Insurance intermediaries will remain an important distribution channel for insurers, with their business forecast to enjoy high growth rates for at least the next five years, according to Mr Jiang Ming, Chairman and CEO of Datong Insurance Services, China's largest and first nationwide professional insurance sales and service provider.
Speaking at an insurance forum, he said that professional insurance intermediaries serve as information channels, conveying customer needs to insurance companies and acting as a window through which insurers can observe the whole market and obtain information from multiple sources.
He said that several changes in the insurance market are benefitting insurance intermediaries, such as the introduction of high-end pension products and critical illness insurance as well as the reform of commercial auto insurance pricing, reported the local media.
He also said that with the insurance regulator CIRC cracking down on malpractices in the intermediary segment, the market has been transformed from what was “small, fragmented, messy, lacking” to a professionalised sector.
Since 2012, CIRC has implemented several measures to tighten licensing of insurance intermediaries. The measures included increasing capital requirements to raise the entry barrier to the segment. One of CIRC's recent measures is to ask would-be investors in an insurance intermediary to deposit with a bank the capital that they wish to invest, before CIRC grants approval for a licence.
This is expected to force consolidation in the market, in which hundreds of intermediaries operate. Smaller firms are expected to merge; but larger firms are not expected to accept the smaller firms which would lead the latter to pull down shutters. At present, the 20-30 biggest insurance intermediaries command a market share of 70-80%, according to industry sources.
Another development which has affected the intermediary market is that several insurance companies have set up direct channels or their own sales companies.