China’s new ‘two child family’ policy, unveiled on November 12, will expand the market for banks and insurance companies which are expected to ramp up front office and product staff to meet the expected increase in demand for financial service products.
The proposal – it is by no means a done deal yet, as it needs to be voted on by regional People’s Congress structures – will allow parents to have a second child – but only if either the mother or the father are single children themselves. Research suggests this could mean 10 million more babies within five years, with parents spending an additional $790 billion on them.
Investors are already counting their chickens, saying the potential ‘Chinese baby boom’ should help the country’s life assurance and healthcare companies and therefore their share values.
Charles Rue, associate director at Page Group says there is unlikely to be a short-term surge in hiring. But, he says, the new policy will definitely provide long-term benefits to the insurance market in China.
“Having a second child will probably make parents rely more heavily on credit and especially consumer loans to finance their purchases. Banks and consumer lending organisations will be interested in tying the mortgage to a credit insurance product to protect against default risks.”
This means that the credit life protection market should be more active in the medium term, and candidates with a bancassurance, automobile finance or consumer lending background should be in higher demand, Rue says.
Els Ren, a deputy manager at Shanghai Trusource Insurance Brokers, says the new policy creates the perfect opportunity for foreign companies to enter or expand into the China market.
“It will create a market for insurance products focused on children, and it may be better for foreign insurance companies to bring new types of insurance in China for this market segment.”
He points out that local companies offer “poor coverage”, which is why fewer people are buying life insurance in China. “This market needs more fresh blood. “
Leo Sun, head of strategy at ICBC AXA has a different take on it. “One of the key consequences of the one-child policy is the accelerating aging population, which will in turn increase the demand on retirement services such as long-term savings (i.e. annuity products) and protection protects. Government is planning a deferred tax on annuity products, which will directly increase demand.”
Rue says that hiring will be influenced by two major drivers emerging in the China market: “The increasing participation of local banks in the insurance market (either as distributors with bancassurance channels or as major owners of underwriters) and the need for insurance firms to enhance their financials by keeping their cost slow and increasing their premium margins.
“Therefore we anticipate strong demand for candidates with a background in bancassurance and alternatives sales; retail marketers from a consumer background, brand and web marketing managers, credit life product developers, and technical and specialty underwriters, among others.”
Sun agrees, adding that insurance sales in China are now dominated by bancassurance and e-commerce. “This will reduce the demand for insurance agents. Given the trend of insurance pricing liberalisation, there will be more product innovation and this will drive demand for product developers.”
But with a caveat. Leo highlights the unique nature of the China market, and this means candidates must have local knowledge and language skills.