Recognizing the Current Market Environment our Clients Operate in to Become Trusted Advisors

October 5, 2015

Insurance is generally considered a mature industry in the west. However, in China it is a growing sector spurred on by rising household incomes and China’s internet Boom. Within the past two years, some privately held Chinese insurers have started to aggressively pursue foreign investments. Business model innovation has also led to the emergence of new venture-backed insurers. This dynamic market environment presents unique challenges and opportunities for foreign and local insurers operating in China.

We tend to think of the insurance industry as being highly regulated, carefully making gradual investments in safe and low-yielding assets. However, a lesser-known Chinese insurer that was founded only in 2004 recently acquired Hilton’s Waldolf Astoria New York, 100% equity of Dutch insurer VIVAT, Belgium’s 100-year-old insurer FIDEA, and Delta Lloyd Bank. Compared to two decades ago when the insurance markets were extremely restricted in China, what we see today speaks volumes about how the market environment has changed and the scale of opportunities made available.

Meanwhile, successful IPOs of China’s internet companies have inspired new business models and product innovations in the insurance sector. Backed by two internet giants (Alibaba Holding Group and Tencent), China’s first online insurer was established in 2013 and has promised to revamp the entire insurance industry. Other insurers are also leveraging the rising popularity of e-commerce among local consumers by providing innovative insurance solutions. For example, one local insurer has partnered with Taobao.com (China’s eBay) and introduced “Moon insurance” for the traditional Mid-Autumn Holiday. With Moon Insurance, policy holders pay a premium and receive a payout in case local weather conditions obscure the moon from view.

Understanding today’s dynamic market environment in China is particularly critical for foreign insurers or mid-sized domestic insurers who may lack the capacity to compete in capital expenditure or technology. For such companies, lean operations are a way to improve their bottom line and stay competitive. Recognizing the current market environment our clients operate in is an essential part of being their trusted advisors.

By: Ran Liu