New Directions for China's Life Insurance Industry, Part 2

June 2024

In the past 30 years, China’s life insurance industry has experienced what most would describe as the golden age, with a compound annual growth rate (CAGR) soaring as high as 37 percent. Then, hard times hit, and the industry slowed and plummeted to a negative growth rate of -0.3 percent in 2021. The industry has been working to recover ever since.

Part 1 of this article, published last month, covered where the industry has been and where it is today. In this month’s article conclusion, we discuss the direction the industry is heading and what it will take to succeed.

One thing life insurance leaders agree on is that the industry must face the challenge of transforming the distribution channel and identify and introduce a new growth model.  

From Product Sales to Customer Experts

As current industry leaders in China work to transform the life insurance industry from high-speed development to high-quality development, they understand that the future of the agent channel is specialization and professionalism, and agents should realize the transition from "product-oriented" to "customer need-based" as soon as possible.

The new generation of agents is required to have four core competencies:

• Sales aptitude. The ability to successfully sell insurance products to potential customers.
• Customer management ability. The competence to establish and maintain long-term cooperative relationships with customers.
• Professionalism. Deep understanding of insurance, market dynamics, product information and regulation to help consumers better choose insurance products that suit their needs.
• Digital tools proficiency. Skilled use of various digital tools, such as artificial intelligence, big data analytics, etc., to improve the efficiency of insurance sales and customer management.

At the same time, life insurance companies should design products that effectively promote engagement between them and end customers. A new set of efficient, transparent and highly matched product and service models needs to be formed. Through omnichannel, personalized communication services and accurate customer demand prediction, life insurance companies can achieve customer resonance, fulfill consumer needs and ultimately provide services beyond customer expectations.

Life insurance companies also are working to establish powerful data analysis and content operation platforms to support agents’ sales and customer management efforts. Through the data analysis platform, agents can obtain targeted customer sales strategies and referral leads. At the same time, agents can easily push all kinds of information through the content operation platform to improve customer experiences.

Providing comprehensive training and support to field advisors is another area of focus for life insurance companies in China, helping advisors build a variety of core skills, including sales, customer management and digital application proficiency.

Furthermore, life insurers are continuously innovating their product portfolio, developing new insurance products and services to provide customers with more diversified choices to meet their individual needs.

Bancassurance Channels

As opposed to the mature banking-insurance market in the world, Chinese banks and insurance companies generally adopt a cooperation model. Only a few bank-insurance companies have established a long-term strategic cooperation relationship. The strategic agreements between the two parties are often just a formality, with unclear expressions of their respective rights and obligations, and lack of enforcement-binding force.  

Obviously, deep integration, embedding, and efficiency improvement are becoming the focus of the future transformation of the bank-insurance channel. With the popularization of internet technology, bank customers have become accustomed to handling business online, and the interaction with banks has gradually become more focused and efficient. Therefore, the true integration of bancassurance channels will be based on joint customization of products, integration of customer journeys, customer insights and data sharing, integration of team collaboration and ecological scenario construction. Therefore, the deep integration of bank-insurance channels is an inevitable transformation trend.

The transformation of China’s life insurance industry from high-speed to high-quality development brings both challenges and opportunities. Challenges include lower premium growth, slow value recovery, asset-side risk and solvency issues.

The country’s life insurers are meeting those challenges head-on. For starters, they are developing comprehensive training and support programs for field advisors. Core skills include sales, customer management, professionalism and digital proficiency. They also are changing the agents’ orientation from “product” to “customer needs.”

Back-office enhancements include the development of powerful data analysis capabilities, effective content operation platforms and products that not only meet evolving customer demands, but also encourage engagement with the company.

As you can see, it is an exciting time for China’s life insurers. We’ll keep you posted as events unfold.