Ten key questions answered about Chinese attitudes concerning insurance Article added by William Dyess on July 12, 2011
William R. Dyess

William Dyess

Plantation, FL

Joined: September 05, 2002

China is awakening to a good deal of the same financial and personal family issues that we in the U.S. are facing. As this society looks for solutions, they are looking at the insurance industry for support. That means tremendous opportunity to meet the need for financial planning and products.

Recently, I had a chance to travel on a three city, 12 day tour of China with a group of financial planners representing the National Financial Planning Association. The information I found was quite startling.

In 1949, the average life expectancy of the Chinese people was just 35 years old. Today, the average age for males is 73 and for females it is 76. The Chinese population totaled 541 million just 60 years ago, and today stands at 1.33 billion.

As you might know, China imposes a one child policy. This policy is under severe pressure to be modified in the very near future as the 4-2-1 (see question #10 for details) policy will play havoc with the aging of their population. I wanted to write this article to give you a better insight as to how the Chinese are dealing with a number of insurance issues and with their aging population.

Let’s take a look at insurance in all its forms, and see what role it plays in the lives of the Chinese people. The following is what I learned in discussions with our Chinese financial planner counterparts during the FPA in China tour.

1) How have insurance companies that are not based in China found the business climate in China?

The opportunities here are very good; however, there is a go-slow approach on behalf of the Chinese government. Their view is that the growth in this sector has to be managed so the people don’t get taken advantage of. The consensus is that more regulations will be needed in the future to protect the people.

2) What type of insurance coverage is the most popular?

Homeowner’s insurance is the number one insurance product sold in China, as the Chinese are very big purchasers of real estate.

3) How are insurance products distributed to the Chinese?

Mainly through the banking industry. The bank is paid the commission and the bank officer is paid a salary with production bonus opportunities.

4) Do the Chinese have access to annuity products?

Yes they do have access to annuities, and as an incentive to purchase these products, which in turn creates more available dollars for the society, the annuities grow tax free. There is talk of the government taxing the growth in the future.

5) Do disability insurance and long term care (LTC) insurance products exist in China?

Disability plans exist but on a very limited benefit payout. Usually it is only for three to six months of benefits and then nothing. As for LTC, there are currently NO products available. However, the country is taking a good look at this product as a way to deal with the high cost of caring for the aging population and considering the dramatic increase of people over age 65 taking place over the next few decades in China.
6) Is life insurance a product that is selling and accepted?

The answer is yes, there are sales of life insurance, but there is some reluctance by the population to discuss the death/dying issue, so the bank sales officers do get push back on this issue.

7) What about elder care? Do Chinese families hire outside help to care for their elders?

Some have, but others still take their parents into their homes and care for them. Some families, who have wealth, choose to just pay money to have outside people provide the caregiver service. Long term care insurance has much potential in China due to the aging population and the lack of sufficient children to care for their elders.

8) With the aging of the population, what are the top disease issues that this age group currently faces?

There is a huge rise in diabetes, heart disease, obesity and cancer. The almost 350 million people who smoke are beginning to cause high medical services utilization.

9) Is there a safety net like the United States Social Security system in China, and if not, how are the Chinese preparing for retirement?

There is no Social Security system in China, which is one of the main reasons why the Chinese save, on average, 30 percent of their income. The average retirement age is 50 to 55 for female workers and 55 to 60 for male workers. Management workers in private companies retire at age 60. Life expectancy is now about age 73 for males and age 77 for females.

10) What is the 4-2-1 policy and what impact will it have on the Chinese people?

As the first generation of law-enforced only children came of age for becoming parents themselves, one adult child was left with having to provide support for his or her two parents and four grandparents. Called the 4-2-1 Problem, this leaves the older generations with increased chances of dependency on retirement funds or charity in order to receive support.

If personal savings, pensions, or state welfare fail, most senior citizens would be left entirely dependent upon their very small family or neighbors for assistance. If, for any reason, the single child is unable to care for their older adult relatives, the oldest generations would face a lack of resources and necessities. In response to such an issue, certain provinces maintained that couples were allowed to have two children if both parents were only children themselves. As of 2009, all provinces in the nation adopted this new adaptation. As a result of the 4-2-1 Problem, long term care insurance may have a bright future in this market.

China is awakening to a good deal of the same financial and personal family issues that we in the U.S. are facing. As this society looks for solutions, they are looking at the insurance industry for support. That means tremendous opportunity to meet the need for financial planning and products.
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