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CNinsure Inc. aims to boost business coming from commercial lines and to increase business contributions from the insurance brokerage segment to 10% of its total net revenue in the next five years, said Chairman and Chief Executive Yinan Hu.
The Nasdaq-listed Chinese insurance intermediary has optimized its business structure by setting up a new insurance brokerage business division in order to expand its product offerings from retail to commercial lines, on top of its existing four business units, Hu told BestWire.
Although CNinsure is the largest insurance intermediary in China in terms of revenue, Hu said a majority of the revenue come from the company’s retail agency and claims adjusting business.
“Brokerage business is largely an untapped area for CNinsure though we currently have three affiliated brokerage firms,” said Hu. By establishing a separate business unit, the chairman said the company will devote more resources to develop commercial insurance in order to further diversify its sources of revenue and increase the sustainability of its business model.
The insurance brokerage team will focus on providing property/casualty, liability, credit and guarantee, cargo, employee benefits and specialty risk insurance and reinsurance services to corporate clients.
Hu said he believes finding experienced market experts is the key to the company’s business expansion.
“We intend to enhance our insurance brokerage capability by recruiting top-talent entrepreneurial brokers, as well as acquiring existing insurance brokerage firms and setting up joint ventures with entrepreneurial sales professionals,” Hu said.
The recently formed brokerage division will be led by a group of professionals who used to work for insurance companies and have more than a decade of experience in providing risk management and reinsurance services to enterprises and organizations from various industries, said Hu.
“Their strong client relationships and deep expertise will strengthen our presence in the insurance brokerage market and enable us to grasp more market share in the insurance intermediary market,” he said.
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CNinsure saw premiums generated by insurance brokers in China rise to 24.5 billion yuan (US$359 million) in 2009, from 10.6 billion yuan in 2006, representing a compound annual growth rate of 32.4%. Premiums rose 41.9% year-on-year to 5.11 billion yuan in the first quarter of 2010.
“We have seen substantial growth in the insurance brokerage market over the past years, while premiums generated by insurance brokers in China only accounted for 1.35% of the total insurance premiums as compared to approximately 30% in more developed markets,” Hu said.
As China’s economy continues to grow and enterprise owners become more aware of the need to protect themselves from potential loss, Hu expects there is still “huge upside” potential in the Chinese insurance brokerage market.
“We have noticed that insurance brokerage markets in the U.S. and the United Kingdom are pretty much dominated by several giants like Willis, Marsh and Aon, while in China, the market is quite fragmented,” he said.
In China, among the more than 300 brokerage companies that have commercialized operations, Hu said “none have really established a dominant position.”
CNinsure’s leading position in the retail agency market, including its network and strong customer relationships as well as its strong capital position, will enable the Guangzhou-based company to “consolidate the market and expand its presence in the country,” according to Hu.
In May, CNinsure formed strategic partnerships with the largest Chinese nonlife insurer, PICC Property and Casualty, and Taiping General, a subsidiary of China Taiping Insurance Group, for product development and distribution, data sharing and outsourcing of claims adjusting services.
Chunling Wang, vice president and head of CNinsure’s property/casualty business unit, said the partnership with PICC will increase predictability for resources allocation, improve revenue and earnings stability of the company (BestWire, May 17, 2010).
CNinsure earlier said it expects its net profit to grow by around 35% for the second quarter of 2010, compared with the corresponding period of 2009.
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