For older Chinese, buying health insurance is like cursing yourself.

“If I take out insurance then something bad is going to happen to me,” is what they think, according to Alastair White, a Beijing-based partner of insurance brokerage house Abacare Group.

If a foreign insurance company makes it as far as being able to sell to the local market, it’s already doing pretty well.

Mr. White paints a daunting picture of the international insurance industry trying to sell in China.

Think of it this way: There are two kinds of health insurance providers in China.

“There are those that are authorized by the Chinese government,” Mr. White said. “Then there are those that aren’t licensed, but aren’t necessarily illegal.”

Foreign insurance brokers and other companies participating in the China market largely fall into this second category due to the regulatory environment.

Technically, foreign insurance companies in China should be selling accredited products the government has authorized. Practically, that doesn’t happen.

These companies often set up representative offices, which allows them to perform consultancy but not sell insurance, Mr. White said. They sell anyway by signing contracts with clients here and sending the paperwork to be processed further overseas.

“It’s a bit of a grey area to be honest,” Mr. White said.

Mr. White, slated as a panelist for the upcoming Small Medium & Entrepreneurial Enterprises (SMEE) conference this Friday, January 16 in Beijing (and we’re a sponsor – click here for a 40% discount ), is clearly prepared to answer some hard questions that – let’s face it – could get his own industry in trouble.

Pay attention: His insights are indicative of how difficult it can be to break into the Chinese market – both for regulatory and cultural reasons.

There are seemingly enticing reasons to tap this market.

Chinese companies are selling insurance to Chinese people, and they aren’t doing a great job of it. Under some life insurance plans, a Chinese client who dies in an airline crash may be insured for up to 1.5 million yuan. The same client would only be insured up to 500,000 yuan in the event of a motor vehicle-related death.

“The chance of a Chinese person dying in an airline crash is pretty minimal because they don’t tend to fly anyway,” Mr. White said - not to mention the infrequency of airline-related deaths compared to car crashes.

Customer service also is lacking – to put it mildly.

Getting in and competing with these Chinese companies is a difficult process, though.

Mr. Alastair noted his own company is operating under several licenses in China, and the registration paperwork continues. The company is able to broker a variety of insurance plans to expatriates, but relatively few to Chinese. There are further ways to get around the selling of certain plans, but it often involves bringing local insurance companies in on the action, which then get a slice of the commission.

Further, while it can be difficult to sell to Chinese, it may be equally stressful trying to convince a U.K. expatriate to buy insurance in China. The English aren’t brought up with the same urgency to buy and have health insurance as Americans because they are covered automatically by a national health system. Convincing them to pay for insurance in China when they’re not used to doing so at home can prove troublesome.

Other expatriates are playing it “fast and loose” in China, aren’t paid well, and don’t want to pay for coverage. Care at Chinese hospitals can be inexpensive so long as you don’t end up like Christopher Reeve.

Given the difficulties of quasi-legal office setup and overcoming cultural barriers to selling both to Chinese and expatriate markets in China, this industry isn’t particularly ripe for new investment.

“I haven’t noticed a big influx of competitors,” Mr. White said. “It’s quite expensive and complicated to come into the market. Some do sell over here - but [often] on the back of the Internet.”

    Channel: Local Wisdom     |