Understanding the Changing Life Insurance Market in China
Walter H. Zultowski, Ph.D.
WZ Research + Consulting, LLC
SOA Life & Annuity Symposium
May 19, 2014
I. Background
II. Methodology
III. General Findings
IV. Market Segmentation Results
V. Application of the Research
I. Background
• The economy of China has changed dramatically
– Growing middle class
– Greater urbanization of the population
• Concurrently, life insurance is changing
– Traditionally, discussion of death was taboo
– Most life insurance was endowment, savings-oriented products
– Largely sold through banks
• The life insurance business is changing
– Emergence of death-protection products
– Expansion of distribution channels
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• Purpose of the research
– Document the changing life insurance business in
China
– Apply market segmentation methods to understand
today’s life insurance consumer in the country
• A “First of Its Kind” such study in China
– Up until now most life insurance market research
has been census data and/or general attitudinal
research
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• This research was commissioned by the SOA, and
funded by:
– The International Section
– The Marketing and Distribution Section
– The Research Expanding Boundaries Pool
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II. Methodology
• 1,989 completed surveys across 16 cities
• 18 minute, online questionnaire
• Horizon Research (Beijing) conducted the data
collection using their on-line panels
• Mathew Greenwald & Associates conducted the data
analysis
• Data collected between December 6-15, 2013
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• Families selected for the study were:
--Married couples
-- Age 25 – 50
-- At least one child, age 0 – 18
-- Annual household income between RMB 60,000
and RMB 360,000 (Roughly 10,000–60,000 USD)
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Cities Represented
•Beijing
•Chengdu
•Chongquing
•Dalian
•Shanghai
•Sheuzen
•Shijiazhuang
•Tianjin
•Guangzhou
•Hangzhou
•Jinan
•Wuhai
•Xiamin
•Xi’an
•Nanjing
•Zheugzhou
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Caveats to the Research
• An attempt was made to differentiate life insurance
as a protection-oriented product from a savingsoriented product
• Term “death benefit life insurance” was used
• Didn’t differentiate as well as had been hoped
because endowments typically have a death benefit
component
• Could have been some confusion in the respondents’
minds which may have washed out some of the
results
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III. General Findings
How important is purchasing death benefit life
insurance becoming to…
Your Community?
Your Children?
5%
6%
67%
27%
13
62%
How important is it for a family to purchase death
benefit life insurance to protect loved ones in the
event of the insured’s death?
26%
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“I use life insurance primarily for saving money.”
Strongly Agree
Agree Somewhat
Neutral
13%
33%
33%
Somewhat Disagree 17%
Strongly Disagree
4%
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46%
Life Insurance Ownership
Percentage Owning…
Any Individual Life Insurance
72%
Endowments
Death Benefit Life Insurance
62%
46%
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Attitudes Toward Death Benefit Life Insurance
“Your family has enough death benefit life insurance in the event
that you or your spouse dies”
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Attitudes Toward Death Benefit Life Insurance
(cont’d)
“Which of the following best describes how you feel about the total
amount of death benefit life insurance coverage your household
currently has”
You have much more than you would like
6%
You have a little more than you would like
30%
You have the right amount
38%
You have a little less than you would like
14%
You have much less than you would like
6%
You have no insurance and are comfortable with that
4%
Don’t know
2%
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Future Purchase Intentions
“How likely are you to purchase more death benefit life
insurance coverage in the near future?”
62%
23%
4%
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Observations From the General Findings
• The life insurance business in China is changing, and
will continue to become more diversified
• There is significant opportunity for future life
insurance sales
• Consumers are not homogeneous in their attitudes;
they are all along this change continuum
• To effectively market to them in terms of product,
messaging, and distribution methods, companies
need to be able to identify different groups and
approach them accordingly
• Thus…the need to segment the market
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IV. Market Segmentation Results
Market Segmentation Methodology
• K-means cluster analysis
• Resulted in the identification of three segments
• Respondents classified based on their responses to
eight questions
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Three Segments of Young, Middle Market Life
Insurance Consumers in China
33%
26%
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Snapshots of the Three Segments
“Uninterested” (33%)
• Least concerned with family’s financial security
• Lowest interest and belief in life insurance
• Much less likely to own any type of life insurance
• Lowest level of financial product knowledge
• Lower income; less educated
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Snapshots of the Three Segments (cont’d)
“Life Protectors” (26%)
• Most appreciation for the value of life insurance throughout one’s
lifetime
• Most likely to buy for security, peace of mind
• Most oriented toward the concept of death protection
• Also own endowments; have an expanded view of life insurance
• Oldest; best educated; more likely female
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Snapshots of the Three Segments (cont’d)
“Life Investors” (41%)
• Own more endowment and death benefit policies than the other
segments
• Less likely to see life insurance as a part of their life-long planning
• Have a broad view of life insurance, but more for “temporary”
needs
– To borrow against
– Business purposes
– Pay for a child’s education
• Most likely to buy life insurance as a savings vehicle
• Demographically between the other two segments; more likely
male
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“I use life insurance primarily for saving money.”
% Strongly Agree/Agree
Total (46%)
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“Life insurance serves only a temporary need until
such time as the kids leave the house or the
mortgage is paid off.”
% Strongly Agree/Agree
Total (45%)
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“It is very important to own death benefit life
insurance.”
% Strongly Agree/Agree
Total (34%)
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“Your family has enough life insurance in the event
that you or your spouse dies.”
% Very/Somewhat Confident
Total (59%)
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“Thinking about the last time you purchased
individual life insurance, was the amount you
purchased based primarily on….”
Total = 65%
Total = 33%
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“Are either you or your spouse covered by one or
more life insurance policies that were…
Total = 51%
Total = 36%
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V. Application of the Research
Application of the Research
• Collect responses to the eight questions:
– Asked by agents
– Asked by a call center rep
– Answered by prospect on a website
• Categorize prospects into the three segments
• Develop different strategies, messaging, and
products for each segment
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Marketing to the Segments
“Uninterested”
• A significant challenge
• Role of education
• Basic term life insurance protection
• Need to address trust, and safety/security of life insurance
companies
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Marketing to the Segments (cont’d)
“Life Protectors”
• Targets for existing coverage “check-ups” and updates
• Targets for new products
• Market to female decision-makers
• Consider marketing to them online or thru call centers
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Marketing to the Segments (cont’d)
“Life Investors”
• Disturb them regarding the need for death benefit life insurance
• Position life insurance as the “bedrock” of a financial plan
• Target with a better trained agency force
• Do a better job of targeting online
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