Foreign firms wanting to access Chinese auto insurance market

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So far the Chinese auto insurance market has been controlled by the big Chinese companies such as PICC and Taiping, but smaller companies such as Da Zhong insurance are starting to enter the market. Now the game is about to change in a big way as foreign insurance companies are planning to enter the Chinese market:

China’s insurance regulator is considering opening the market for compulsory automobile insurance to foreign firms, said three people with knowledge of the matter.

The China Insurance Regulatory Commission may allow foreign firms to offer mandatory liability insurance, said the people, who declined to be identified because the decision isn’t final. Foreign insurers, which can now only offer some optional car insurance products, are losing out to local firms as drivers tend to choose the same company for both non-compulsory and mandatory coverage.

Easing the rules would allow overseas insurers including American Insurance Group Inc. to boost their business in the world’s biggest car market, and increase their share from 4 percent of the $164 billion insurance market six years after it was opened under World Trade Organization commitments. Auto insurance generates more than 70 percent of revenue for PICC Property & Casualty Co., China’s biggest non-life insurer.

“The government is no longer worried about foreign companies dominating China’s insurance market,” said Tuo Guozhu, a professor with Beijing-based Capital University of Economics and Business. The proposed relaxations “reflect their confidence in the nation’s own insurance industry.”

Foreign banks including Citigroup Inc. have also trailed Chinese rivals, whose strong ties with local clients and nationwide networks helped defend their dominance.

PICC added 0.7 percent in Hong Kong trading as of 11:23 a.m. local time. The shares of China Life Insurance Co., the world’s biggest life insurer, were unchanged in Hong Kong.