French agricultural insurance giant Groupama SA unveiled its first Chinese branch in Chengdu, Southwest China's Sichuan Province Tuesday, launching its foray into a vast new local market.
Groupama became the first European insurer a year ago to be allowed to operate a wholly-owned non-life insurance business in western China. Chinese insurance authorities are pinning high hopes on the French insurer to help expedite growth of long-dormant agricultural insurance in the local market.
The Chengdu branch will sell three product packages in the first stage in the agriculture-heavy province, which cater to rural and urban residents, as well as small and medium-sized enterprises and private commercial and industrial businesses, the company said.
"We believe in China's development and the huge potential of the Chinese insurance market," said Jean Azema, chief executive officer of Groupama. "The commencement of the Chengdu branch is the first step of our growth in China."
Azema said his company also plans to apply for a life insurance licence in China to supplement risk coverage for farmers. Life insurance and non-life insurance are separately regulated in China.
The insurance coverage for Chinese farmers and agriculture is highly insufficient to protect farmers from risks as even the long-dominant providers have largely withdrawn from the risky business in the absence of government support.
Premiums from agricultural insurance totaled a meagre 460 million yuan (US$55 million) last year, 0.5 percent of all property insurance premiums.
The authorities recently announced the establishment of three specialized local agricultural insurance companies in an attempt to revive the business, but also expressed expectations that the French insurer could contribute with its 100 years of expertise.
Groupama was established in 1900 and controls two-thirds of France's rural market. It focused on rural France until its takeover in 1998 of Gan, the third largest French Insurer. That enabled its leapfrog into the cities and foreign markets.
The company introduced a variety of new products into the Chinese market in three packages, including unexpected job loss, hospitalization subsidies, countryside tourism and entertainment liability insurance.
It will sell policies both through agents and banks. The company plans to set up 10 sales outlets as the first step, including five in the Chengdu city and five in its suburbs.
The insurer also announced a strategic alliance Tuesday with Agricultural Bank of China (ABC), one of China's four largest State-owned commercial banks and the nation's largest rural lender. The alliance will allow Groupama to sell its products through the bank's 2,300 counters and 1,700 agents throughout in Sichuan.
Sichuan is one of China's main agricultural producers. Some 70 percent of the 87 million people are engaged in farming, and agriculture accounted for more than 20 percent of the province's gross domestic product last year, according to Yang Zhiwen, vice-governor of Sichuan.
Although the average income of farmers in the province is still low, the huge potential of rural Sichuan will provide abundant growth opportunities for agricultural insurance, he said.
Migrant workers from Sichuan, who are originally farmers, remitted home a combined 31 billion yuan (US$3.7 billion) they earned in other parts of the country last year, up 26 percent on a year-on-year basis, Yang said.
(China Daily October 27, 2004)
