"Tough competition" in China

Not all the dreams of Western managers have come true in China, but many still regard China as a market of the future. Uwe Michel, head of Insurance Growth Markets Asia discusses Allianz’s strategy in the Middle Kingdom.

 

Mr. Michel, the One Allianz in China Initiative was recently launched under your leadership. What’s the story behind it?

Uwe Michel: We want to showcase ourselves to the Chinese public as a company that can offer the entire gamut of financial services. We have ten units in China, from Euler Hermes to Allianz Global Assistance and Pimco. None of the foreign competitors can boast such a broad product range and we need to make this clearer in the public’s mind. Until now the units have operated largely independently of each other. The aim of the initiative is to generate more profitable business and the key to that is better cooperation and concerted action in our dealings with clients. We want Allianz in China to become synonymous with financial solidity – just as Mercedes stands for solidity in automobile manufacturing.

 

Western companies complain about difficult market access. What obstacles does Allianz have to overcome in China?

Tough competition for one. The former state insurers are still the dominant force in the market. Regulatory restrictions are also a problem. Foreign suppliers have a 4.8 percent share in the life insurance market and just a 1.2 percent slice of the property and casualty segment. The supervisory authorities don’t let foreign insurers near the really rich pickings, although the Communist Party has now promised a measure of liberalization.

 

Not for the first time.

I’m not going to be naïve about it, nor will I rule out the possibility. Chinese insurance companies have become so strong that they won’t have to tighten their belts even without the protective hand of the state. In an emerging country like China you need a healthy dose of optimism, otherwise there’d be no point in entering the market at all. And you need to be in it for the long haul. The time horizons in China are different to what we’re perhaps used to.

 

Does One Allianz in China mean that Munich is picking up the reins?

Not at all. One Allianz in China is an initiative of the ten Allianz units in China. We see it as our job to bring them closer together. They should be seen in the marketplace as a single Allianz. But the reins will remain in the hands if the local Group companies. They know the market, their clients and their needs. What we’re providing is support. China works from the top down. That’s why our executives and experts should visit more often. In the future we need to clarify what we have to offer the Chinese and expand our role as a knowledge provider in order to enhance our brand image.

 

What does that mean specifically?

We’re going to send our experts to China to give presentations, meet with decision-makers and get the media on board. Recently, for instance, our chief economist, Michael Heise, traveled to China to hold a lecture on the future of the euro and the European Union. This was well received in the press. We don’t want to spend more money on marketing – that would be ineffective in such a big country with so many megacities – but we do want to put our know-how to better use, for instance in the fields of demography and infrastructure projects.

Uwe Michel, head of Insurance Growth Markets Asia: “We’ve created a good base in China in the past few years, also in terms of business licenses. But now it’s finally time to reap the harvest.”
Uwe Michel, head of Insurance Growth Markets Asia: “We’ve created a good base in China in the past few years, also in terms of business licenses. But now it’s finally time to reap the harvest.”
Allianz in China

Who’s the target group in China?

The main target group is the growing middle classes in the cities, now numbering 300 million people. They’re increasingly interested in insuring their wealth. This opens up opportunities in all areas, particularly in life and health insurance. We’ve just set up a health insurance company with our partner CPIC. But there are also opportunities for Allianz Global Corporate & Specialty (AGCS). China wants to expand its green technology – which is understandable given the country’s huge environmental problems – and Germany is a leading player in this area. We will of course support our German insurance clients in this respect as well but we’re also setting our sights on Chinese companies.

 

China is a huge market. Are people even aware of a foreign supplier like Allianz there?

We’re strong in certain niches where the Chinese can learn from us. Health insurance is a typical example where the Chinese lack experience. Private health insurance still accounts for only a small fraction of healthcare expenditure. We can contribute expertise in terms of products, risk management and IT. CPIC, with whom we’ve set up the joint venture, is contributing its sales network and contacts with state agencies. I’m optimistic that we can secure a slice of the pie in China. Of course we need to ensure that the gains from this knowledge transfer will benefit all parties concerned.

 

Allianz will be the minority partner in the joint venture. Is that a paradigm shift?

It’s quite a step for Allianz to be the minority partner in a joint venture, as is the case in the health insurance company we’ve just set up. But we realized that we wouldn’t stand a chance if we entered the market alone. So we asked ourselves three key questions: What is the added value for Allianz? How big is the risk as the minority partner? And will we be able to take any profit we make out of China?

 

Other companies have decided to cut back or give up their commitment in China. Is that also an option for Allianz?

It’s always an option. Of course we must ensure that we don’t fall by the wayside. The question is whether we can do something constructive in China with the money that our shareholders put at our disposal. I’m certain that we’re in a position to do so, and One Allianz in China can make an important contribution. Needless to say, clients won’t take out insurance just because we’ve launched this initiative. They’ll do so because Global Automotive has a good product range or because AGCS offers good cover. One Allianz in China aims to facilitate information exchange between the subsidiaries. They need to discuss who’s got which clients and how the units can cooperate in supporting them. Customer managers from the various Allianz units are already teaming up to approach major clients.

 

How’s that working out?

The response has been extremely positive. Allianz China, Global Automotive and Allianz Global Assistance have already signed contracts with an international telematics company. The premium income amounts to ten million euros. And we have many other companies on our target list.

 

As Allianz is a European provider, isn’t the financial crisis throwing a wrench in the works?

Europeis no longer seen as a bastion of security, and naturally the state of the euro crops up in every conversation. But Allianz is still regarded as a stable company in China, and our good rating helps a lot. This is exactly the strong image that we want to convey to the public. It will also enhance our attractiveness as an employer. Employee loyalty is an ongoing issue for us in China.

 

Are people running away?

We have a very high staff turnover. It’s hard to find good employees in China, and even harder to keep them. We train them and then they’re poached by the competition. In April, we had our first internal China job fair. More than 40 Chinese speaking employees from different Allianz departments who can see themselves working in China took part. That gives me hope. We have to get the message across that Allianz is a top-notch company that is listed on the Fortune 100 Index and that, thanks to its wide-ranging activities, offers exciting advancement and career opportunities. Then we can get to grips with staff turnover. We need to be seen on the market as a single multifaceted unit. This is precisely the aim of One Allianz in China. I’m convinced that we can adapt to the Chinese market and be successful.

 

How far should adaptation go?

It’s got nothing to do with currying favor. It’s about understanding the market so that we can put our knowledge to good use. The Chinese want to work with us precisely because we’re German, because we’re European. We’ve created a good base in China in the past few years, also in terms of business licenses. But now it’s finally time to reap the harvest.

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Patience Chan
Allianz Asia Pacific
Phone +852.2238-8574
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