Distribution strategy in China's diverse market conditions
21 July 2010
I talked with a reporter recently about Asia distribution channels. She asked me question about in emerging markets like China, what the challenges are, and issues facing by insurers to build up a cost effective distribution channel, and what being important for a successful distribution strategy in China's diverse market conditions. China is a big and diverse market. Most places in China are emerging markets. It is not common for people to initiate the purchase of insurance products. This is due to the limited knowledge they have of life insurance. Insurance is mainly sold in a face-to-face setting with an individual agent of an insurance firm, where the agent would provide a detailed introduction of the product; hard selling may be involved as well. Hence, the main sales channel for life insurance in these emerging markets is individual agents. But in many big cities in China, insurance markets are maturing. People are more aware of insurance product; they’ll purchase insurance through banks, car dealers, travel agencies, telephone, and internet. Individual agents are still an important distribution channel in these big cities, but in the face of stiff competition with other distribution channels, as well as the increase in diversity of financial products, some insurance companies are investing in more training to equip agents to become financial advisers, and establishing online and mobile support system. The biggest challenge by insurers to build up a cost effective distribution channel in China is the market diversification. Multi-channel distribution is very important. Any single distribution channel, any single distribution strategy can’t meet all market conditions. The important thing for a successful distribution strategy in China's diverse market conditions is the alignment of product and distribution channel. Design of product should be aligned with target customer and designated distribution channels.