However, the biggest hurdle Hong Kong insurance companies face before entering the mainland market is an asset requirement of US$5billion under the Closer Economic Partnership Arrangement (Cepa). Companies must also have an operating history of more than 30 years and have had a mainland representative office for more than two years.
"With the signing of a framework agreement on Guangdong-Hong Kong co-operation, which supports the entry of Hong Kong insurance companies into the Guangdong market, hopefully the Hong Kong government can help the industry to remove this asset requirement," says Chan Kin-por, a member of the Legislative Council's functional constituency for insurance.
"Given the fact that Hong Kong companies own thousands of companies and factories in Guangdong that would like to use the services of Hong Kong insurers, entry into the Guangdong market will create huge business opportunities for Hong Kong non-life insurance companies and intermediaries."
He says Guangdong's population of more than 95 million is an attractive proposition for life insurers.
"The entry of life and non-life insurers into Guangdong will create [economic] value for firms in Hong Kong and Guangdong as they can share their knowledge and experiences in areas such as customer service, product development, claims handling, underwriting and computer systems. Consumers in Guangdong will also benefit from greater choices in insurance products and services offered by Hong Kong companies," Chan says.
For example, in the non-life market, the sharp rise in vehicle ownership and the introduction of compulsory third-party liability is also expected to fuel demand. However, insurance companies setting up new businesses also face organisational challenges to attract, develop and retain staff across different functions. They also need to build service and distribution channels across a large geographical area.
Terry Lo Kin-wing, chief executive of HSBC Life Insurance, headquartered in Shanghai, says it will take the company some time to build brand awareness. However, HSBC is a leading foreign bank on the mainland and has an edge when introducing insurance products and trying to win customer confidence.
The 50-50 joint venture between HSBC Insurance (Asia) and Beijing-based National Trust principally acts as a bancassurer.
"The China market is at the centre of HSBC's emerging markets strategy," Lo says. "HSBC continues to strengthen its wealth management position in China by offering one-stop, financial and insurance services under the HSBC brand name."
While the industry is experiencing rapid growth, market competition is fierce, with domestic firms having established a solid footprint. "Despite the competition, the growth potential is enormous, but so are the challenges.
"For instance, people development and retention are two big challenges," Lo says.
Jason Sadler, managing director for Hong Kong insurance business at HSBC Insurance (Asia), says that while the new company has a national operating remit, it will seek operating licences for other mainland cities in phases. "This is a clear demonstration of our ability to react quickly and effectively in a changing market as well as deliver products that truly meet customer needs," he says.
As the first non-Chinese provider to obtain its own general insurance branch licence in Beijing, Zurich Insurance Brokers (Beijing) sees opportunities.
"There are excellent opportunities for Zurich to share insurance and risk management expertise in China, transferring know-how and supporting good governance, transparency and sustainable growth both within our own operations and in the broader market," says Ted Ridgway, chief executive of Global Life Hong Kong, part of Zurich's suite of financial services.
Ridgway says Zurich is building a multiskilled team on the mainland to support its strategy.
Johnny Chen, chief executive for Greater China/Southeast Asia at Zurich Insurance Group (Hong Kong), says insurance should keep pace with the growth of the mainland economy.
"Continuous product and service innovations are needed by the new market environment and enterprise demand. As the market continues to develop, the legal environment and the intermediary service system will also mature," he says.
