Why Foreign Life Insurers Did Not Achieve Their Ambitions in China: Structural and Operational Obstacles

China’s economy has experienced rapid growth in the past thirty years. A highlight is in the growth of its insurance industry, whose premiums increased at an annual rate of around 30%. Naturally, people would think that the foreign insurance companies who entered the Chinese market during this period should have achieved impressive performances, especially given that they are competing with the domestic insurance companies who do not have the advantage of experience and technology. However, the reality is that foreign insurers, especially foreign life insurers, often found it difficult to expand their market shares in this emerging market. Many foreign life insurers experienced frequent management turnover and some even withdrew from the Chinese market. This paper aims to analyze this interesting market phenomenon from two different perspectives: (1) structural obstacles including the regulatory environment and the influence of the recent financial crisis, and (2) operational issues faced by foreign life insurers, including operational efficiency, shareholding structure, and distribution channels. Based on these analyses, we offer several suggestions to the market participants and regulators.