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Chinese insurers expanding in Singapore; eyeing South-east Asia
DESPITE Singapore's small market size, a handful of Chinese insurers has been expanding slowly but surely into the country, and appears poised to use it as a springboard into the rest of South-east Asia.
Currently, two China-based insurance companies are licensed by the Monetary Authority of Singapore (MAS) to conduct business here as direct insurers, while two others have entered the market to distribute their technology and wealth management solutions. Among them, two have already expanded into Indonesia after setting up shop here.
Observers are hardly surprised, noting that not only does Singapore offer a stable, well-regulated environment for companies looking to heed the call to head overseas under the Chinese government's "One Belt, One Road" strategy, but it also occupies a strategic position in South-east Asia for further expansion.
"Singapore has been well known as a leading insurance hub in Asia," said Ang Sock Sun, insurance partner at PwC Singapore, noting that the country has the necessary infrastructure and ecosystem to continue propelling growth in the sector.
FSMOne.com equity analyst Ong Zi Yang added: "Consumers in Singapore understand the value of insurance policies, therefore it is also easier for the Chinese insurers to launch their business here as a starting point, without the need to educate the general public first."
But he believes their ultimate target is the emerging markets of Southeast Asia, with their increasingly wealthy populations and growing middle class. This growth will drive long-term demand for protection-type insurance, like health insurance, and wealth management products, he said.
PwC's Ms Ang said: "We have to bear in mind that the market is not limited to just the locals in Singapore, but (includes) the accessibility that Singapore can provide in reaching offshore markets."
China Taiping Insurance Singapore was originally the Tai Ping Insurance Co Ltd Singapore Branch, which has been carrying out general insurance business in Singapore since 1938. It launched its life insurance business under its new name in January, after receiving its MAS composite insurer licence to sell both life and general insurance in August 2018.
It declined to comment on its regional plans, but has said that reasons for expanding its business here include Singapore's high regulatory standards, the conducive business environment and significant market potential for its products.
For instance, the growing market of high net worth individuals in Singapore and the region creates an increasing demand for insurance and wealth management solutions, while an ageing population will call for more retirement solutions, it said.
The other licensed direct insurer is China Life Insurance Singapore, the local office of China Life Insurance Group's overseas subsidiary.
The insurer entered Singapore in June 2015 as its first foray into Southeast Asia and part of the China Life Insurance Group's larger expansion plans in Asia under the "One Belt, One Road" strategy. It has already indicated its intention to venture further into South-east Asia, expanding its overseas business into Indonesia in August 2018.
To attract customers here, the direct insurers have rolled out several promotional deals on their products.
For instance, China Taiping Singapore offers gift sets of red wine and canned abalone and clams for those who sign up for their i-Wealth Builder or Infinite Harvest legacy plan, which was launched on Feb 26. Other promotions include discounts on some of its many general insurance products like domestic maid insurance and travel insurance.
As for China Life, it has offered cash incentives of up to S$8,888 per plan to customers who purchase selected insurance plans.
However, competition with incumbents for customers is not the only challenge the insurers will face in the region, said FSMOne.com's Mr Ong. Doing business in South-east Asia involves complying with many different regulatory and legislative structures across the various countries.
"We think they are likely to approach this problem through cooperation and joint ventures with local incumbents who likely understand their individual markets better."
He noted that the insurers lack the branding consumers value, especially for longer-term policies that lock in sizeable amounts of capital for retirement. "Consumers need to trust that insurers will honour the payout eventually."
Customers also should judge the insurance products by their merits and not by the attractiveness of the promotion, said Li Choo Kwek-Perroy, chief customer officer at Manulife Singapore.
"Ultimately, customers need to understand that life insurance is a long-term investment. It's important for consumers to assess the suitability of a product based on their long-term needs, versus short-term incentives," she said.
Ms Kwek-Perroy added that consumers will benefit from a competitive insurance market, and Manulife is confident of holding its own amid the increased competition. "We have been in this business and in Singapore for a long time, where we have been growing exceptionally well in the last two to three years. So we believe we have a strong customer proposition that puts us in good stead for further growth in Singapore."
Offering their technology solutions to Singapore companies are ZhongAn Online P&C Insurance Co and Ping An Group. ZhongAn Technologies International Group (ZA International) in January established a joint venture company with Grab Holdings to build a digital insurance marketplace. The Chinese company will add to the JV its technical assets to build the platform and insight into Internet ecosystems, ZA International said in a press statement.
Ping An set up a Singapore office last November for its subsidiary One Connect Financial Technology, which provides insurtech solutions to financial institutions and businesses. In September 2018, the group unveiled a Singapore-based online wealth management platform called Lu Global.
These companies, too, plan to expand further in the region, although their goal is to leverage their strengths in financial and insurance technology for now, rather than competing in the traditional space.
ZhongAn's director of business development Young Yang said the company intends to tap Grab's wide user base and "unparalleled customer insights" to reach users all over Southeast Asia and encourage adoption of digital insurance.
Singapore, as one of Grab's more mature insurance markets, serves as a good starting point since the drivers will be somewhat familiar with many of the initial products offered on the platform, said Mr Yang, who is also project leader and supervisor for the Grab project.
He added: "More broadly, ZhongAn exports our technologies to help upgrade the insurance value chain and work closely with partners like Grab who shares the same vision of sealing the insurance gap."
A Ping An spokesman said OneConnect is the main focus for the group's expansion in Singapore and Southeast Asia, but declined to comment on its plans to sell traditional insurance here. The insurtech company recently expanded to Indonesia, setting up a branch office there on Feb 20.
"Singapore is already a well-established regional headquarters hub for international companies. It was a natural choice for our subsidiaries as they expand overseas, outside China in South-east Asia," said the spokesman.
The focus on technology is wise, given the companies' deeper expertise in the developing field, said Benjamin Cheong, a partner at Rajah & Tann Singapore LLP, which acts for ZhongAn in its deal with Grab.
"It's quite well known that Chinese companies are ahead of the rest of the world in software, artificial intelligence and blockchain tech," he said. "We believe that quite a lot of these companies have the expertise to do proper insurtech software which is not found in Singapore, so they feel that they can do better in the insurtech business and can complement the existing players."
Mr Ong of FSMOne.com noted that the Chinese insurers' innovations will likely disrupt local incumbents, forcing existing players to adapt and innovate as well or lose market share.
He said: "However, this should be good news for consumers, who stand to benefit from a wider selection of options for insurance policies, as well as better services as the local insurance industry embraces innovation."