past were smaller, savings-oriented endowment products, Zultowski says, and insurers would market the product from that perspective. Also, life insurance has been typically purchased through banks. Now, with the country’s burgeoning population of life agents (Richards estimates 3 million, including part timers), China’s life industry is more diversified in the way products are distributed.
The methods by which life insurers are appealing to younger buyers have also diversified. Yuan says that insurers are reaching the middle market via three new avenues: direct sales on websites, shopping sites equivalent to Amazon, and through online content created around consumer interests. “ Insurers are responding to wealthier population, retirement planning, health planning, and more demanding customer base,” she says.
Redirected focus benefitted
Still, the shifts in China’s culture and economy aren’t the only factor in selling success. Richards says the true success lies in how the products are being presented. He sees a difference in how even agents are recruited. “We recruit on the three I’s – impact, income, and independence. In the US, it’s impact: do you want to change for the better the lives of your fellow human beings? We’re all about widows, orphans, jobs and companies surviving the death of a key person,” he says.