Agents, the dominant distribution channel in China again
China Insurance Regulatory Commission (CIRC) issued an insurance distribution report for the first half of 2009 on August 7. One interesting result is that the insurance sold through banks and post offices decreased 3% compared to the same period in 2008, while insurance sold through the sales agent channel increased 39%. This is the first time that business from banks and post offices channel decreased in the last several years, and agents is the dominant distribution channel in China again.
Bancassurance increased dramatically in the first half of 2008 in China. Most of the business was paid-up investment type life insurance. Life insurance companies paid very high commissions to banks and post offices, which increased business but reduced the profit of bancassurance. This phenomenon is not healthy for the long-term development of China’s insurance industry, so CIRC issued a policy to adjust life insurance business structure in August 2008. The effect has been gradually becoming evident since Q4 2008:
- Agents’ market share increased, and banks’ and post offices’ share decreased.
- Protection products' share increased, and investment products' share decreased.
- Periodic payment business increased; paid-up business decreased.
In future, China insurance premium growth rate may slow down, but the profitability, risk control, and solvency of insurance companies will increase. Insurance companies might spend more on agent training and support to increase agent productivity and retention.