Insurance companies in China apply different business model in regard to retirement business. Some insurance companies focus on individual annuity, some are extending retirement business horizontally, selling corporate annuity, group pension, and individual annuity; and some companies are extending retirement business vertically, such as enter into retirement apartment business. In China, reverse mortgages face cultural opposition and will not be popular in the next five years. The main reasons are:

• Old people want to leave their apartments to their children after death.
• There is no legacy tax in China.

The target market for reverse mortgages is people who have more than one apartment or no child. There is no insurance company or bank that provides this kind of business yet.

• The possibility of apartment prices going down is the main factor that worries financial institutions.
• Banks do not have sufficient data for life expectancy.
• Regulations are not complete: China land usage is limited to 70 years. If it is not renewed or does not get approval, then theoretically the land reverts to the state.

So the more acceptable method for old people is to sell their apartment and move to a cheaper one. Another way is living in retirement apartments and renting their own apartments out to provide income and cover the cost. The problem is that retirement apartment facilities are not good as of yet. For this reason, some insurance companies are extending retirement business value chain, have started to invest in retirement communities. For example, Taikang Life is building a retirement community in a suburb of Beijing. Union Life is building a retirement healthcare community in a suburb of Wuhan. For more, see my new report Pensions in China, Hong Kong and Singapore: Opportunities for Insurers.