Foreign firms are rushing in as China's government lifts its overseas ban on mandatory policies.
The world's largest automarket will soon relax laws on foreign insurance companies selling mandatory protection policies to drivers, making it an attractive market for companies such as Allainz SE and American International Group Inc, who will soon all be vying for a share of the lucrative market. Previously, only domestic firms have been able to sell third party to car owners, but now China will open up its $50 billion (CNY 316 billion) marketplace.
AIG and Allainz SE are both formulating ideas on how best to design and implement effective insurance policies in a nation where 40,000 cars are purchased every day. Head of AIG's property-casualty business in the country, Kevin Golding, has been analysing the nation's four largest municipalities, which are home to over 500 million of the nation's residents, gathering data on effective insurance packages.
Allainz SE has already been in the Middle Kingdom for some time and in 2011 had received around $6.7 million in auto premiums after five years by selling voluntary coverage. The Munich-based company's new strategy will be to target customers buying from luxury car dealerships, such as Mercedes-Benz and BMW.
Although the size of the market is tempting for some, insurers may have to wait up to 18 months before being able to set up provincial branches. Local firms will also have the upper hand and will be able to offer low-end policies through existing dealerships, cornering a large portion of the market. Despite the attractive prospects, both Western and Japanese firms, like Tokyo Marine Holdings Inc, will still be entering a very hostile marketplace.