WANG BIN has gained the undesirable distinction of becoming China’s first “tiger” of the year. The term refers to a senior official ensnared in a corruption probe (as opposed to a “fly”, a lower-level cadre). Mr Wang, the chairman and Communist Party secretary of China Life, one of the world’s largest insurers, is a big catch. On January 8th the Central Commission for Discipline Inspection, China’s corruption watchdog, announced that he was under investigation for serious violations of law and party discipline—bywords for corruption. (China Life said in a statement that it firmly supported the probe.) Conviction rates for high-profile, publicly announced investigations such as this are 100%. One of the biggest tigers of finance so far, Hu Huaibang, the former head of China Development Bank, is imprisoned for life. Another, Lai Xiaomin, the former chairman of a state asset manager, was put to death. The probe into Mr Wang is only part of China’s long crackdown on insurers. Much of that attention has been warranted. Not long ago the fastest-growing segment of the industry, which holds about 25trn yuan ($3.9trn) in assets, was high-risk, high-return investment products, rather than conventional policies such as life and health insurance. Premiums on short-term policies were often used by companies to buy property and trophy assets overseas, leading to dangerous mismatches between assets and liabilities. A whirlwind crackdown starting in 2017 at the direction of Xi Jinping, China’s president, put a stop to many of the excesses. The chairman of the industry watchdog was thrown in prison, and the regulatory body was taken over by its banking counterpart. The chairman of Anbang Insurance, which had gone on a foreign-acquisition spree lasting several years, was arrested and his company was bailed out and nationalised, in order to prevent spillovers to the rest of the financial system. Regulators have become more stringent over time. Many high-margin investment products have been banned. And investments made by the companies are closely monitored. As soon as new products prove popular and profitable, regulators often step in to make sure they become less so. That is starting to make the job of providing insurance harder to do. Products that cover accidents, for example, were until recently a booming corner of the industry. This came to a halt when new rules required insurers either to raise their loss ratios (claims as a share of premiums earned) or lower their premiums. Vehicle and health insurance have also faced more red tape and have seen a rapid decline in premiums, too. Insurers now find it increasingly difficult to plan for the long term because “the rules of the game change almost every year,” says Sam Radwan of Enhance International, a consultancy. There have been knock-on effects. Chinese insurers rely heavily on vast armies of agents to sell products. By 2018 China Life had amassed more than 2m agents, about the same number as active personnel in the military. Cheap labour and ever-fatter premiums made the industry incredibly profitable. In 2019 the profits of Ping An, the world’s largest insurer by market value, surged by about 40% in a single year. Since then, however, agents have become hard to hire and retain. Tighter rules and shrinking premiums have made the job less lucrative for salespeople, who rely on commissions. The pandemic has discouraged in-person meetings and has made it harder to make sales. At the same time, as premiums have become compressed, big insurers have sought to sell higher-value products to wealthier people. This requires skilled agents with a knack for working with rich clients—something few companies have in great numbers, says Li Jian at Huatai Securities, a broker. The impact has been devastating. China Life has shed more than 1m agents since the start of 2018, with nearly half the exodus taking place in 2020. About 700,000 agents left Ping An between 2019 and September 2021. Overall, about 30% of salespeople have departed from the industry over the past three years. All this has turned a booming industry into a backwater. China Life’s value of new business, a gauge of profitability, fell by 19.6% in the first nine months of 2021, compared with the same period in 2020. Net profits were about 55% lower in the third quarter of 2021 than they were a year earlier. Ping An has reported similarly gloomy results. The investigation into Mr Wang has industry executives asking who might be next. But that is probably not the only thing keeping them up at night. ■
