The big allure of China’s bank channel

His enthusiasm is underpinned by an in-depth
study of bancassurance in China undertaken on behalf of ACL by
Chinese research firm Oracle Value Added (OVA).

The study was conducted in 12 provinces in
China from March to September 2008 among 3,100 bank customers of
five major Chinese banks: Industrial & Commercial Bank of China
(ICBC), China Construction Bank, Agricultural Bank of China, Bank
of China and China Merchants Bank.

It emerged clearly from the study that
stimulating growth in the Chinese bancassurance channel depends
heavily on increasing consumer awareness of the availability of
insurance products in bank branches.

OVA found that a mere 37 percent of customers
were aware that they could buy insurance over bank counters. In
contrast 66 percent knew about personal loans and 50 percent about
bonds.

When it comes to buying products in a branch,
97 percent of bank customers demand saving accounts, 40 percent
apply for credit cards, but only 3 percent buy insurance. In
respect of insurance sales channel choices, one out of two bank
customers prefer to purchase insurance from an insurance agent, 11
percent through banks and 4 percent through brokers.

“Actually, many bank customers either do not
know that insurance is available through bank branches, or do not
yet consider buying insurance in banks,” commented Blackburn.

“There are two consequences for us at Allianz
China Life,” he continued. “Firstly, we will raise the awareness
levels among Chinese people that insurance is available in bank
branches. And, secondly, we will make suitable and highly
competitive products available to our bank partners, which are
tailor-made to meet the needs of their customers.”

Based on the results of this study, ACL has
already launched one new life insurance product marketed as Allianz
An Yu Feng Cai III. The product is a regular-premium participating
insurance product which features a minimum guarantee of 100 percent
premium return together with accident protection against nine
natural disasters. It is a unique product in China, according to
ACL.

Market segmentation

Another primary objective of OVA’s
study was identification and separation of different consumer
groups among urban residents in China to enable ACL to improve
product design according to the specific distribution channel.

A total of eight customer groups with distinct
needs, desires and buying patterns were identified. The three most
important groups are:

• The Family Pillar describes 13.5 percent of
Chinese urban residents, Most of them are married and with a child,
aged 30 to 49 with average education and below-average salary. Most
of them live in first- and second-tier cities in East China.

• The Young Future Builders describes 8.1
percent of Chinese urban residents. Most are single, aged 20 to 29,
with an academic background and relatively high income.

• Savvy Investors describes 6.6 percent of
urban residents. The majority live in Shanghai and Guangzhou, are
between 30 and 39 years of age, are married and have children, and
have a good education and high salary.

Other groups identified are the Low Income
Striver, Protectors of My Future, Enjoy Now, Plan Future and
Traditional Family Nester.

Distribution channels

ACL was established in January 1999
as a joint venture with Chinese financial services company firm
CITIC Trust & Investment with Allianz holding a majority stake
of 51 percent. Initial focus was on establishing an agency sales
force which has increased significantly in recent years from about
7,700 agents in 2006, to 10,000 in 2007 and 18,000 in 2008.

ACL first major entry into the bancassurance
channel came in January 2006 via an alliance with the country’s
big-four banks in terms of assets, ICBC. The alliance was
strengthened the same year when Allianz as part of a consortium
with American Express and Goldman Sachs acquired a 2.5 percent
stake in ICBC for $1 billion.

Allianz’s stake in ICBC was reduced to 0.97
percent when it sold a portion of its shareholding in April this
year. Allianz confirmed that the sale has had no influence on their
strategic cooperative relationship with ICBC.

The alliance with ICBC provides ACL with
potential access to the bank’s 18,000 branches, 100 million private
customers and 4 million corporate customers.

Further strengthening its bancassurance
channel ACL has formed further alliances with the most significant
being with China’s second largest bank Agriculture Bank of China in
September 2006. The alliance provides potential access to the
bank’s 30,000 branches, 150 million private customers and 2.5
million corporate customers.

Serving corporate customers was the motivation
for ACL’s addition of a third marketing channel in April 2008 with
the launch of Group Sales Allianz China Life. “The huge corporate
insurance market in China is our next target market,” ACL’s then
CEO Christian Molt said at the time of the launch. According to
Allianz, China’s corporate insurance market was worth €58 billion
($80 billion) in 2007.

Overall ACL’s multichannel strategy has served
it well with the insurer enjoying significant growth in premium
income between 2004 and 2007 with bancassurance becoming the
biggest contributor in the latter year.

ACL experienced a growth setback with premium
income down 20 percent compared with 2007 to CNY2.4 billion ($351.3
million). Despite this ACL retained its position as China’s
fourth-largest foreign life insurer in 2008.