A Policy Shift in the Chinese Mind-Set

It’s after dinner and Zheng Lingzhi is still knocking on doors.

“Go away! What do you think I am, a child?” barks an old woman through the bars across her kitchen window.

“It’s not because I don’t accept it, it’s because I don’t need it,” says a 36-year-old teacher who reluctantly opens her door a crack.

Zheng is selling door to door. But instead of encyclopedias or the Bible, she is peddling something even more foreign and seemingly unnecessary to the average Chinese: insurance.

For nearly half a century, the state and its “iron rice bowl” policy have promised to meet all the needs of China’s citizens, from cradle to cremation. Private insurance was labeled bourgeois, something to be eliminated and forgotten.

But with the flowering of market reforms during the 1980s, private insurance has made a comeback.

In 1992, Shanghai became the first Chinese city to welcome back foreign insurers, and it remains one of only two cities open to them. China’s expected entry into the World Trade Organization is likely to further relax restrictions and unleash a stampede of outside competitors. As the former commercial and insurance capital of Asia, this metropolis of 13 million people is at the heart of insurers’ efforts, against formidable odds, to tap what could be their biggest market in the world.

Unlike a pair of Nikes or a bottle of Coke, insurance is an invisible product. Much of the industry’s recent success in China has been driven by the aggressive door-to-door sales strategy introduced here by giant American International Group, a U.S. firm founded in Shanghai in 1931 and now based in New York. It became the first foreign firm to reenter the market.

Middle-Aged Women Dominate Sales Force

The largest force of insurance salespeople in China is in Shanghai: an army of 22,000, more than half of them middle-aged women laid off by state-owned firms. Their mission is not only to earn commissions but to reprogram the minds of people raised on the notion that the state is all the insurance they need.

The salespeople push mostly individual life and health insurance.

“They are our major distribution channel at this point of the market,” said Joseph Sin, president of AXA-Minmetals Assurance Co., a French-Chinese joint venture and one of 14 foreign companies with permission to operate in Shanghai and Guangdong. “If they don’t do well, we don’t do well.”

This door-to-door technique was widely used in the U.S. during the first half of the 20th century, according to the National Assn. of Professional Insurance Agents, a trade group based in Virginia. But it gradually went out of vogue as people’s awareness about insurance grew and marketing and distribution systems improved.

The technique, however, is still valuable in developing countries such as China, where market penetration hovers at 1.6%. Even in this receptive and relatively affluent city, only one in 10 people says he or she is willing to buy insurance. Nearly half think putting their money in the bank is the better way to prepare for the unexpected, according to a 1998 survey conducted by the industry.

But that could soon change as the country faces growing anxiety over the breakneck speed and impact of economic reforms. Already, the Chinese Insurance Regulatory Commission predicts that total revenue for the industry will jump about 13% a year over the next five years. Annual revenue could reach more than $30 billion.

Companies that are fully or partially foreign-owned account for only about 2% of the total premiums in China. But competition against fledgling domestic firms is likely to rise, as 12 more cities are expected to allow foreign firms to begin selling policies two years after China joins the WTO, which it hopes to do this year, officials say.

Liberalization of the insurance industry has long been a major demand of WTO negotiators. Group policies constitute the most lucrative and largest segment of the market, but they are off-limits to foreign companies. Such firms also are barred from the reinsurance market. Most are limited to owning 50% of their Chinese subsidiaries.

Chen Xiaohui, 50, a former lab technician, became an AIG saleswoman in Shanghai two years ago, after mandatory early retirement from her state job cut her income to less than $100 a month. Many of the same economic pressures are at work on her potential customers.

“Before, we paid nothing for our medical expenses,” she said. “Then we were told to chip in a few percent for minor illnesses. Now I hear we might have to pay a share for major illnesses too.

“That’s why so many people spend so much money buying incense to pray for wealth and wellness,” she said. “But if you have an emergency, can Buddha pay your medical bills?”

Consumers, however, don’t want to be scared into buying. Among the taboos that could break a deal: talking about death and injury in direct relation to the client. An agent might say instead, “If I were to be hit by a car” or “If I were to get cancer.” Schmoozing and flattery also help. So does charisma.

“The client is not only buying your product, they must also buy into you as a person,” said Jiang Junrei, 23, dressed in shirt and tie and carrying a black briefcase and an incessantly ringing mobile phone. Jiang went into the business at 19, following in the footsteps of his father, a doctor of traditional medicine whose income rose twentyfold in the first year after he switched careers.

Potential Pool of Clients Shrinks

But selling insurance today is not nearly as easy as it was when the market first opened up, Jiang said. Rising unemployment has bloated the sales force while tighter spending habits have shrunk the potential client pool.

“Everybody and his relative is an insurance salesman now,” said Jiang, who said he also is tired of fruitless trips in bad weather and the abuse he gets from security guards when he ignores the increasingly common “no solicitors” signs.

So Jiang is getting out. He plans to start a mail and package delivery service, another underdeveloped aspect of the Chinese economy.

More than half of all insurance agents recruited each year in Shanghai drop out, said Zhu Yan, an economist with the Shanghai Insurance Assn. Only about 10% of agents have more than three years’ experience.

The least likely to jump ship are middle-aged women, who are often the first laid off from other jobs.

“During training, we were told to be on time. If we were late more than twice, we didn’t have to go back,” said Chen, the former lab technician. “A lot of people couldn’t get used to it. I thought, ‘This is great. We are from state-owned enterprises; we need this kind of discipline.’ ”

Her former job in a lab dealing with poisonous and harmful materials was close to her home. The work occupied only an hour of the day. The rest of the time she spent reading newspapers, eating lunch and taking a nap. By 4:30 p.m. she was home cooking; by 9:30 she was ready for bed.

Now, Chen leaves at dawn and returns home near midnight. She eats on the run and catches extra sleep during the three-hour bus ride to and from work. To save money, she hails a taxi only when her image is at stake.

She makes about $500 a month, almost four times her old salary.

“People from my old job say I look so much older after selling insurance. That’s because I don’t get enough sleep,” she said. “But this life is so much more stimulating!”

That desire for reinvigoration convinced Zheng to join Ping An, a large Chinese firm that captured 41% of the country’s life insurance market last year. In four years, the former inspector at a watch factory has developed an impressive list of about 2,000 clients.

“I liked it right away because it is a job without a retirement age,” said Zheng, 52, who was recruited while looking for a position for her son at a job fair.

“At first, my husband said I was crazy,” Zheng said of her sailor spouse. “My son is a Communist Party member. He was most embarrassed. He kept telling me, ‘Please don’t try to sell insurance to my friends!’ Now, I make more money than my husband, and my son is introducing his college friends to me as clients.”

New Career Has Included Travel to U.S.

Zheng’s high sales volume has given her a life she couldn’t have imagined before. She has discussed insurance on television and traveled to the U.S. for meetings.

Whereas Chen is still uncomfortable making cold calls and prefers to tap friends and acquaintances as clients, Zheng will ring any bell.

“The doors in this building have been knocked rotten,” said Zheng, slipping into the elevator of a dark European-style apartment building. “I’m always nice to the lady that runs the elevator. She can tell me who is nice, rich or poor, so I don’t waste my time.”

Most deals require at least three visits to seal, agents say. Often clients need to be moved to action by unusual acts of perseverance. Even after the initial deal is made, clients expect instant access and constant relationship-building before they will sign on for more than a year. That can mean cards during holidays, cakes on birthdays and designer ties for wealthier clients, all coming out of the agent’s wallet.

A few months back, Zheng said, she was lying on an operating room table. Still, her beeper went off nonstop. During her hospitalization, she repeatedly asked the doctor for permission to leave so she could tend to client needs.

But she made sure her stay paid off. She recently visited the ward and sold a $200,000 policy.

“I knew they were getting a Chinese New Year’s bonus that week,” whispered Zheng. “So insurance is also detective work.”

On a recent evening, Zheng skipped dinner and headed down yet another dark hallway. Instinct told her to try the one apartment with the light shining over a newly renovated doorway.

A man could be seen through the window, puffing on a cigarette. His wife tucked in her sweatshirt and strained to see the late visitor.

“Insurance again?” said the wife.

“If you still haven’t bought it, you don’t really understand it,” Zheng replied.

After a few minutes of back and forth in the cold hallway, the couple gave in. They invited Zheng to sit down on their stiff new furniture and poured her green tea, which she didn’t have the time to sip.

The husband said he sympathized. He also is in sales--air conditioners. Then he went back to watching soccer on an expensive flat-screen TV. Before the game was done, his wife was signing on for basic health coverage. It’s only about $100 a year. But it spells victory for Zheng and peace of mind for the wife.

“Our country is going through medical reforms, and we’re getting older,” said Zhou Qing, 44, noting that she has high blood pressure. “I want more security. But if she didn’t come here, I would never have gone looking for her.”