Greater China: A growing market for life and health insurance

00:00:00: What key dynamics shape the life and health insurance market in greater China, why protection

00:00:21: gaps persist and how primary insurance can navigate such a complex and fast-moving region?

00:00:28: Welcome to Replay by Hanova Ri, I'm your host Susanna Loomis and today we'll talk to

00:00:31: Niall Mulvey about Greater China, a growing market for life and health insurance.

00:00:40: This podcast is for general information only, no professional advice and is subject to change.

00:00:45: You can find the full disclaimer in our show notes.

00:00:49: Welcome to our podcast Niall.

00:00:51: Thank you Susanna, it's a pleasure to be here.

00:00:53: Niall is head of Life and Health Greater China with Hanova Ri and brings more than two decades

00:00:58: of experience across a range of markets, from the U.S. and U.K. to Canada and Greater China.

00:01:04: Now, when people talk about Greater China, they usually mean places like mainland China

00:01:10: and Hong Kong, but you also cover many more markets, including Singapore, Macau, Taiwan,

00:01:17: the Philippines, Indonesia and Mongolia.

00:01:21: That's quite a broad region.

00:01:23: How do you stay closely connected to those local markets?

00:01:26: Does all of that work in a virtual setup?

00:01:29: It is a broad region and staying connected is obviously very important.

00:01:32: To be connected, I guess, in a region like Greater China, we need to have two things

00:01:36: in place.

00:01:37: We need to have local presence so that we're well connected to the local market and we

00:01:41: do it in a way where client centricity is at the core of what we do, but we also need

00:01:45: global collaboration.

00:01:46: So we operate as one team worldwide because we achieve more when we leverage our global

00:01:51: strength and our global position as a reinsurer.

00:01:53: That is what we call in Hanova, we spirit.

00:01:56: Our business itself is ultimately based on relationships.

00:01:58: And one of the first words I learned, I hope I can pronounce it right in Mandarin, but

00:02:02: Guangqi, it's the importance of networks and relationships for business.

00:02:06: And in my experience in China, being connected and having the relationships is really important

00:02:10: in the day-to-day business.

00:02:11: So virtual is important, but in person is vital.

00:02:14: It's a bit like the local cuisine, it needs to be experienced.

00:02:18: For sure.

00:02:19: And that personal connection makes all the difference.

00:02:22: And that, in essence, is our we spirit, just like you said.

00:02:26: So let's get into it.

00:02:28: Greater China is seen as a rapidly changing region that includes major economic hubs with

00:02:34: lots of strong growth potential.

00:02:37: Can you give us a brief overview of what the life and health insurance scene looks like

00:02:40: in that region?

00:02:41: Sure.

00:02:42: Yeah.

00:02:43: So firstly, I guess Greater China is a vast region.

00:02:44: It's very big and it's very diverse.

00:02:46: You mentioned rapid change and one example we clearly saw of rapid change was the impact

00:02:51: of COVID-19 on sales agents.

00:02:54: In China alone, the number of sales agents dropped by six million in the industry, from

00:02:59: a high of nine million pre-COVID to just three million today.

00:03:02: So the distribution in the industry has really changed.

00:03:05: To give you a sense of some numbers of the market, China is home to about a fifth of

00:03:09: the world's population and Asia has contributed about two-thirds of global GDP growth in recent

00:03:15: years.

00:03:16: So truly staggering and truly major economies.

00:03:19: And Scremium's life, PNC and life and health, it's about 500 billion plus per year.

00:03:23: And that's the number that's grown five to six percent year on year, so has continued

00:03:27: to grow.

00:03:28: Asia in the life and health space contributes about a third of the world's direct life insurance

00:03:32: premium, so it really does give you a sense of the scale and the growth potential that

00:03:36: exists there.

00:03:37: Yeah.

00:03:38: Those are impressive numbers.

00:03:39: And what drives this growth?

00:03:41: Prosperity ultimately, I would say, drives this growth.

00:03:44: Economic prosperity.

00:03:45: In spite of geopolitical uncertainties and concerns on slowing trends, Asia economies

00:03:50: have grown significantly in the past few decades.

00:03:53: And with this growth comes a rising middle class and a growing need for reinsurance.

00:03:57: Yeah.

00:03:58: In Greater China, three specific aspects come to mind when talking about growth.

00:04:02: I think firstly, the innovation culture.

00:04:04: We see a real strong innovation culture in life and health insurance in Greater China,

00:04:09: particularly with third party partnerships.

00:04:11: Having the distribution challenges that I refer to above, that's been a key focus of

00:04:15: many Asian life insurers.

00:04:18: And we've seen a demand in reinsurance to help finance heavy investment in digitalization.

00:04:23: And then lastly, I guess, driving growth, evolving consumer needs.

00:04:27: This has created competition among insurers as they adopt their product offerings, leaving

00:04:31: benefit products are now expanding to a wider range of treatments, and there's a growing

00:04:35: focus on products for older ages.

00:04:39: And does this apply across the entire Greater China region?

00:04:42: The markets vary.

00:04:43: They're all unique and they're all diverse.

00:04:45: And the growth varies across the markets too.

00:04:47: It's really influenced, I would say, by the maturity of the markets and by the insurance

00:04:51: gap present.

00:04:52: To give some examples, in mainland China, insurance penetration rates are 4% compared

00:04:57: to 10% in other parts of the world, but that penetration in China is quite spread.

00:05:03: Insurance penetration is quite low in Indonesia, but we see Taiwan by comparison as one of

00:05:07: the highest penetration rates globally.

00:05:09: So it gives an example of the fact that it can be quite diverse and quite spread.

00:05:12: In Taiwan, they often say insurance is sold rather than bought.

00:05:16: So other markets have unique dynamics too.

00:05:18: Right.

00:05:19: And we can already see clear differences here.

00:05:22: And what about some of the other markets?

00:05:24: Hong Kong and Singapore are fascinating spots, in my view, but highly sophisticated financial

00:05:29: centers.

00:05:30: One example of that both are key global high-network hubs for life insurance and have really built

00:05:35: a unique offering and are quite mature markets.

00:05:38: When you look across the bay in Hong Kong at night, I think one thing you'll be struck

00:05:41: by is the number of insurance company logos dotting the skyline.

00:05:45: It's pretty cool and it's very fascinating to see.

00:05:47: And really symbolizes how big a financial center Hong Kong is.

00:05:50: So yes, we definitely do see differences across the markets in greater China.

00:05:54: Would you say there's a common thread between these regions as well?

00:05:58: Yes, there are some.

00:05:59: In many markets, a key insurance product is often a savings product.

00:06:03: And there's a heavy focus on investment too.

00:06:06: Health insurance is big in many of these markets with a need for medical and morbidity protection,

00:06:11: and these are popular and have historically been.

00:06:13: We see that with critical illness, we see that with long-term care, and we see that with

00:06:17: disability and income protection.

00:06:19: Now we see also an increasing demand across the region for old age products.

00:06:23: And there's a growing demand for protection products too, targeting the protection gap.

00:06:28: So we're looking at product types and then market behavior.

00:06:32: And have there been any steps taken to tackle that demand?

00:06:35: Yes.

00:06:36: One example of an initiative to tackle our support to demand.

00:06:39: The Chinese government has expanded personal income tax incentives.

00:06:43: This is there to help encourage take up, to meet and to foster demand.

00:06:47: They've also started piloting private pension schemes in select cities.

00:06:51: And this is to complement the public system and encourage growth, recognizing the change

00:06:56: in demographic and the old age profile.

00:06:58: And given the diversity across Greater China, I'm sure this calls for a more nuanced approach.

00:07:05: Do you see this being an important factor?

00:07:07: Yes.

00:07:08: Two things I think that always hold in every market and in all cases, all markets require

00:07:13: local knowledge and local expertise.

00:07:16: And then as a global reinsurer like Hanover Lee, we want to leverage that global position

00:07:21: and use that strength in empowering successful partnerships and delivering solutions.

00:07:26: But it is never a one-size-fits-all approach, particularly not in reinsurance.

00:07:30: Each solution is tailored for the clients and it's specific to the market.

00:07:34: I mentioned Guangxi earlier.

00:07:36: Our office in China is in Shanghai and I've been really struck by the level of personal

00:07:40: relationships that local team have in a country as vast as China, covering all major clients

00:07:45: across all major cities.

00:07:47: It's a really vital part of how we can make our business model successful.

00:07:52: Absolutely.

00:07:53: And what are your thoughts on why so many people remain underinsured, though?

00:07:58: That's a tough question, Susanna.

00:08:00: A protection gap is unfortunately common in rural areas, I would say, where penetration

00:08:04: rates are really much lower.

00:08:06: There are several factors contributing to that.

00:08:09: Distribution challenges are a key factor here in terms of reaching people.

00:08:13: But we also need to acknowledge and take responsibility, too, for the fact that insurance products

00:08:17: can be complex and difficult to understand, particularly at the underwriting stage.

00:08:22: At times in underinsured areas, there can be a reliance on government healthcare, too.

00:08:26: And it highlights the importance of education and helping underinsurers understand the insurance

00:08:31: need.

00:08:32: And then, I guess, affordability is generally really a factor that plays a part in underinsurance.

00:08:36: Thankfully, I guess we see digitalization and product design.

00:08:40: These are really at the forefront of how we can help solve that.

00:08:44: What would you say makes it challenging to break into these markets?

00:08:48: We always support startups breaking into the market and are actively involved in new partnerships,

00:08:53: too.

00:08:54: Always encouraging innovation.

00:08:56: Recently, we supported a new partnership bringing an innovative global cancer care solution

00:09:01: to the market for the first time.

00:09:02: It was quite different.

00:09:04: But to your question on challenges, three specific considerations spring to my mind when we talk

00:09:08: about greater China.

00:09:10: Brand incumbents is the first one.

00:09:12: These can be well-established and dominant players, so people breaking into the market

00:09:16: have to think about ways to complement or partner with these.

00:09:20: Regulation and operational hurdles are important, too.

00:09:22: While foreign partnerships are encouraged, it is important to understand the operational

00:09:26: complexity and the cost of breaking in, and the regulatory expectations, too.

00:09:31: And then, finally, for successfully breaking into a market, I think it's focused on consumer

00:09:35: behavior.

00:09:37: Brand awareness is really key to success, and finding the right distribution partnerships

00:09:41: is really important, too.

00:09:43: So Niall, you clearly have a strong grasp of the region.

00:09:46: Do you think there's a gap between perception of the greater China market and reality?

00:09:51: I think at times there is.

00:09:53: One thing that is true, everyone that visits the region leaves with a very different perception,

00:09:58: which is a good thing, because it's a wonderful part of the world.

00:10:01: It is easy, in many cases, to under-appreciate the scale of digital evolution happening in

00:10:06: China.

00:10:07: It's fascinating.

00:10:08: It ensures a really embracing digital tools, AI, and they're using health data more and

00:10:14: more to optimize services as well as risk assessment.

00:10:18: Government and regulators are quite a positive and can really be a catalyst for growth.

00:10:22: We see this now, for example, in the longevity space.

00:10:25: And one perception that is true, I think, the markets are truly quite dynamic and they're

00:10:29: truly quite diverse, so you really have to experience it firsthand.

00:10:34: Regarding the complexity and the pace of change, what would you say are the most compelling

00:10:38: reasons for primary insurance to think about entering this market?

00:10:42: Where do you see the biggest opportunities?

00:10:45: For one, I think, even becoming a small player in a market like China, it's the same as being

00:10:50: a medium or a big player in almost all other markets.

00:10:53: So that alone is quite a compelling and attractive reason.

00:10:56: Opportunities clearly exist.

00:10:58: For instance, I noted we see changing demographics and an aging population trend, and this will

00:11:02: increase opportunities in the longevity space.

00:11:06: Local regulatory regimes are changing and have changed too, and this always creates opportunity.

00:11:11: We've seen this with IFRS 17, and we see it now with RBC changes in local markets.

00:11:16: And then I think there's always a lot you can learn.

00:11:19: Technology trends continue to emerge, and they're emerging at pace.

00:11:22: Like we see examples today in the use of AI-based doctors and telemedicine platforms to extend

00:11:27: medical access.

00:11:29: So lots happening there that I think represent opportunities.

00:11:32: What do you mean?

00:11:33: And your last point also lines up with a couple of other podcast episodes where we touch on

00:11:38: how tech is shaping positive outcomes in life and health insurance.

00:11:42: We have an episode with Lisa Bobowa and one with Wesley Clay, and I'll link to it in the

00:11:47: show notes for our listeners.

00:11:49: So now, thank you for walking us through all of this detail.

00:11:53: And to sum this up a little bit, greater China has a lot of potential, but it's also extremely

00:11:59: complex in terms of regulations, competition, and very different end customer needs.

00:12:05: It is also more dynamic and technologically advanced than one might think.

00:12:11: What are your final thoughts on what all of this means for the future?

00:12:16: It means insurance companies in greater China can really be at the forefront of global developments

00:12:21: well into the future in life and health insurance.

00:12:24: It also means in greater China there's really strong potential for growth.

00:12:29: Lots of opportunities exist in various spectrums, be it technology, be it traditional products,

00:12:35: or be it in financing or other lines.

00:12:38: And it also kind of highlights, I think, that global partnerships and global synergies are

00:12:42: really important in what you do in a market like China.

00:12:45: Well, thank you so much, Niall.

00:12:47: I really appreciate all the perspective you shared with us.

00:12:51: Thank you for having me today, Susanna.

00:12:52: So today we talked about what the life and health insurance landscape looks like across

00:12:57: greater China.

00:12:58: We touched on how some of the challenges for new entrants looked at how different the markets

00:13:03: can be and talked about some of the opportunities worth keeping an eye on.

00:13:07: Thank you for listening to Replay by Hanoveri and we hope you found this conversation helpful.

00:13:12: Don't forget to subscribe for more episodes, leave us a review and stay connected with

00:13:16: Hanoveri on LinkedIn.

00:13:17: Until next time.

00:13:28: Lots ideas, documents, and other content discussed or shared in this podcast are not intended

00:13:32: to constitute any professional advice.

00:13:34: Hanoveri and the participants are not liable for any damages resulting from the usage of

00:13:39: the content of this podcast.

00:13:40: For further information, please see the show notes.