PICC promotes online sales
By Zhang Dingmin (China Daily)
Updated: 2004-11-22 09:03

The Peoples Insurance Company of China (PICC) Property and Casualty Co Ltd, China's largest insurer, excluding life insurers, is promoting online sales to reduce costs and improve its bottom line.

Although Internet sales, enabled by its e-PICC platform launched two years ago, now account for less than 1 per cent of its total sales, the company expects the new channel's contribution to grow to 5 per cent as the market matures and clients become more familiar with online purchasing.

Internet sales will potentially help the insurer reduce a fair amount of acquisition costs, given its huge business scale. PICC Property and Casualty's direct premiums written in the first half of this year totalled 37.4 billion yuan (US$4.5 billion), according to its first-half financial statements.

Foreign experience suggests the cost of online sales is only 10 per cent that of setting up sales outlets. Online sales are also the most cost-efficient distribution channel in China and leads other channels such as intermediaries and direct sales by a broad margin, company executives said.

"E-commerce marketing has incomparable cost advantages," said Wang He, executive vice-president of PICC Property and Casualty.

But the new channel has yet to be recognized by China's growing ranks of Internet users, he admitted.

Chinese Internet users now number a staggering 87 million, 6.4 million of whom shop online on a regular basis, official statistics indicate. However, a recent survey by PICC Property and Casualty found that as many as 35.6 per cent of respondents were unaware that insurance is also available online.

"It shows that insurance e-commerce faces the problem of hugely insufficient investment in publicity," Wang said. "E-commerce is very difficult for insurance," he said in an interview, adding that online sales of insurance policies account for less than 1 per cent even in countries leading in this area, such as Germany.

"It requires effort from the entire industry, and will benefit society by reducing consumption of resources," Wang added.

Online sales will also reduce the local industry's reliance on traditional channels of agencies or bancassurance - insurance sales in banks -, where a commission war has been eroding insurers' profitability, analyst say.

PICC Property and Casualty will soon launch its second generation of e-series policies, which will feature travel-related products, company executives said.

The underwriting operations of China's first listed insurance company, which launched its initial public offering last year in Hong Kong, has witnessed strong growth this year. Turnover from the motor vehicle sector, the main pillar in the mainland non-life insurance sector, increased by a robust 4.8 billion yuan (US$578 million) in the first six months of this year.

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