Skandia-BSAM Life Insurance Co Limited, a joint venture between Sweden’s Skandia and Beijing’s state-owned Asset Management, has launched several insurance products in China that were initially unique to its consumers. The opening of the insurance sector has not only ushered in these innovative products but also a set of diverse sales and marketing strategies as well as services. To successfully expand in the market, foreign firms must adopt localization strategies enhanced by a mature, multinational touch to win over their target audience.

“We were initially concerned whether Chinese consumers would accept our operational mode, said general manager of Metlife China Qi Laiping. “Judging from what we have achieved in the past two and half years, we have won over our consumers with more diverse operational strategies.”

Back in 2004 when Metlife first entered China, Qi stated that if its operation and products were too similar to other local companies instead of bringing in something new, the company would not be able to differentiate itself clearly from others.

Unlike traditional insurance firms, Metlife has used advanced information technology to analyze and design insurance plans for clients. At the same time, it adopts an “elitist” human resources structure for its insurance agents.

Heng An, at Standard Life, a British-Sino joint venture, also has a similar relationship with its insurance agents.  Mainland insurance firms generally do not sign labor contracts with their agents. However, the two human resources systems the two joint ventures employ offer basic protection, salary and insurances for its agents, and not only offer incentives to reduce employee turnover, but also to maintain quality standards.

“China’s accession to the WTO has created a better environment for the industry’s rapid development, allowing foreign-funded investment firms to establish operations in different parts of the country,” says Meng Jianan of Allianz China Life Co Limited. “We have now entered 14 cities in five provinces, a sharp contrast with only three cities prior to China’s accession.”

However, the level of localization remains the question to most foreign insurance firms in their process of entering the Chinese market.

“Our biggest ongoing challenge is the lack of local insurance experts since the sector is a new industry with few skilled human resources being trained in the past,” Qi says.

High employee turnover is a common problem facing the insurance industry.  Tracking and recruiting available human resources to stay in their organizations has become the top priority. Local experts are important to the organization because they are the medium between the firms and the market. With the insurance sector becoming more open, foreign insurance firms are expanding into second-tier cities where the local market is not as open as in the major cities of Beijing and Shanghai. Only a team of local workforce can cultivate these markets.

“As a foreign insurance firm, the pace of development and trends are appropriate,” Qi adds. “With the expansion to second-tier cities, the pace of development will accelerate. While local firms will also strengthen their management and organizational systems, competition will be over keeping skilled human resources.”

Currently, statistics of China Insurance Regulatory Commission showed that there are a total of 47 foreign insurance firms from 15 countries and regions in China with 121 branches in China, and 135 foreign insurance firms have set up near 200 representative offices by far. Major multinational insurance and finance institutions from developed countries have entered China, pouring in 60 billion yuan (US$7.5 billion) to establish joint ventures or to a acquire stake in Chinese firms. Insurance premiums at these foreign firms have soared from 3.329 billion yuan (US$416.13 million) in 2001 to 34.12 billion yuan (US$4.27 billion) by the end of 2005.

Industry experts point out that how foreign insurance firms have to operate through establishing joint ventures in the Mainland is not desirable to the industry’s development. “To a certain extent, these joint-ventures a waste of resources,” claims the Chief of the Insurance Department at the Central University of Finance and Economy Hao Yansu. “Limited by their JVs, some foreign insurance firms choose to cooperate with corporations that are already established in the market and cultivate the market with a monopoly strategy. Such unequal market competition is a result of poor policy. If the government can allow foreign insurance firms to establish wholly owned subsidiaries, the industry would see much bigger development potential and consumers could enjoy a higher level of service as well as greater variety of products.”