On December 11, 2001, the day China joined the World Trade Organization (WTO), New York Life International secured approval to establish a joint venture insurance company in China. 

Half a month later, it announced the selection of Haier Group China's leading home electric appliance producer to be its joint venture partner. Twelve months later, the Shanghai-based joint venture sold its first policy in China.

"That was the fastest creation of a life insurance company in China," says Raymond Sander, the company's senior vice-president of international government affairs. Generally such a process takes about 16 to 18 months.

"The experience of New York Life International is a very strong demonstration of the Chinese Government's ability and commitment to implement its WTO obligations," he told China Daily. "China deserves an A-plus in its opening of the insurance market."

The comment came as some WTO members and foreign companies called for further opening of the Chinese market.

Take the US Chamber of Commerce, the world's largest federation representing nearly 3 million companies, as an example.

Although admitting it was "encouraged by progress" made by China in fulfilling its WTO commitments, the chamber expects extra efforts from China.

"We see progress with China's WTO efforts but not enough," said Myron Brilliant, the chamber's vice president for Asia.

However, insurance is one of the sectors with the highest satisfaction levels among foreign companies. China has passed two formal reviews by the WTO and, during both reviews, the insurance sector was not singled out for questioning.

Sander says he has reason to be optimistic.

In 2003, total premium income of its joint venture Haier New York Life Insurance Co Ltd reached 83 million yuan (US$10 million), doubling his earlier expectations.

Moreover, the result was achieved despite the outbreak of severe acute respiratory syndrome (SARS), a deadly flu-like disease which forced many companies to halt their normal business operation and shelve their business plans. At Sander's joint venture, agent recruiting was suspended during that period.

"I am very satisfied with the performance of the joint venture and very optimistic about the Shanghai market," Sander said. He also expects the second-year performance to double that from the first year.

Meanwhile, the joint venture's success is encouraging the company to look for a second operation in Chengdu, capital of southwest China's Sichuan Province, also with Haier as its partner.

"Haier knows China well and has a great marketing concept and has been very customer-oriented," Sander said.

Based in Qingdao, east China's Shandong Province, Haier has become one of the few Chinese brands to establish a major position in the world market. It has been assessed as one of the most valuable brands in China.

"Haier knows China and we know insurance," Sander said. New York Life, now 156-years-old, is in turn the largest mutual life insurance company in the United States.

"Coming together, we make a strong company which knows both insurance and China," he said.

He describes his company's decision to locate its second operation in Chengdu as a response to the Chinese government's call to go west.

But the launch of the Chengdu venture will depend on the issuance of a new regulation by the China Insurance Regulatory Commission (CIRC) to lower capitalization requirements on foreign insurance companies to enter or expand in the Chinese market.

Officials with the CIRC confirmed that the commission is working on the regulation and Sander believes the new rules will come out very soon.

Meanwhile, the commission is working closely with the People's Bank of China, the central bank, on the possibility of allowing foreign insurance firms to negotiate one-year-up deposit agreements with banks, an instrument in which many local insurers currently hold a big part of their funds.

Sander called the revision a "big step forward" and "a positive indicator" of the Chinese government's willingness to implement its WTO obligations.

However, he also hopes China can loosen its restrictions on foreign insurance companies' branch and sub-branch operating structures.

China's current regulations do not allow insurers to sub-branch off of a branch operation, except within a licensed territory.

A change in the current practice will enable foreign insurers to achieve the economies of scale necessary to build a truly national business like their domestic counterparts, Sander said.

Since China joined the WTO, nine foreign insurance firms have entered the Chinese market, bringing the total number of foreign insurers operating here to 37. They include 20 life insurance joint ventures, 14 non-life branches of foreign insurers, and three foreign reinsurers.

Sander said he believes the entry of foreign insurance companies will impose "no risk" to domestic insurance companies.

Instead, domestic and foreign companies could together develop China's insurance market from "a small pie" into "a seven-layer cake."

"Chinese insurance companies are very adaptable to foreign competition and they know how to learn from foreign rivals," he said.

The entry of foreign rivals has pushed domestic insurance firms to develop new products, as well as new management and new marketing strategies.

Despite rapid growth in recent years, the Chinese market still has huge potential and the insurance penetration rate remains very low. These factors are very attractive to New York Life, which has a special interest in emerging markets where the middle class and an understanding of insurance products are both growing.

(China Daily February 12, 2004)