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Health Insurance In China And India - Size Does Matter

Health Insurance In China And India

On March 26, 2008, Beijing hailed the opening of its third airport terminal. Designed by the British firm Foster + Partners, the sleek, modem terminal is 3 km (1.8 miles) long, and 17 percent larger than all of London Heathrow's terminals combined, including Terminal 5, which opened the same week. Built at breakneck speed in four years by an army of 50,000 workers, Beijing's Terminal 3 is an architectural masterpiece to marvel at, with a lofty ceiling, full-height glass windows, and a roof formed in the shape of a dragon.

It was not so long ago that travellers to China resigned themselves to backward terminals, squat toilets, passenger lines from counter to curb, and lounges blanketed by curtains of cigarette smoke. Fifteen years ago, Beijing's airport was a subsized airport located in paddy fields northeast of the capital. Serving 100 flights a day, the terminal was dark, dingy, cramped, and smoky. 

Passengers took crowded buses from the terminal to airplanes on the tarmac. In some regional airports, computerized check-in systems were nonexistent, and passengers elbowed each other to board the plane - there was no assigned seating. 

James Kynge, who chronicled the rise ofthe Chinese economy in his book, China Shakes the World, recounted the days "when CAAC was known as China Airways Always Cancels. They never took off if there was a hint of bad weather." Health Insurance In China And India

By 2007, Beijing Capital International Airport was the ninth busiest airport in the world. The evolution of Beijing Airport chronicles the rising significance of China and the other emerging Asian giant, India. For strangers to these countries, the statistics of China and India are often mind-boggling, The size and speed of development of these nations have captivated headlines in recent years. In aviation, China's air traffic is expected to double every five years and India has seen an increase of 29 percent in the number of flights taking off from its airports between 2006 and 2007. 

The Airports Authority of India estimated that 100 million people travelled by plane in India in 2007, compared to just 43 million in 2003-04. Only a hermit living on a remote mountaintop can have failed to get the message that China and India are the "new superpowers" of economic development with real gross domestic product (GDP) growth set to expand by 8-10 percent per annum between 2007 and 2012. These growth rates are even more remarkable given that India and China comprise 37 percent of the world's population. Anyone focusing on China's 1.3 billion population needs to appreciate that India is on course to exceed this total.

Ask any historian though, and they will tell you that the significance of China and India is not a recent phenomenon at all. It is striking to see that China and India have been the leading producers in the world economy for over 1,700 years! It was only in the last two to three centuries that the two countries' economic production shrunk, as a percentage of global production. So what is normal? One interesting perspective is that China and India are merely regaining their historic position on the world's economic map.

The implication of China and India's growth for life insurers is that these two countries will represent much of the growth in Asia in the next decade and beyond, with likely sustainable double-digit growth rates. Today, large parts of the populations of both India and China are still poor but as incomes rise, more people will have the ability to save, and life insurance is often the first financial product these people purchase. Health Insurance In China And India

For life insurers, the potential market is analogous to looking at a reservoir that goes on forever. This does not mean that there will not be hiccups along the way though. Volatility, a hallmark of Asia, definitely applies to both China and India, and it would be foolhardy to think that growth will develop in a straight line.

Although there is enormous potential for market growth, the environment is already extremely competitive. These countries are certainly not easier markets to penetrate than other parts of Asia - in particular, for foreign players who have to deal with significant regulatory constraints - but the potential rewards are much greater.

China opened the window to foreign insurers in 1992; India eased its window open only since the turn of the millennium. Both nations have thriving domestic life insurance companies and foreign joint ventures - how will these markets play out for them? This is certainly going to be one of the most interesting questions for these markets. Most of the major foreign life insurance players are playing in both markets, they are not choosing between India and China because they realize that they need a presence in both countries. And they know that if they want to make an impression in these markets they have to take a long-term view. Some Chinese local players are also beginning to become serious contenders on the world stage both in terms of clout and size. The Indian players are not far behind.

Despite the enormous growth potential, the current size of the China and India life insurance markets is still moderate. In 2007, China and India respectively ranked as third and fourth in Asia, with gross premiums of US$68 billion and US$52 billion respectively, significantly smaller than Japan's US$325 billion or South Korea's US$85 billion, and comparable to Taiwan's US$50 billion. In terms of growth expectations for the next five years, China and India are expected to continue to improve their position to second and third respectively in Asia and within the top 10 globally.

Chinas gross written premium (GWP) grew at 17 percent and India's grew at 30 percent annually from 2002 to 2007, and we expect them to grow at an average of 20 percent for the next five years. This tremendous market growth has also enabled the emergence of local players with global significance: The two largest insurers in China, China Life and Ping An, are now among the largest global insurers by market capitalization (on June 30, 2008, this was: China Life: US$99 billion; Ping An: US$53 billion). The Life Insurance Corporation (LIC) of India has 200 million policyholders and had 1.1 million agents in March 2007. To find out more, you can check out Health Insurance In China And India.