Insurance in China: Market and IT Overview
| Tokyo, Japan July 21, 2005
Celent projects that IT spending by insurers in China will jump from US$2 billion in 2005 to over US$5 billion in 2009.
China is fast becoming one of the world's most important economies. Although its financial services sector is still small compared to the US, Europe, or Japan, its rapid growth rates and huge potential size make it a critical arena for expansion for both insurers and solution providers. Celent痴 latest report, , provides an overview of this important market and a high-level look at some of the key organizational and IT-related issues for both local Chinese and foreign insurers. Future Celent reports may examine specific elements of this market more closely, especially the roles and positions of local and international solution providers.
Since 2000, the Chinese insurance market has tripled in size to about US$60 billion in premium, and Celent estimates that it is on track to exceed US$100 billion by 2009. IT Spending currently accounts for approximately 3.5% of premium, but Celent projects that this will rise to 5% of premium by 2009 as insurers continue to build out their increasingly complex IT infrastructures."As Chinese and foreign companies compete in this market, they face different organizational and technological challenges. Chinese companies have an advantage with their market knowledge and especially with their relationships with regulators, but are hampered by underdeveloped business practices and technology," comments Matthew Josefowicz, manager of Celent痴 insurance group, and lead author of the report. "Foreign entrants are typically further advanced in those areas, but must adapt to a new market which operates differently from the more mature markets that many are used to dealing with."
Chinese insurers old and new are both starting from an early stage when it comes to building a mature IT infrastructure. Given this position, they are generally free from the "legacy problem" that bedevils the US and European insurance industries. Celent believes that insurers in China must think strategically about the task ahead in order to minimize the risks of creating their own legacy problems in the future.
As this report went to press, the Chinese government revalued the yuan by 2 percent against the dollar and left the door open to future revaluations. Although a re-pegged or un-pegged Yuan may slow the amazing recent growth in China's financial services sector somewhat, we do not expect it to have a drastic impact because the market is still highly underserved. There is plenty of room for growth within the category of financial services even if overall economic growth rates cool somewhat. Celent believes that China will continue to be an important expansion market for US and European financial institutions and the solution vendors that serve them.
The report is 18 pages long and contains eleven figures and tables. A table of contents is available here.
of Celent's Property/Casualty Insurance and Life/Health Insurance research services can download the report electronically by clicking on the icon to the left. Non-members should contact firstname.lastname@example.org for more information.
Celent, LLC is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally experienced analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis.
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