The new face of China

‘Continual change is the only constant’ has been a Chinese wisdom since ancient times. The country of China has transformed itself rapidly in the past two decades, presenting unprecedented market potential and challenges to consumers and insurers. Allianz SE Board Member Manuel Bauer, Allianz Life China CEO Chen Liang, and Allianz China General Insurance CEO Peter Nestmann share their insights on how to achieve success in this important market.
 

People said that the transformation in China is shocking. What is your perception?

 

Chen: The transformation is shocking in a positive way, especially at the speed in which this has happened - all within one generation.

 

Twenty years ago buildings looked alike, as did the clothes on men and women, whether they were from the warm south or from the cold north. Now the National Stadium - also known as the Bird's Nest - and the National Aquatics Center or Water Cube took the No. 1 and No. 2 positions of Business Week’s ten architectural wonders. Meanwhile, people are aware of global fashion trends, keen to find the lifestyle and labels that best fit them.

 

Meanwhile, industrial and new cities have quickly replaced farm land. City dwellers outnumbered China’s rural population for the first time in January 2012.

"The National Stadium - also known as the Bird's Nest - and the National Aquatics Center or Water Cube took the No. 1 and No. 2 positions of Business Week’s ten architectural wonders." (Chen Liang, CEO of Allianz Life China)
"The National Stadium - also known as the Bird's Nest - and the National Aquatics Center or Water Cube took the No. 1 and No. 2 positions of Business Week’s ten architectural wonders." (Chen Liang, CEO of Allianz Life China)

Bauer: …generally speaking you have to bear one important detail in mind: In 2011 China formally overtook Japan to become the world’s second-largest economy. The volume of insurance premiums has grown rapidly from renminbi 0.46 billion in 1980 to renminbi 1.55 trillion (190 billion euros) in 2012. The government used to plan for every aspect of people’s lives. Now people have significant freedom of choice on matters such as where to travel, where to be educated, where to work, how to protect their property and how to plan for retirement.

 

 

Despite the market potential, doing business in China can be very tough. What leaves you optimistic over the business prospects?

 

Nestmann: I am familiar with the challenges international business faces in China. There is no lack of questions on how to cope with rising labor costs, a currency that constantly increases in value, and on how to find and retain local talent.

 

To win in such a challenging market, it is necessary to keep focusing on what we do better than competitors, leverage the Allianz Group’s resources like our global network and investment capabilities. We also collaborate with other Allianz entities in China in order to provide a comprehensive offering.

Allianz SE Board Member Manuel Bauer: "For Allianz, China is a key strategic market and a must."
Allianz SE Board Member Manuel Bauer: "For Allianz, China is a key strategic market and a must".

What opportunities do you see in China?  What is Allianz’ plan in China?

 

Bauer: For Allianz, China is a key strategic market and a must. Over the past decade, China has led the world in insurance premium growth, with a compound annual growth rate of 26.5 percent. This is the year on year growth in average over the last few years. The rapidly growing insurance industry in China provides great opportunity in many areas, including motor, life, pension and health protection.

 

Nestmann: Retail business, including motor and Travel Insurance and Personal Accident, are full of growth opportunities. Motor business is an important source of premiums. The market volume is 50 billion US dollars - the largest in the world! About 45,000 cars are sold every day. Last year the mandatory third-party motor liability insurance sector was opened to foreign insurers.  Since then, foreign insurers have been able to provide the whole spectrum of motor products to customers.

 

In a market where many players are focused on low prices and high volumes, we believe improvement and innovation in service levels is the most important way to attract customers, improve retention and distinguish ourselves from the pack. Instead of eyeing all vehicle segments, we will continue to focus on medium to high-end premium brands, and further improving value-added services like enhanced claims support.

 

Chen: Opportunities in life, pension and health protection are increasing. China’s state pension kicks in very early. Retirement ages are currently set at 55 for women and 60 for men. There is an urgent need to create retirement savings vehicles for a population that is going to age rapidly over the next two decades.

 

This aging population is also experiencing the dual burdens of a rising rate in chronic diseases and climbing costs for healthcare. The government is increasingly looking beyond public insurance for ways to improve the provision of medical insurance. Two annuity products have remained our top sellers in China since they were launched. Customers choose them as a supplementary income for future retirement.

 

 

What about regulations in China? Some say it’s not so easy in China…

 

Bauer: Regulators set the tone for the environment where insurance companies compete and respond with innovation and flexibility to increasingly demanding consumer needs – all  while protecting consumers.

 

But regulations are not the most important matter. They don’t determine success. The key to success is to understand consumer needs, then to invest in product and service innovations in order to service the most attractive customer segments. Then in the long run you will build your competitive lead. We are committed to China, and are ready to commit further as far as the regulatory framework allows.

 

 

About Allianz in China

 

Allianz has a long business relationship with China that started in 1910, providing fire and marine insurance in the coastal cities of China. The regions Allianz already operates in account for over 52 percent of China’s GDP. Allianz now provides comprehensive financial solutions, ranging from life, pension, motor insurance, assistance to asset management products.

Allianz Life China CEO Chen Liang: "Two annuity products have remained our top sellers in China since they were launched. Customers choose them as a supplementary income for future retirement".
Allianz Life China CEO Chen Liang: "Two annuity products have remained our top sellers in China since they were launched. Customers choose them as a supplementary income for future retirement".

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Claudia Mohr-Calliet
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