China, the world’s largest auto market, is likely to open its mandatory auto insurance market to foreign companies next year, chairman of the Insurance Association of China said on Wednesday.
The 200 billion yuan ($31.53 billion) auto insurance market is dominated by Chinese insurers such as PICC Property and Casualty Co. and Ping An Insurance, but regulators aim to introduce more competition.
“Foreign firms can only sell commercial auto insurance now. We want to make it possible for them to do both commercial and mandatory auto insurance,” Jin Jianqiang told Reuters on the sidelines of a business event in Taipei.
“We see a good chance to open the market next year to foreign companies, including those from Taiwan.”
Giving foreign companies access to the mandatory auto insurance market may help foreign insurers compete more effectively with Chinese rivals in selling commercial auto policies as car-owners tend to buy both products in one shop.
Commercial auto insurance companies sell policies to cover different types of risks but it is not mandatory for auto owners to buy these.
Analysts, however, say such a rule change won’t have a major impact on the sector in the near term, as Chinese insurers have a huge advantage in terms of sales networks and after-sales capabilities.
“If China opens the market, I don’t expect to see a big impact in the short term,” said Zeng Sufen, analyst at Industrial Securities Co.
“It takes time for foreign insures to steal market share from big players like PICC or Ping An.”
Currently, 19 foreign property and casualty insurance companies operate in China, including Tokio Marine & Nichido Fire Insurance Co., Chubb and RSA Insurance Group.
They recorded 4.28 billion yuan [$675 million] in total premiums in 2010, equivalent to just 1 percent of the premiums collected by 34 Chinese players.
In September, the China Insurance Regulatory Commission, the industry watchdog, published draft rules to reform the pricing of commercial auto insurance policies.
The mandatory insurance policies were introduced five years ago, and the government has been keeping a tight leash on pricing. As a result, insurers have been making losses for years due to rising costs of selling such policies, Chinese media have reported.