Expanding through its own Sales and Marketing channel

                   -- An interview with Mr. Bisschop, SFLI’s General Manager

Expansion is to be launched

Launched in early 2006, Beijing-based Sino-French Life Insurance is a joint-venture between the China Post Group and French insurer CNP Assurances SA. It has become a leading Chinese insurer of selling products through Postal Services as it combines two unique strengths of its two shareholders: China Post Group has 77 thousand service outlets in China; CNP Assurances SA is a leading French insurer with the operating history of 150 years. Currently Sino-French Life Insurance has a number of selling outlets in Beijing, but Mr. Bisschop told the reporter that the company’s board of directors has approved the plan to establish business branches in other provinces and regions of China. The first two branches will be located in northeastern and southwestern China. In addition, the board also approves the proposal of increase in the registered capital of company.

Along with its expansion, Sino-French Life Insurance plans to establish a phone sales center to sell some relatively simply life insurance products, but it will not adopt the model of selling insurance products via sales agents.

Mr. Bisschop pointed out that currently most insurance products selling through banks are participating products, investment-linked products and universal life insurance, in other words, these products are in fact deposit insurance products. For Sino-French Life Insurance, its business will be focused on launching and selling risk protection insurance products, such as health insurance products and annuity products, as more and more Chinese people need to buy insurance products for their retirement life when China is stepping into the aged society. In Mr. Bisschop’s opinion, the trends are obvious: the proportion of the risk product will increase in the future. This will offer insurance companies good opportunities to earn profits on wider margins.

Fierce competition about the service charge

After the establishment of the Postal Savings Bank of China, there is no difference between selling insurance products via banks or via postal savings services as two sales channels of selling simple products over the counter. The insurance companies’ competition at these channels is becoming much fiercer as the overall competition in Chinese insurance industry is intensifying. In the case of selling insurance products via banks, currently one bank acts as the agency of selling products of several insurers, in the future the market will move towards a more exclusive relationship between the bank and the insurance company. Selling insurance via postal services also faces this challenge of competition.

“We have much profit pressure because we have to pay soaring handling charges to the agency as other insurers all do in the same way”, Mr. Bisschop said with some disappointment. He told the reporter, “In order to maintain appropriate profit margins, the company should first control the handling charges paid and then control the overall expensed expenditure and improve the returns on investment, put differently, the appropriate balance between these three factors should be achieved.”

Mr. Bisschop emphasized: “The very business model that the company wants to develop is to sell insurance products through Chinese postal savings services by more closely collaborating with China Post Group. He said he hoped the insurance products win a place among many financial products sold through postal services channel. “Our aim is to make all financial products including insurance products needed by customers available at postal service outlets. At present, it is difficult to attract and retain a customer of financial products for both banks and postal services. If a customer could not find the financial products he or she seeks at postal services, he or she will undoubtedly go to banks or other institutions to seek the products needed.” Said Mr. Bisschop.

“According to the media now four banks have received a preliminary approval to make equity investments in insurance companies in accordance with the interim regulations promulgated by the China Banking Regulatory commission CBRC (China Insurance Regulatory Commission (CIRC)), showing a new trend that more and more banks will make equity investments in insurance companies in the future. The existing business model of bancassurnace will be inevitably changed”, said Mr. Bisschop. He also thinks that in the future the banks and insurance companies may have a cooperative relationship on an exclusive selling basis, that is, one bank only sells the products of one insurer.

In Mr. Bisschop’s view, a successful business model of bancassurance should be a win-win model for both banks and insurance companies, thus the soaring handling charges paid by insurers to banks as a result of competing at selling products at the same bank by several insurers should be curbed. At present, the soaring handling charges has significantly eroded the profit of insurers; it is not a win-win model, though the only beneficiaries may be the customers. This is an unsatisfactory situation for insurers. We are waiting CIRC to promulgate new regulations that may bring some favorable changes in bancassurance area.

Outlook for the future

Mr. Bisschop perceived that Chinese insurance market has changed dramatically from its initial stage at ten years ago. In particular, Chinese life insurance industry has undergone an explosive growth. Now more and more Chinese people begin to buy insurance products as the means of wealth management and risk protection.

“I believe that the bancassurance will undoubtedly acquire a more and more important position in Chinese insurance market. With respect to insurance products, such products as health insurance products, medical insurance products and annuity products will become more and more popular and secure increasing market share. Moreover, the market share of such products as long-term care insurance products and loan insurance products will also rise”, said Mr. Bisschop.

Mr. Bisschop has solid confidence on the further development of Chinese insurance market. He believes there exists abundant opportunities for Sino-French Life Insurance to introduce and launch many new insurance products into the Chinese insurance market, a thriving market that has much potential to grow substantially.