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The insurance companies in China have already seen opportunity for business structure adjustment despite the financial crisis.

Transformation” and “adjustment” are the two key words for the Chinese insurance industry. Presently the domestic capital market is haunted by uncertainties. The calmer and more rational investment of the insurance companies and the eased development pace of the insurance businesses concerning investment and financing provided a good opportunity for the Chinese insurance companies to adjust their business structure.

H1 Data Better than Expected

Influenced by the international financial tsunami, most people hold a cautious attitude towards the prospect of the Chinese property insurance market. There was a large shrink in the number of newly built projects and newly sold vehicles. There were fewer and fewer policy holders in those two aspects. For a while, the market was infested with pessimistic views.

However, with the issuance of the central governments 4-trillion-yuan economic stimulus package and the Outline for Reviving the Auto Industry, the property insurance companies in China saw the twilight of benefiting from them. According to the data from the China Insurance Regulatory Commission (CIRC), the Chinese insurance industry saw a large increase in the income from the premiums in the first half of 2009.

Whats noticeable is that the large property insurance companies, which had determined their transformation strategies, were gradually approaching stability in the scale of premiums and market share after 6 months adaptation and run-in. The positive effect brought by the transformation is emerging. If reviewing those companies market transformation strategies carefully, we will find that the sustainable development can be realized when the company focuses on the field where it has advantages and brings the special superiority in risk guarantee and long-term assets liability into play.

Take China Pacific Property Insurance Co., Ltd (known as CPIC Property) for example. Early in the last year, the company has already fixed its target and strategies of transformation. According to the data issued by the CIRC, the company saw an 18.62 billion-yuan (USD 2.72 billion) income of premiums, up 18.38% year on year. The growth rate was 2 percentages higher than the average rate of the whole Chinese insurance industry. Therefore CPIC still stood at the second place among the domestic property insurance companies. Judged from the detailed data of the companys operation, the companys operation level, business quality and profitability were all increased. Take the same company for example again. In the past five years the compound growth rate in the companys annual average premiums was 19%. The rate of compensation in the same period was only 61.7%. The rate of composite cost might be controlled within 100%. This is different from the other property insurance companies which suffered from covered losses. In those years market situation, the Chinese property insurance companies are generally haunted by the huge expense and loss ratio which result in the huge losses. CPIC Property is featured with market dominant place, abroad customer base, excellent distribution ability and the centralization process of strict price fixing, insurance coverage and settlement claim, making the company different from the competitors in the same industry.

The insider of the company said that the vehicle insurance market saw betterment in complying with the regulations in the second half of 2008 with the initial implementation of the supervision policies. It was mainly reflected in the smaller discount of the insurance policies and the stricter enforcement of the commission in distribution channel. Recently the supervision policies had its effect generated, which will be maintained and consolidated in a certain period. From the long-term view, the recovery and betterment of the property insurance market order relies on all the insurance companies carrying out the insurance acceptance principle.

Intensified Management: a Necessary Path for Vehicle Insurance to See Profits

It is known to every one that the vehicle insurance is the most important business source of the Chinese property insurance companies. “The company who controls the vehicle insurance dominates the whole insurance market”. These words have been generally recognized in the industry. However, many companies misunderstood the meaning of this sentence and partially emphasized on the importance of business scale, forgetting the intensified management over this business. The result was the high loss ratio which made it difficult for the vehicle insurance to see profits and even affected the whole companys profit prospect.

Driven by the short-term profits, the m alignant price competition in the vehicle insurance market accumulated a large number of risks. In that situation, some property insurance companies have to deal with the problems of extremely fast development pace, preference to scale rather than performance, extensive development pattern, irrational product structure, insufficient development potential and worse solvency. The recent years market performance also explained the seriousness of these problems.

As the radical property insurance companies who took the market share with m alignant price competition lost their competitive power, the lower concentration in the property insurance market was somewhat improved. Some large insurance companies, including Chine Pacific Property Insurance Company, have got stable share in the Chinese vehicle insurance market.

It is known that the large insurance companies also put great effort in improving their own strength. They exerted the intensified management over their vehicle insurance businesses. For example, CPIC Property enhanced the management of the insurance acceptance to improve the premium adequacy ratio. It also adopted the centralized management of the settlement claim to improve the efficiency in this respect. It also built up a cost control system to make the trinity strategies of improving the profitability of vehicle insurance more effectively. Meanwhile, the company also implemented a series of measures to promote the development of vehicle insurance business.

In the past years, many insurance companies tried to change the vehicle insurance business and got certain achievements. However, some companies lost confidence when their market share decreased. So they gave up the adjustment plan.

CPIC Property also suffered the pain and loss in the early period of transformation. But now the positive influence can be seen by everyone. Its Ningbo branch successfully reduced its composite cost ratio from 123.6% in January to 99.8% in June. The commercial insurances composite cost ratio also decreased to 90.9% in June. Its loss ratio of operation accounting also decreased from 63.26% in January to 61% in June. Whats more delightful is that the company successfully increased the quality together with the market share, which increased by 2.6% to 18.76%.

Dig up Profits: Enhancing Non-vehicle Insurance Businesses Is Essential

In the past, since the vehicle insurance took most of the operation of the property insurance companies, not enough attention was paid to the non-vehicle insurance businesses. Now, there are more and more market main bodies and the competition is becoming more and more furious. The various property insurance companies have to spread the other business other than vehicle insurance.

Because of the lack of regulations, the Chinese non-vehicle insurance market was soon trapped into chaos. The CIRC began to attach importance to this situation. Many measures have been or will be taken.

The large property insurance companies have more experiences to deal with this situation. The difficulties in the non-vehicle insurance sector keep many companies from the door. Therefore, the large property insurance companies have larger spaces to develop their businesses.

Judged from the data, CPIC Property earned the revenue of 8.194 billion yuan (USD 1.20 billion) in 2008, up 17.1% year on year. In the first half of 2009, its businesses of liability insurance and short-term accident insurance saw faster growth than the average level of the industry.

In addition, CPIC Property has unparalleled advantages in large projects with commercial risks, which can bring the sharpest brief the strength of a property insurance company. It is known that CPIC Property has accepted the insurance of the new lines of Beijing subway and some other large commercial banks.

The success of CPIC Property provides a vivid sample for the other Chinese property insurance companies to find their own ways to make their transformations able to succeed. It is the best way for them to get rid of the current difficulties.