Exploring the future path of China's insurance intermediary industry under the wave of separation between production and marketing

Today, when the digital wave is sweeping the world, the insurance industry also stands at the crossroads of transformation. Digitalization has not only reshaped traditional business processes, but also brought unprecedented opportunities to the industry. In this context, whether domestic insurance intermediaries separate production and marketing and integrate with the international community, or whether to directly reach users through digitalization or the Internet model is a difficult problem facing all practitioners.

Exploring a new path for the industry: the choice between “separation of production and marketing” and “going to the middle layer”

Going back to April 2015, the 14th session of the Standing Committee of the National People's Congress amended some provisions of the “Insurance Law of the People's Republic of China”, abolished the qualification approval and approval of insurance agents, insurance brokers, etc., and the insurance industry ushered in an important turning point in the separation of production and marketing. The encouragement of regulatory policies has brought the insurance intermediary industry to an unprecedented moment of glory. The implementation of the separation policy between production and marketing has promoted the deepening of cooperation between insurance companies and intermediaries. Intermediaries can focus on market expansion, customer service and product innovation, while insurance companies focus on product development and risk management. This transformation has not only improved the operating efficiency of the insurance market, but also promoted the diversification and individualized development of insurance products.

In the context of the separation of production and marketing, the insurance intermediary industry has rapidly emerged as a bridge connecting insurance companies and consumers. With more flexible basic laws and richer product portfolios, intermediaries attract a large number of insurance agents to leave insurance companies and join the army of insurance intermediaries. The insurance intermediary industry experienced rapid development from 2015 to 2022, and achieved remarkable results in terms of overall premium income, premium business structure, and number of insurance marketers.

The rapid development of insurance intermediaries has huge conflicts of interest with traditional insurance company pyramid marketing organizations. In addition to the fact that many insurance intermediaries themselves are not strong, there are certain problems in terms of management ability, ability to cope with risk, and ability to operate for a long time. Under the economic downturn and the impact of the pandemic, the exposure was particularly obvious.

At the same time, the economic downturn has also put tremendous operating pressure on the investment side of insurance companies, and industry authorities have taken frequent steps to maintain market stability. First, in January 2021, the China Banking Insurance Regulatory Commission issued the “Measures for the Supervision of the Informatization Work of Insurance Intermediaries”, which aims to strengthen the supervision of insurance intermediaries and raise the level of informatization work and management of insurance intermediaries. Beginning in the second half of 2023, the “integration of reporting and banking” has had a huge impact on the industry. The continuous reduction in interest rates on products has greatly affected consumers' enthusiasm to buy, and the drastic reduction in intermediary channel fees has dealt a fatal blow to the entire intermediary industry.

Insurance Intermediary Industry: Exploring and Learning from Overseas Success Models

From encouraging the development of insurance intermediaries to “improving quality”, facing the double pressure of a “integrated reporting and banking” regulatory policy and market competition, how domestic insurance intermediaries can position themselves and explore sustainable development paths has become critical. From a global perspective, the “giant” international insurance brokerage, VistaSin (MMC.US), has provided a model to refer to.

As the world's largest insurance brokerage company, Vistasin's innovative approach is representative in the international insurance brokerage industry. Vistasin adheres to a professional-oriented rather than sales-oriented, technology-driven development concept. The company is committed to providing customers with high-quality insurance solutions through professional knowledge and technical means. Vistasin takes “risk” as the starting point and believes that insurance is one of the solutions to risk. This concept enables Vistaxin to thoroughly understand customer needs and provide targeted risk management services. Vistasin's business structure includes two major segments: risk and insurance services, and consulting services. This diversified business structure enables Vistaxin to provide a complete ecosystem from insurance product sales, product design, risk management to a range of additional services.

In 1959, Vistasin Group bought Mercer and made it a member of the Vistaxine Group. Through the merger and acquisition of Mercer, Vistasin Group has further expanded its scope of business, particularly in the field of human resources management consulting. The addition of Mercer enables the Vistaxin Group to provide customers with more comprehensive and professional services. Mercer has an extensive customer base and business network around the world, which helps Vistasin Group further expand its global business layout and enhance its position in the international market. Through mergers and acquisitions of other outstanding companies, Vistaxin Group has not only achieved rapid business growth and diversified development, but also further enhanced its talent reserves and technological strength. In the future, Vistasin will continue to adhere to this strategy and continue to explore and expand new business areas and market opportunities.

Coincidentally, as one of the world's leading insurance brokerage companies, AON.US also provides customers with services such as risk management, human resources consulting, investment and integrated solutions to create value for global customers. On December 21, 2023, Aon announced that it will acquire American insurance brokerage firm NFP for US$13.4 billion. The total consideration includes $7 billion in cash and $6.4 billion in Aon shares. Mergers and acquisitions have brought significant business growth and increased market share for Aeon. Through mergers and acquisitions of high-quality assets such as NFP, Aon will further strengthen its leading position in the global insurance brokerage market.

Looking at the international market, there is indeed a lot of market space in the insurance intermediary sector, thanks to the continuous expansion of the global insurance market and the increase in consumer demand. Through investment, mergers and acquisitions and diversified development, insurance intermediaries can maintain a steady growth trend.

Where are China's insurance intermediaries headed?

Currently, the Chinese insurance intermediary market has the following typical business models:

1. Internet insurance model. As Internet traffic is becoming more and more expensive, this kind of platform does not rely on its own traffic to drive business growth, and it is difficult to solve the problem of continuous profit. In particular, the “Rubik's Cube” products created by certain platforms have greatly damaged the reputation of the industry.

2. Relatively traditional agent model. The level of development of these institutions varies, but without exception, they are all moving forward with a heavy burden in the wave of “integration of reporting and banking.” We can see that the biggest company in the industry, Pan-China, experienced a certain decline in both performance and stock prices, and even sold to foreign consortia.

3. A new model of ecological co-creation. Typical examples are Zhongmiao Holdings (01471), the first insurance intermediary platform listed on Hong Kong stocks. Their core is to build a unique ecosystem and achieve deep cooperation with insurance companies. Provide a diverse product portfolio for different users and improve the user experience through continuously improving digital capabilities. Judging from the results disclosed by the company, Zhongmiao is still maintaining a high growth rate in the general environment of economic downturn. This model of ecological co-creation seems to be more resilient.

In fact, no matter what kind of business model, continuously meeting the needs of users and improving the user experience is the real core. Insurance intermediary platforms must use their advantages to allow insurance users to buy the most suitable products at the most reasonable price, rather than simply pursue rapid expansion of their own scale, and follow the old path of buying traffic and building a sea of people.

Similarly, drawing on foreign industry experience, diversified development and the ability to invest in mergers and acquisitions is very important to the future of an enterprise. This requires insurance intermediaries themselves to have good cash flow and continuous hematopoietic capacity. Of course, becoming a public company is a prerequisite for operating in this market.

In summary, the future development of China's insurance intermediary industry requires enterprises to continuously innovate service models, deepen cooperation with insurance companies, and provide better services to users.