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Let's Talk Insurance
It won't be easy to crack China's huge market

Simply a Matter of Time: When will mainlanders embrace credit cards?

Liang Na and Xu Jiaying stare at each other one last time before diving into the abyss that is China's insurance market. The two rookie agents have been briefed on everything they need to know to make a sale: from different techniques for shaking hands to playing on parental guilt and fear by selling life insurance as a protection for children. The fact that Liang, 17, and Xu, 18, have received some sales training is a little unusual in China's insurance industry. But it makes sense. They work for Beijing-based China Life, which pays them a 15% commission. Other domestic insurers like Tai Kang Life pay as much as a 30% commission but don't offer training. China Life is therefore willing to take on less-experienced people, train them and pay less. The common denominator is that the companies want agents: Since most insurers pay only in the form of commissions on actual sales, they typically operate on the theory that the more salespeople they have the better.

Such is the wild and woolly insurance market in China today. It is not a new industry. In the nation's major cities, an estimated 17.5% of the population has some type of insurance — usually life. The sector grossed $17 billion last year and is expanding at a rate of 35% annually. But with China's entry into the World Trade Organization expected as soon as late this year, the size and scope of the market — including both the number of people with coverage and the range of policies available — looks set to explode.

In WTO negotiations with the European Union three months ago, China granted seven new licenses to European insurers effective immediately. Before then, 14 foreign companies were operating. And within five years of joining WTO, which is expected later this year, China has promised to remove all requirements that foreign companies in the industry take on Chinese joint venture partners. With the lifting of such restrictions, the number of foreign players in China's insurance industry is expected to triple.

The rationale for all the foreign interest is obvious: China's 1.2 billion people spent an average of $12.50 each on insurance last year (though the majority of mainlanders, living in less-developed regions of the country, actually spent nothing on insurance). Globally, the average was $357. Domestic insurers are equally keen to take part in the expected growth. A Guangzhou company has begun selling policies over the Internet. Beijing-based Tai Kang has started offering something called dividend insurance, which protects investors in the event that companies they hold shares in stop paying dividends. But before such policies can be sold and the enormous potential of the China insurance market is tapped, insurance buyers and sellers must get used to and start trusting each other. Tang Ning is a trainer for China Life. It is his job to instill confidence in inexperienced agents like Liang Na and Xu Jiaying. He does it by constantly repeating his message that the insurance industry is noble and challenging.

Challenging for sure. Many people in China still see buying insurance as tantamount to inviting disaster. "People are superstitious," says trainer Tang. "They are afraid to even think of bad things." In turn, this has prompted China's enterprising insurance agents to adopt some decidedly un-socialist characteristics. Many insurance brokers call prospective clients daily and even send gifts. That is a science in itself. "It's better to send books than flowers," advises Hong Jiaying, an experienced agent, "Husbands may misunderstand if their wives suddenly start getting flowers."

The trust factor should not be overlooked. Even compared to the West, media reports of insurance agents in China are unflattering. Chinese agents are frequently shown to be hustlers or cheats. Last year, according to one published report, 800 agents were punished for business irregularities, which usually means they pocketed their clients' premium payments. Chinese agents also tend to be peripatetic, which does nothing to inspire confidence: "We're like the actors of traditional times," says a woman who calls herself only Mrs. Wong. A former English teacher, Wong is now a two-year veteran of the insurance business: "Chinese value stability."

Agents tend to see themselves like critically important educators, particularly when it comes to informing people of how the government has retreated from many of the social obligations it accepted in the past for things like housing, health care and retirement support. With fully half of the nation's state-owned enterprises either breaking even or losing money, companies are now buying health insurance rather than subsidizing their employees' medical care. The shift to privately owned housing has also upped the demand for property insurance. The insurance companies and agents see this government retreat as an enormous selling opportunity.

Back on the job, Liang Na and Xu Jiaying have been in and out of so many offices so fast they're beginning to feel like pinballs. They run into a stony-faced receptionist who is not inclined to listen to their sales pitch. Just another rejection in a long day of cold-calling. But the rookies are confused when ordered so abruptly to leave. Was that part of the training? In all likelihood, yes. Trainer Tang has a stock lecture to his students about putting rejection behind them and moving on.

Many agents apparently don't handle rejection well. Turnover in the industry is an estimated 80% annually. Add to that the amount of poaching being done by new foreign entrants and existing domestic companies, and you have an industry roiling with personnel upheaval. Experienced agents command a premium and can earn extra by training new recruits.

Liang and Xu, the two rookies, are slowly making their way down one of Beijing's biggest office buildings. It is standard insurance-agent black humor: Work your way from the top of a building down — sinking along with a heart damaged by rejection. At the end of the day, the two have only a single prospect to show for their effort: the namecard of a receptionist. But Xu insists he is still optimistic: "I'm here because I like challenges." Perhaps he is encouraged by stories about agents like Zhang Dehou, who earned enough in six months from commissions to buy his own home. But for every Zhang, there are probably dozens of agents like Yang Wei, who was so grateful for her first sale that she spent the entire 15% commission on gifts for the child of her first customer. In the runup to WTO entry, it seems that everyone is betting that China's insurance industry will take off. It's just that the agents are the ones taking the biggest chances.

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