China's $50 Billion Opportunity for Auto Insurers

On a recent two-week trip, Kevin Goulding, head of Chartis China, American International Group’s Shanghai-based property-casualty business, scouted four regions where his company is considering opening its next branch as he prepares to sell car coverage for the first time. The combined population of these cities and provinces: 500 million. It’s that kind of number that delights the foreign insurers eyeing China’s $50 billion auto coverage business. “It’s an extremely large market and will also allow us to offer other products to consumers,” Goulding says.

Soon-to-be-relaxed rules in China mean foreign insurers will be able to sell mandatory policies that cover drivers’ costs if they harm another person or somebody else’s property. The compulsory insurance coverage is a loss leader for Chinese firms. To turn a profit, companies often bundle the mandatory coverage with more lucrative, voluntary insurance that covers damage to a driver’s own car.