Mis-selling risks grow with China's insurance sales army
By Lawrence White and Engen Tham
HONG KONG/SHANGHAI (Reuters) - Chinese insurers are on a hiring binge, recruiting an army of agents to sell their products to a burgeoning middle class, but the risk of mis-selling by inexperienced agents on commission could prove costly to the industry and its customers.
In an immature market with less than half the penetration of the United States, and about a quarter of Japan's, China’s insurers tapped the rising demand mainly by selling through banks, until regulators curtailed that channel last year over concerns that inexperienced customers assumed the products were as safe as bank deposits.
That triggered the recruitment drive as insurers needed direct access to customers to keep the $290 billion market growing. The largest, China Life Insurance Co (2628.HK: Quote) (601628.SS: Quote), increased its salesforce by 28 percent to nearly a million in the six months to June, while next in line, Ping An (2318.HK: Quote), swelled its sales ranks by 25 percent to 800,000.
Industry specialists say the drive brings with it the danger of a part-time salesforce whose enthusiasm for commissions outstrips their financial expertise or training.
"Agents in China rely largely on personal networks to sell products; there's not a high bar to hiring them, and some don't get much training," said insurance industry specialist Cliff Sheng, Greater China partner at consultant Oliver Wyman.
A spokeswoman for Ping An said the company has strict procedures for recruiting agents including a three-tier interview system, and a comprehensive training system to help agents acquire industry knowledge and professional ethics.
China Life declined to comment.