Marketing death culture and the making of a life insurance market in china

Illustrations Figures 1 Total Insurance Premium and Life Insurance Premium Income in China, 1984 – 2004 5 2 Life Insurance Penetration in China and Shanghai Compared to the United St

Marketing Death

in research, scholarship, and education

Oxford New York

Auckland Cape Town Dar es Salaam Hong Kong Karachi

Kuala Lumpur Madrid Melbourne Mexico City Nairobi

New Delhi Shanghai Taipei Toronto

With offi ces in

Argentina Austria Brazil Chile Czech Republic France Greece

Guatemala Hungary Italy Japan Poland Portugal Singapore

South Korea Switzerland Th ailand Turkey Ukraine Vietnam

Copyright © 2012 by Oxford University Press, Inc

Published by Oxford University Press, Inc

198 Madison Avenue, New York, New York 10016

www.oup.com

Oxford is a registered trademark of Oxford University Press

All rights reserved No part of this publication may be reproduced,

stored in a retrieval system, or transmitted, in any form or by any means,

electronic, mechanical, photocopying, recording, or otherwise,

without the prior permission of Oxford University Press

Library of Congress Cataloging-in-Publication Data

Chan, Cheris Shun-ching

Marketing death : culture and the making of a life insurance market in China / Cheris Shun-ching Chan

p cm

Includes bibliographical references and index

Summary: “Marketing Death is the fi rst book to off er a penetrating sociological analysis of the emergence of

a life insurance market outside of the Euro-American context Drawing on rich ethnographic data, it documents the processes and micro-politics through which local cultures shape the way a market is formed and, hence, sheds light on the dynamics through which modern capitalist enterprises are diff used to regions with diff erent cultural traditions.”—Publisher’s description

ISBN 978-0-19-539407-8 (cloth : alk paper) 1 Life insurance—Social aspects—China I Title

Cheng Suet King

Contents

1 Is China an Inviting Place for Life Insurance?

Societal Conditions, the Market, and Remaining Puzzles 19

2 Defi ning Life Insurance and Product Development :

3 Manufacturing Sales Agents : Cultural Capital

4 Making Transactions : Selling Strategies and Sales Discourses 115

5 Buying Life Insurance : Multiple Motives but Consistent Preferences 143

6 How Culture Matters : Culture, Market, and Globalization 169

sociol-in my research areas Fortunately, it did not require much eff ort to convsociol-ince my colleagues of the connection between my earlier work and my current project; all

it took was a brief elaboration on my theoretical interest in the role of culture in making a life insurance market Th e idea of researching the emergence of life insurance in China was fi rst inspired by Arjun Appadurai, who probably did not imagine that his 15-minute meeting with me would propel me into this project for 10 years now In our conversations about culture and modernity, Appadurai found the commensuration of the value of human life to a probabilistic calcula-tion of risks sociologically intriguing Although the ultimate outcome of my project is not entirely about the commensurate logic of life insurance and moder-nity, I thank him for his stimulating conversation that triggered this project in the fi rst place

My deepest gratitude goes to my informants that, unfortunately, I cannot name individually here Th ey include the sales agents, in-house managers and assistants, and life insurance clients and prospects I am especially grateful to the sales agents, who shared their invaluable time with me when they could have been prospecting clients and for their unreserved openness to me and trust in my research I warmly thank those friends who connected me to the fi eld Cao Yang, Chen Xiangming, Fan Lizhu, James Farrer, He Min, Jane Hu, Hu Jun, Charlie

Lu, Tracy Shu, Sun Han, Sun Jiaming, Sun Jiwei, Tang Nie, To Yushan, Wang Jiangguo, Wang Lihua, Calvin Wong, Wu Yuxiao, Terry Xu, George Yang, Yap Chong Huat, Terence Yip, Yu Hai, Yu Zhiyuan, Zhang Ji, and Zhao Dingxin all connected me to my informants in China My fi eld research would have been impossible without their help In particular, I would like to acknowledge Zhiyuan’s

parents, Yu Min and Zhao Qi, for their hospitality and assistance in my settling

in Shanghai, as well as Terence Yip and his colleague Ronald Wan, who worked

in the life insurance industry in Shanghai, for their help and patience with my endless questions

Th is book derives from my doctoral research I was fortunate to work with superb faculty during graduate school I owe a tremendous debt of gratitude to Gary Alan Fine, the chair of my dissertation committee, for his unfailing support and encouragement throughout the ups and downs of my six-year-long stay at Northwestern University Gary and I were initially connected by our commit-ment to ethnography and cultural sociology But I must admit that I was a bit worried in the beginning that my theoretical position might not fi t exactly with his tradition Luckily, I soon realized how open and appreciative Gary is to diff er-ent theoretical positions For this, and for his unreserved confi dence in my work,

I am extremely grateful Gary has been a good friend, and his generosity as my mentor continued even aft er I left Northwestern University

I also owe great thanks to the members of my dissertation committee: Wendy Griswold, who followed my project from the very beginning and guided me to locate my position in cultural sociology; Bruce Carruthers, who off ered his expertise in economic sociology that helpfully shaped my theoretical formula-tion; and Bobai Li, whose sharp and critical comments pushed me to make improvements along the way I express special thanks to Charles Ragin for launch-ing research funding for the Center for International and Comparative Studies (CICS) at Northwestern University, which made my fi rst stage of research pos-sible I am also indebted to Charles’s engagement in my project early on and his continuous support to me and my project aft er his departure from Northwestern

My gratitude extends to my teachers and the peers who gave me feedback, comments, and suggestions at diff erent stages of my research Chen Xiangming, Matthew Chew, Lee Ching Kwan, Liu Xin, Hermann Maiba, Geeta Patel, Alvin

So, Arthur Stinchcome, Yeh Wen-hsin, Viviana Zelizer, Zhang Xiaodan, and Zhao Dingxin—all gave me constructive comments and suggestions in the pro-posal stage Participants and organizers of the Culture and Society Workshop, Ethnography Workshop, and CICS Graduate Students Workshop at Northwest-ern University and the East Asia Workshop at the University Chicago deserve my thanks for their useful feedback during my dissertation writing Friends and col-leagues who read part of my manuscript in diff erent occasions and gave me con-structive feedback include Michael Adorjan, Tom Baker, Peer Fiss, Debbie Gould, Ho Sik Ying, Jin Lei, Erin Leddon, Assata Richards, Hovann Simonian, Colin Smith, Ling Tang, Tao Lin, Wang Danling, Viviana Zelizer, participants of Cultural Transformation in a Global Age Forum at the Department of Sociology, University of Pittsburgh, participants in various seminars and workshops at

UCLA (including the Global Seminar and the Center for Chinese Studies nar at the International Institute, and the Seminar on Th eory and Research in Comparative Social Analysis, the Culture Working Group and the Ethnography Working Group in the Department of Sociology), and participants in the Cul-ture Workshop at the Sociology Department of UC San Diego I am indebted to all these people for sharing their brilliant minds with me

Parts of the manuscript were presented at various institutions and ences, including the Asian Studies Center at the University of Pittsburgh; the Departments of Sociology at Boston University, the Chinese University of Hong Kong, and Taiwan National University; the School of Sociology and Anthropol-ogy at Sun Yat Sen University; the Department of Anthropology at the Chinese University of Hong Kong; the Centre of Asian Studies at the University of Hong Kong; the Half-Day Forum with the University of Sydney at the University of Hong Kong; the annual meeting of the Association for Asian Studies in New York (2003); the Globalization Conference at the University of Chicago (2004); the Interim Conference on Values and Beliefs held by International Sociological Association Research Committee on Sociological Th eory in Rio de Janeiro (2004); the World Congress of the International Institute of Sociology in Stock-holm (2005); the annual meeting of the American Sociological Association in Atlanta (2003) and in Montreal (2006) I was fortunate to have numerous engag-ing audiences who oft en raised sharp, thoughtful, challenging, and constructive questions to push me to ponder and refi ne my arguments I also had the privilege

confer-of participating in the Summer Institute on “Economy and Society: Trajectories

of Capitalism,” held by Neil Fligstein and Walter Powell at the Center for Advanced Study in the Behavioral Sciences in the summer of 2006, where I ben-efi ted from exchanging ideas with a group of superlative young scholars

My year-long ethnography in China would not have been possible without funding support from the International Dissertation Field Research Fellowship off ered by the Social Science Research Council, the research grants by the CICS and the Graduate School at Northwestern University, and the Scholarship Devel-opment Award by the Midwest Sociological Society Th e Alumnae Dissertation Fellowship off ered by Northwestern University freed me from teaching and made my dissertation writing more effi cient Th e University Center for Interna-tional Studies, Asian Studies Center, and China Council at the University of Pittsburgh all provided fi nancial support for my follow-up fi eldwork in 2004

Th e Center for Asian Studies at the University of Hong Kong kindly hosted me during my writing in Hong Kong Th e International Institute at the University of California, Los Angeles generously extended a fellowship for completing the manuscript I am grateful to these funding institutions not only for their fi nancial contributions but also for their recognition of the signifi cance of this project

I thank the team at Oxford University Press for their great eff orts in moving this book along James Cook, the editor of this volume, deserves special thanks for his appreciation of the manuscript early on and his enthusiasm in making this book as perfect as it can be (though it is still far from perfect) While some edi-tors from other publishers complained about the diffi culties of securing reviewers for my manuscript, James incredibly convinced seven highly engaging reviewers

to read through the entire manuscript at two diff erent points of time I have undoubtedly benefi ted from these anonymous reviewers’ insightful comments and constructive suggestions I thank each of them for their critical eye and gen-erous feedback that improves this book in many ways, particularly Viviana Zelizer, who decided to reveal herself as one of the reviewers, and off ered enthu-siastic encouragement and specifi c comments to sharpen this book My thanks also extends to James Cook and Joe Jackson for their patience in working with me for the cover, and to Jenny Wolkowicki and Lora Friedenthal for their hard work

at coordinating the production process I thank Helen Chen, Maurice Choi, Owen Fung, Elaine Lau, Nichole Lu, and Sherese Tong for their research assist-ance in some rather tedious but indispensable tasks

It was in 2000 when I commenced this project Th e journey over the years would have been impossible without love and support from friends and family I thank all my dear friends in Chicago, Pittsburgh, Los Angeles, and Hong Kong for their joyful companionship and enduring friendship, particularly Yenni, Wing, Fabian, Alice, Moonlight, Sik Ying, Kaire, Mei Sin, Wong Tao, and Ming Ming For Lucy and Anna, apart from keeping me companies through my gradu-ate studies, I thank them for cheering me up and pulled me through some very diffi cult moments in Chicago Eng, a special friend with a passionate heart, accompanied me through my transition from Chicago to Pittsburgh and off ered tremendous practical help that made my life so much easier His heartily generos-ity will never be forgotten My colleagues at the University of Pittsburgh, includ-ing Nicole Constable, Evelyn Rawski, Tom Rawski, Tang Wenfang, and Bell Yung, treated me like a family member and off ered unfl agging support through-out my stay in Pittsburgh I wish to express my gratitude to them from the bot-tom of my heart Th e main body of this book was written when I resided in Los Angeles Ken, despite being thousands miles away, was always at my side spiritu-ally and aff ectionately His love and enthusiasm suff used me with energy and inspiration His enormous patience and enthusiastic encouragement embraced and indulged me to venture to take risk for possibly most rewarding returns I am deeply grateful to him for sharing all the joys and pains throughout this process

I am also lucky to have four loving siblings, who have always been supportive of

me in so many ways over the years Finally, my dear mother and great friend, Cheng Suet King, contributed to this book in a special way Her eagerness to

pursue knowledge, despite the nearly insurmountable odds present in China in the 1950s and 1960s, was passed on to her children, who have had the privilege to pursue knowledge in a much more conducive environment Her endurance, her stubbornness in upholding principles, and her boundless love for her family have nurtured us to be who we are Th is book is dedicated to her

Illustrations

Figures

1 Total Insurance Premium and Life Insurance

Premium Income in China, 1984 – 2004 5

2 Life Insurance Penetration in China and Shanghai

Compared to the United States, 1991 – 2004 6 1.1 Real Growth Rate of Life Insurance Premium Income in

1.2 Life Insurance Growth in Relation to GDP and Per Capita

Disposable Income Growth in Shanghai, 1994 – 2004 46 1.3 Insurers’ Market Shares of the Individual Life Insurance

1.4 Estimated Numbers of Personal Accident and

Investment Policies Sold in Shanghai, 2001 – 2004 49 2.1 Insurers’ Market Shares of the Life Insurance Business

3.1 Sources of Top Managers’ Cultural Capital

and Its Impacts on Management Strategies 113 6.1 Interactive Multiple-Process Model of Culture

5.2 Perceived Functions of Life Insurance

5.3 Types of Life Insurance Policies Purchased

A.1 Summary of Fieldwork, 2000 – 2004 203 A.2 Summary of the Socioeconomic Profi les of the

Insurance Practitioners Interviewed (N=143) 204 A.3 Summary of the Socioeconomic Profi les of the

Clients and Prospects Interviewed (N=131) 204–205

Marketing Death

Introduction

To dramatize their impact, life insurance publications did not hesitate in using death as their “solicitor,” invoking the brevity of life to hesitant customers     [Life insurance agents] were a visible reminder of the “gloomy and disagreeable prospective” of death — V I V I A N A Z E L I Z E R, Morals and Markets , 1979

For many Victorians, their fi rst taste of life insurance appeared as an invitation to imagine,

like Scrooge in A Christmas Carol , the haunting spectre of their future mortality Salesmen

combined plaintive scenes of the uninsured’s deathbed with sensational threats of premature death, which in their foretelling invariably struck without warning

— T I M O T H Y A L B O R N, Regulated Lives , 2009

If you died suddenly, would your spouse have enough money to cover your funeral costs?  . 

If you died tomorrow, would your spouse have the fi nancial wherewithal to provide your children with the opportunities you always dreamed they’d have?  .  [I]f you died today  .  [w] ould your spouse have to make drastic lifestyle adjustments to make ends meet?  .  If someone would suffer fi nancially upon your death, you need life insurance

— A D V E R T I S E M E N T, Time , September 2006

We can’t talk about death, you know, it’s a taboo  .  [The Chinese] don’t want to hear about misfortunes They don’t want to think about those things They don’t want to talk about those things It’s very diffi cult!

— L I F E I N S U R A N C E S A L E S A G E N T I N S H A N G H A I, 2002

S I N C E T H E M I D- 1 9 8 0S, commercial life insurers have aggressively expanded their business to Asia, Latin America, and Central-Eastern Europe as markets in Western Europe and North America began to saturate Home to one-fi ft h of the world’s population and noted for its impressive economic growth, China has become a primary target for this global expansion Dozens of transnational life insurance corporations had established offi ces in Beijing by the end of the 1980s, impatiently awaiting their operating licenses On September 25, 1992, American International Assurance Company, Ltd (AIA), a subsidiary of American Interna-tional Group, Inc., was the fi rst among its competitors to obtain a license to oper-ate in Shanghai, gaining the fi rst toehold in the People’s Republic of China A

number of foreign life insurance corporations were subsequently granted licenses, operating as joint ventures with domestic partners By the late 1990s, locally estab-lished life insurance fi rms began to appear on the scene as well Yet despite the arrival

of all of these players, creating a market for life insurance was not, and has never been, a simple process

In China, the local public’s resistance to the concept of life insurance was dent at the start In the mid-1990s, one could see shopkeepers and offi ces in Shanghai post signs in their windows and doors that said, “Life insurance sales-people are not welcome!” 1 In 1998, Richard Huber, then chairman and CEO of the Hartford, Connecticut–based Aetna Insurance Company, commented that a bigger obstacle to the life insurance business than China’s bureaucracy was its culture, specifi cally, that its population had “very little concept of insurance.” 2 During an interview in 2000, the general manager of the Sino-German joint ven-ture Allianz-Dazhong Life Insurance Company, Ltd (Allianz-Dazhong) com-plained that the Chinese still held, in his words, “a stupid superstitious belief ” that the topic of death should be avoided at all costs Throughout my field research from 2000 to 2004, Chinese life insurance sales agents were frustrated that people “didn’t want to talk about death or hear about misfortunes.” While advertisements in the United States give meaning to life insurance by defi ning it

evi-as “a plan for if ,” 3 this if is “unthinkable” for the Chinese

Intriguingly, despite the cultural taboo on death and insurance practitioners’ complaints about the diffi culty of disseminating the idea of life insurance, the life insurance business in China has been growing rapidly since the mid-1990s

Th e average annual real growth of life insurance premium income from 1995 to

2004 reached 30.7 percent, compared to only 9.1 percent growth for property insurance 4 Moreover, the proportion of revenue coming from life insurance sales compared to revenue generated by the entire insurance industry soared from 34 percent in 1995 to 75 percent in 2004 5 Although life insurance pene-tration, or its proportion of the nation’s gross domestic product (GDP), was relatively low compared to developed markets, it did increase from 0.34 percent

to 2.02 percent during the same period Th is time frame witnessed a comparable dramatic growth in Shanghai, where average annual real growth attained 33.6 percent and penetration jumped from 0.68 percent to 2.87 percent Th is impres-sive growth of the Chinese life insurance market starting in the mid-1990s is vividly displayed in fi gures 1 and 2 Yet the puzzle remains: How could a life insurance market grow so rapidly when death and fatal misfortunes are taboo subjects?

Th is book documents the processes, the dynamics, and the micropolitics through which a Chinese life insurance market emerged in the presence of cultural barriers It examines how life insurance develops in a society where

the cultural setting is substantially diff erent from the places in which it nated and where cultural values are largely incompatible with the probabilistic logic of life insurance Th is case study is intended to address a more general question about the role of culture in economic practice and the role of local cultures in the global diff usion of capitalist enterprises Specifi cally, how can a particular market emerge in the face of local cultural barriers? How do local cultures shape the way a market is formed? To what extent and in what way do local cultures wield the power to selectively adopt and reject certain modern capitalist ideas and practices?

The Puzzle: Marketing Death When Death Is Taboo

Th e global expansion of the insurance industry coincided nicely with China’s dramatic economic and institutional restructuring Launched in 1979, Deng Xiaoping’s daring economic reforms spurred stunning economic growth, escalat-ing purchasing power of the Chinese people and the birth of a new middle class

Th ese changes created the necessary economic conditions for commercial life insurance to emerge At the same time, an obvious process of metropolitaniza-tion took place, with the number and size of large metropolitan areas developing

Sources : Wang, Fei, and Li (2003) for data from 1984 to 1996 and Almanac of China’s Insurance

1998–2005 for data from 1997 to 2004

rapidly (Yan, Fia, Li, and Weng 2002) Th e institutional and sociocultural changes associated with the shift from communal to metropolitan cities have largely followed Georg Simmel’s ([1903] 1971, 1950) description of the rise of new modern life Rapid urbanization, progressive privatization of enterprises, contractualization of labor relations, shrinking provision of state welfare, and reduced family sizes have exposed the urban population to various social and economic risks Together with the Chinese government’s welcoming and sup-portive attitude toward the development of commercial insurance, the institu-tional environment in China in the early 1990s was propitious for the emergence

of a life insurance market

Th e cultural context, at fi rst glance, was similarly promising Urban China’s openness to foreign cultural infl uences, ranging from fast-food consumption to legal-rational business practices, has been well documented (see, e.g., Yan 1997; Guthrie 1999 ) Transnational life insurance companies entered China in concert with a number of other modern capitalist enterprises Th e Shanghai stock market was inaugurated in 1990 ( Hertz 1998 ), the world’s largest McDonald’s restaurant

Figure 2 Life Insurance Penetration in China and Shanghai Compared to the United

States, 1991–2004

Sources : Author’s calculations based on the following data: (1) Wang et al (2003) for life

pre-mium income in China from 1991 to 1996; (2) the marketing and research department of Haier New York Life Insurance Company, Ltd in Shanghai for life premium income in Shanghai from

1991 to 1996; (3) Almanac of China’s Insurance 1998–2005 for life premium income in China and Shanghai from 1997 to 2004; (4) China Statistical Yearbook 2005 for China’s GDP; (5) Shanghai Statistical Yearbook 2005 for Shanghai’s GDP; (7) Life Insurers Fact Book 2009 for life

premium income in the United States; and (8) the Bureau of Economic Analysis of the U.S Department of Commence for U.S GDP

opened in Beijing in 1992 (Yan 1997), and Amway, a direct selling corporation, offi cially started its operation in China in 1995 ( Jeff ery 2001 ) Th ese new enter-prises all received “feverish” receptions from the Chinese Against this cultural backdrop, commercial life insurance, which is a foreign and modern means of risk management, may have been expected to receive a comparable reception by urbanites

However, complaints about the diffi culties of disseminating the concept of life insurance to the Chinese were noted by both the insurance sales agents and the executives of the insurance companies Th e Chinese cultural context, which I dis-cuss in chapter 1 , is not as conducive to the development of life insurance as it appears to be To begin with, the Chinese have long-established risk management practices, mainly through savings and kinship support, that could not be changed overnight More important, the Chinese concepts of life and death conceive of sudden, premature death as morally and spiritually frightening, which in turn has resulted in a cultural taboo on thinking and talking about death, especially acci-dental, unexpected death Th is ingrained and pervasive taboo constitutes a resil-ient cultural resistance to accepting life insurance and poses a cultural obstacle to marketing life insurance products Furthermore, the Chinese concepts of life and death defi ne a “good life” as living well toward the end of life, and a “good death”

as dying in full life Th ey also assign an intergenerational economic obligation to living family members and fi lter people’s selective attention to fatal risks All of these cultural elements are incompatible with the ideological logic of life insurance and the idea of insuring against death

Of course, the Chinese are not unique in refusing the idea of insuring against death Modern insurance emerged with a rather ambitious agenda to convert uncontrollable risks into calculable, manageable ones based on probabilistic logic Commercial life insurance goes further to assume that the loss of human life or parts of the human body can be compensated in part by pecuniary terms

Th is alien, extreme form of rationality through which incommensurable beings and events are made commensurable ( Espeland and Stevens 1998 ) has destined commercial life insurance to face resilient cultural resistance throughout the his-tory of its development ( Zelizer 1979 ; Clark 1999 ; Alborn 2009 ; Murphy 2010 ; Post 1976 ) In the United States, for example, it took almost a century for the life insurance industry to take off , because people refused to put a price on human life ( Zelizer 1979 , 1985 )

Viviana Zelizer’s seminal book, Morals and Markets (1979), poses a radical

challenge to the conventional economic accounts of the development of life insurance Th ese conventional accounts center on economic growth, urbaniza-tion, the purchasing power of a population, and the advent of technical, statis-tical knowledge To Zelizer, they failed to explain why the American life insurance

market did not develop earlier than the mid-nineteenth century, despite favorable economic conditions Instead, she puts forward a cultural argument, attesting that the societal cultural values in the United States before the 1840s were incompatible with the ideological logic of life insurance Th e most critical cul-tural obstacle, among all, was the societal value that human life was sacred and priceless Such a value was profoundly in tension with the logic of pricing human life, and buying life insurance was seen as gambling on life for “dirty money.” However, since the 1840s, changes in the cultural context made the public more receptive to adopting life insurance as a new form of risk manage-ment Th e most critical changes included an increasing rational speculation on economic risk and a growing awareness of the economic loss consequent to a death Th is recognition of the economic value of death, Zelizer argues, chan-neled the public to be receptive to insurers’ rhetorical discourse that linked the benefi ts of life insurance to the notion of a “good death” and a “responsible death.” Th us, the underdevelopment of the life insurance business in American society prior to the mid-nineteenth century was attributed to the impeding power of certain moral values Its sudden expansion since then, to a large extent, could therefore be attributed to a subsequent change in cultural values ( Zelizer 1979 :34–39)

Zelizer’s argument suggests that cultural values can suppress the emergence of

a market and that life insurance as an ideologically embedded entity could only develop when a favorable, namely, rationalized, cultural context arose In line

with Zelizer’s argument is Geoff rey Clark’s Betting on Lives (1999) Examining

how life insurance became a fi eld of gambling on lives, Clark suggests that the sudden expansion of life insurance in England in the late seventeenth to the early eighteenth century expressed an essential feature of modernity It represented a bold eff ort to extend human control over uncertainty and required a particular cultural logic that refl ected “an economic calculus of human life” ( Clark 1999 :5) Likewise, scholars who study the life insurance market in Taiwan contend that Asian cultural values only hamper the development of life insurance markets (Li, Duberstein-Lindberg, and Lin 1996) Th ey argue that the development of the life insurance markets in Chinese and other Asian societies requires a prior change in their societal cultural values

Th is “cultural values matter” argument about the development of life ance, while compelling and convincing, nevertheless leaves some questions unan-swered: If cultural values can suppress a market from emerging, how can modern enterprises originating in culturally specifi c Western contexts be expanded to places with diff erent cultural traditions? Th e sudden emergence of a life insur-ance market in mainland China is a case in point How could the market emerge

insur-in the presence of insur-incompatible cultural values?

In Search of an Answer

My initial analytic frame presupposed that in order to create a life insurance ket, insurance practitioners would have to create a sense of risk that misfortunes could happen unpredictably, anytime and, in doing so, create a feeling of need for the new commodity In other words, I expected to see insurance sales agents sell “pessimistic futures” to prospects, hearing many stories of misfortune from sales agents intending to induce a sense of fear about the vulnerability of life, as Zelizer (1979) documented about the American case and Alborn (2009) about the British case

To my surprise, however, I rarely heard the Chinese agents talk about death, accidents, or misfortune when they were persuading prospects to buy Corre-spondingly, I found it very diffi cult to ask one particular hypothetical question when I interviewed clients and prospects: What would happen to your child if you were to die suddenly, or die accidentally? I did not use the word “die” or

“death,” but instead asked what would happen if “something bad happened to you, or to your husband, that made you or your husband lose your earning abil-ity?” However, I hardly got an answer Th eir common responses were, “I’ve never thought about this.” If I pushed them to think about it, they would say, “I only think about good things I don’t think about those bad things,” or “Th at won’t happen: I can’t be that unfortunate.” Th eir evasive attitude to my question intrigued me As cognitive consent can only be inferred from silences in texts, and normative consent can be discerned by the unthinkability of alternatives or hypotheses ( Schneiberg and Clemens 2006 ), the general absence of a risk dis-course and the “unthinkability” of my hypothetical scenarios about misfortune cued me to the critical role of the cultural taboo My participant observations allowed me to discern the cultural taboo as utterly taken for granted but unar-ticulated knowledge among the local people Yet I wondered where the cultural taboo came from

To complicate matters, I was wrestling with a salient contradiction that emerged early on in my fi eld research On the one hand, sales agents claimed that the Chinese were family centered and that they would sacrifi ce anything for the benefi ts of their family On the other hand, they complained that the Chinese were selfi sh because they were reluctant to buy insurance policies that would ben-efi t benefi ciaries As my fi eld research continued and the data grew, it became clear to me that the underlying cultural force of the taboo on death, and the reluc-tance to buy life policies making payments to benefi ciaries, lies in the Chinese concepts of life and death I elaborate on these concepts and their link to the taboo in chapter 1 , and how they shape people’s choices of insurance products in chapter 5

Th e insights generated from my observations highlight the impacts of etal worldviews and values on members’ preferences and dispositions To expli-cate how culture shapes economic behaviors through shared ideas and values, I

soci-go back to Max Weber’s masterpiece Th e Protestant Ethic and the Spirit of talism ([1904–5] 1991) In Weber’s account, ideas or conceptions, such as the

Capi-religious ideas of “calling” and “predestination,” have the power to drive the behaviors of those who share them in a certain direction, through constituting certain psychological attributes (e.g., fears) and motivations (e.g., serving God)

Th e notion of culture in this classical tradition is conceived of as a coherent tem of meanings shared by members of a social group ( Geertz 1973 ) Th e shared subjectivities, though socially constructed, are central to both economic and noneconomic action In Weber’s famous metaphor, shared ideas that exist in individuals’ heads act like “switchmen” that “determine the tracks along which action has been pushed by the dynamic of interest” ([1922–23] 1946:280) 6 Zelizer’s and others’ “cultural values matter” argument about life insurance devel-opment is in line with this classical notion of culture

Th e classical view, with its emphasis on the impact of overarching societal culture on social and economic action, has been criticized for disclaiming the agency of individual actors Th is criticism was fi rst put forward by symbolic inter-actionists, who attend to culture’s practical dimension and emphasize the creativ-ity of individual actors in using and reproducing generally accepted meanings ( Goff man 1959 ; Blumer 1969 ; Fine 1979 ) Yet, symbolic interactionism does not repudiate the coherent concept of culture In fact, on this view, smooth inter-actions can be accomplished only with shared, consistent cultural rules and assumptions

Th e focus on the practical capacity of culture has been taken further by some contemporary cultural sociologists, most noticeably Ann Swidler, who challenges the fundamental classical notion of culture In her groundbreaking article “Cul-ture in Action,” Swidler (1986) uses the metaphor of a “tool kit” to argue that culture matters as a repertoire—an array of cultural resources upon which indi-viduals can draw to construct their strategies of action to solve various kinds of problems Along the lines of Pierre Bourdieu’s (1977) theory of practice and the concept of cultural capital that centers on bodily know-how (or habitus), Swidler (1986 , 2001) argues that culture in terms of practical skills, habits, and knowl-edge constitutes human action more directly than shared values and beliefs What sets Swidler’s theory of culture apart from Bourdieu’s, however, is the frag-mented image of culture and the voluntaristic underpinning of individual actors

in relation to culture Contrary to the classical conception, culture in Swidler’s theory contains diverse or even “confl icting symbols, rituals, stories, and guides

to action” (1986:277) Its incoherent and fragmented nature is grasped by Paul

DiMaggio’s bold analogy, a “grab-bag of odds and ends” (1997:267) With this notion of culture, people who share similar values and beliefs may behave very diff erently, oft en depending on an individual’s practical urgency, cultural compe-tences, and institutional demands

In my inquiry about the role of culture in the creation of a Chinese life ance market, I fi nd the tool kit or “repertoire” approach to culture useful for resolving the puzzle left by the “culture values matter” argument As the story unfolds in the following chapters, when culture as shared values and ideas con-

insur-fl icts with the ideological logic of life insurance, economic actors mobilize the tool kit properties of culture to circumvent the values and ideas that prohibit market development Th ey strategically capitalize on their local cultural knowl-edge, symbols, and practices to frame life insurance into a locally sensible entity and to smooth the path for transactions on the ground Hence, the tool kit approach is particularly useful for extending the cultural perspective to make sense of the global diff usion of capitalist enterprises to places with diff erent cul-tural traditions

Nonetheless, I maintain that the tool kit or repertoire paradigm alone is

insuf-fi cient to explain the characteristics of the Chinese life insurance market Shared

cultural values and ideas do steer the direction along which the market is

emerg-ing While life insurance in Euro-American societies fi rst emerged as risk ment and gradually moved to risk-cum-money management ( Zelizer 1979 ; Ransom and Sutch 1987 ; Quinn 2008 ; Alborn 2009 ; Murphy 2010 ; Pearson

1990 ), life insurance in China fi rst emerged as money management before ing toward money-cum-risk management Th is new commodity was traded as sav-ings and investment plans, instead of a protection against unexpected misfortunes

mov-Th is trajectory, I argue, is shaped by the Chinese concepts of life and death Defi ing life insurance as a money management instrument during its emerging stage,

n-as I illustrate in chapter 2 , went against the transnational insurance players’ intent, because it proved unprofi table (I use “transnational” or “foreign” as a generic cat-egory throughout this book to include joint ventures, which were indeed headed and operated by foreign partners and were categorized as “foreign” companies in offi cial publications.) Th e experienced transnational insurers failed to create a risk management market to serve their interests, because the cultural resistance forged

by local values and ideas was resilient Th us, collective subjectivities manifested by folklore, values, moralities, and perceptions constitute a rather consistent pattern

of preferences that aff ect the track by which the market takes shape Th ey act like

“switchmen” by constituting obstacles, necessitating circumventing strategies, and circumscribing a range of possible and impossible actions

Th us, this book brings together the classical and contemporary views of ture to understand the formation of the Chinese life insurance market It argues

cul-against the theoretical divide between the coherent and fragmented paradigms of culture, a divide that I argue elsewhere is unproductive to the fi eld of cultural sociology ( Chan 2009a ) Th e important question is not which concept should be prioritized in relation to action, but how to conceptualize the articulation of the two ( Sewell 1999 ) Th is project addresses this line of inquiry I propose an “inter-active multiple-process model of culture” and argue that culture matters, but it matters not as either cultural values or practical tool kits It matters through the

interplay of both Culture matters not only as a regulatory force but also as a

con-stitutive agent 7 Th roughout this volume, I analyze how diff erent forms of culture interplay to regulate and constitute the behaviors of various economic actors, including top managers, sales agents, and consumers I argue that the very cul-tural barriers rooted in shared ideas and values that compose the local resistance

to a new economic practice also necessitate the mobilization of the tool kit to circumvent this resistance Th ese dual processes, shared ideas composing the resist- ance and the cultural tool kit circumventing the resistance, result in a market with

local characteristics Such processes also manifest the interplay of agency and structure My analysis throughout this book highlights the agency of economic actors in materializing symbolic elements into resources and yet puts equal weight

on the structural constraints that culture exercises in the process

In Search of a Site

To dig into the microprocesses by which a new economic practice is introduced

to a population, and the dynamics through which macroforces shape these processes, I confi ned my ethnographic research to one city, Shanghai In addition,

micro-I also interviewed a dozen insurance practitioners in Beijing to assess the izability of the Shanghai case and fi ve insurance sales agents in Chicago to discern the distinctiveness of the Chinese case

Shanghai presents itself as an ideal place for this study for three major reasons First, the city represents the “lowest end” of how Chinese culture plays a role in the construction of a modern capitalist enterprise With its distinctive historical background as an international settlement from the 1860s to the 1930s, Shang-hai is especially receptive to foreign infl uences In the 1990s, Shanghai was an experimental city for everything new, modern, and capitalist, ranging from fash-ions ( Chew 2007 ), to toys ( Davis 2000 ), to sexual discourses ( Farrer 2002 ), to the stock market ( Hertz 1998 ) Th e city and its people are known to take the lead

in appreciating and accepting Western concepts and practices In this context, if

we fi nd that the economic behaviors of people in Shanghai (a city that is relatively

“westernized” and eager to be further westernized) are shaped by certain Chinese cultural elements, then we can be confi dent that these cultural elements are as

infl uential, if not more so, in other Chinese cities Second, Shanghai represents the “highest end” of global–local dynamics In 2000, there were seven transna-tional life insurers in mainland China, six of which started their operations in Shanghai Th e city has been described as the “Olympic stadium” for commercial life insurance and the “insurance hub of China,” where competition between transnational and domestic life insurers has been most intense Th is fi erce compe-tition provides rich data on global–local interactions Lastly, because the majority

of the transnational insurance fi rms started their operations in Shanghai, using it

as a base for future expansion to other cities, their operations and experiences in this city oft en served as a model for other cities to follow

To begin my case study, I conducted six weeks of preliminary research in the summer of 2000 My initial contacts with informants provided two useful fi nd-ings that helped in identifying the major fi eld sites for the subsequent ethnogra-phy during 2001–2002 First, I found that there was a strong tension at both the managerial and sales levels between the fi rst wholly foreign-owned insurer, AIA, and a newly formed domestic insurer, Ping An Life Insurance Company of China, Ltd (Ping An) Second, I noticed the contrasting morale of the sales agents and the conspicuous diff erence in business growth between two joint ventures that started at about the same time: Pacifi c-Aetna Life Insurance Company, Ltd (Pacifi c-Aetna) and Allianz-Dazhong Th erefore, I selected these four insurers, which represented the widest range of variety, to be the major fi eld sites for this study Data were collected through formal and informal interviews, participant observations, and questionnaires and by referencing public documents and insur-ers’ publications I spent most of the time in participant observations, visiting the agency offi ces of each selected insurer on a daily basis I attended training sessions for the agents, joined in morning assemblies, and participated in small group meetings on a regular basis With the consent of certain agents, I went with them

to prospect potential buyers, to sell products, and to visit existing clients My empirical inquiry was centered on the creation of an individual life insurance market, through which the ideas of life insurance is diff used and negotiated 8 (See appendix A for details of my ethnographic journey and data collection.)

Culture and Life Insurance in China

Insurance is indisputably a social and cultural product ( Baker 2000 , 2002 ) Life insurance, in particular, is sociologically interesting Th e instrumental rational assumptions on which life insurance operates are oft en confronted with, and simultaneously attempt to challenge, incompatible societal cultural logics Sell-ing life insurance requires the sale of not just a commodity but a concept, an idea Commercial life insurers in all diff erent sociocultural settings have to convince

the public of the necessity of life insurance How they manage to do so, however,

is culturally specifi c

Th e development of life insurance in China is particularly suggestive of the mechanism through which culture works, because the market has only recently been germinating Culture in this process, prior to the establishment of an institu-tionalized market, is at the forefront in “living” form, as opposed to culture in “dead” form when cultural constructs have been congealed through institutionalization ( Jepperson and Swidler 1994 ) In other words, the “living” form of culture can be found in preinstitutionalized practices, events, activities, and organizations Study-ing the making of a new market therefore allows us to foreground the multifaceted nature of culture and its nuances when investigating its role Furthermore, it opens

an avenue to capturing the micropolitics and dynamics of an institutionalization project in the context of globalization: How do transnational life insurance fi rms establish themselves as legitimate organizations in a specifi c locale? How do domes-tic fi rms as novice players cultivate their legitimacy? How do transnational and domestic fi rms contest and collaborate with each other in forging the organizational

fi eld? Th is institutionalization process is where confl ict, tension, negotiation, promise, and cooperation among economic actors are imperative and intense It is where market as a “societal fi eld” and organization as a “negotiated order” are real-ized ( Swedberg 1994 ; Strauss, Schatzman, Ehrlich, Bucher, and Sabshin 1963; Fine

1984 ) It is also where the interest and agency of economic actors come to center stage (DiMaggio 1988)

Th is book is based on a social constructive image of the market, as common among economic sociologists What distinguishes this project from others, how-

ever, is its emphasis on both the production and the demand that forged the

mar-ket Prominent economic sociologists, more oft en than not, prioritize the importance of production in market formation and economic institutions, focus-ing on organization and management (e.g., White 1981 ; Fligstein 1990 , 2001 ; Van Maanen and Kunda 1989 ; Martin 1992 ; Smith 1990 ; see comments in Zelizer 1988 ) Consumers are either invisible or presented in abstract terms, leav-ing the demand side and market exchange to economists and anthropologists Seldom do economic sociologists explore the dynamics from production to con-sumption, investigating the interactions among producers, distributors, and con-sumers that constitute the market 9 While I agree that the production side of the market is important, because producers create demand and needs ( Fligstein

2001 ; White 1981 , 2002 ), I maintain that producers must react to the lived riences of consumers ( Bourdieu 1984 ; Zelizer 2005b ; Beckert 2009 ; Aspers

2009 ) Th e emerging Chinese life insurance market presents an opportunity to scrutinize how producers introduce a new concept and a new practice to the local population, and how the local public receives and responds to this something

new As life insurance involves complex products, the valuation criteria in this emergent stage must be contested and established in political and social processes ( Beckert 2009 ; Krippner 2001 ) Th e case of Chinese life insurance thus calls for

a multilevel analysis of organizational strategies, interpersonal interactions, and individual motives and rationales: How do transnational and domestic insurers negotiate with consumers? How do insurance fi rms manage and socialize their Chinese sales agents? How do sales agents strategically interact with prospects to prompt purchase? What drives the Chinese prospects to buy? How do they choose among diff erent products? And, what are the meanings of their pur-chases? All of these questions lie at the core of this book

Apart from contributing to cultural sociology and economic sociology, this project also off ers a sociological lens for understanding China in the context of globalization It reveals the global–local dynamics of making a market for some-thing conceptually new to the Chinese, detailing how local people interact with foreign entities and ideas It assesses to what extent and in what ways transna-tional players impose a set of rationalities and practices on the Chinese popula-tion and how the Chinese respond in the process Furthermore, it seeks to grasp the dynamics between the dramatic sociocultural changes in China and its cul-tural heritage

Overview of the Book

Th is project asks why a life insurance market has been emerging and growing

impressively in China despite cultural resistance However, as “why” oft en cannot

be observed directly but only addressed inductively through a series of “how”

questions ( Katz 2001 , 2002 ), this book is replete with a number of how processes

and dynamics To decipher how culture matters in the development of the nese life insurance market, I begin with a survey of the economic, institutional, and cultural conditions under which commercial life insurance was introduced in urban China Th en, I present the characteristics of the emergent market and ana-lyze how diff erent levels of economic activities compose it: from insurance fi rms

Chi-as the units of analysis, to interactions among managers, sales agents, and potential customers, and fi nally to individual buyers’ motives for purchasing life insurance

To protect the anonymity of informants, I use pseudonyms throughout the book 10 However, I kept the names of the companies, because there were only few of them during the market’s emergent stage, and their identities will be obvious to anyone who cares to look them up For the same reason, I have not invented pseudonyms for the general managers of the companies, using their real surnames instead Chapter 1 provides a context for the ethnographic stories that unfold in sub-sequent chapters It begins with a brief historical background of commercial life

insurance in China, dating back to the early nineteenth century through the end

of the Maoist regime Th en, I detail the economic, institutional, and cultural conditions in urban China in the late 1980s to the 1990s, and assess each of these conditions’ possible impacts on the development of commercial life insurance, both favorable and unfavorable In particular, I discuss how major cultural barri-ers to life insurance, including the Chinese cultural taboo on death, are rooted in Chinese philosophical and folk religious traditions Finally, I relate these institu-tional and cultural conditions to the theoretical questions of the book Th is chapter ends with a presentation of the characteristics of the emergent Chinese market, namely its uneven growth pattern, the dominance of domestic insurers, and its disproportionate focus on money management, and argues that neither the cultural value nor the cultural tool kit model alone is suffi cient to explain these characteristics

Chapters 2 through 5 present rich ethnographic details of the micropolitics and dynamics through which the market is emerging Chapters 2 and 3 focus on the organizational strategies of insurance companies Chapters 4 and 5 center on the market exchange Chapter 2 analyzes the disparity between transnational and domestic life insurance fi rms’ strategies Insurance fi rms from both camps faced a confl ict between local preferences and profi ts when designing their products However, they handled this confl ict very diff erently While transnational fi rms defi ned life insurance as modern risk management and off ered products for man-aging unexpected misfortunes; domestic fi rms defi ned life insurance as money management and launched products for savings and investment purposes Th e former adopted a profi t-oriented model by attempting to change local prefer-ences; whereas the latter took on a market-share approach by accommodating local preferences Th rough a chronology of the ebbs and fl ows of the market’s development, I demonstrate the tension between the local cultural logics and the profi t-oriented institutional logic of life insurance I document the battle between the transnational and domestic players in the fi eld, explaining how their battle is rooted in their diff erent ways of handling cultural obstacles, and in their diver-gent institutional logics of operation

Chapter 3 discusses the variation among individual insurers As the life ance business relies heavily on sales agents, manufacturing a productive sales force

is the core organizational task of a life insurance company However, some ers are more eff ective than others in orchestrating a committed and spirited sales force Th e Sino-American joint venture Pacifi c-Aetna was most eff ective in moti-vating its sales agents and boosting their morale, whereas the Sino-German joint venture Allianz-Dazhong was least capable of doing so Th e domestic insurer Ping An adopted a paternalistic approach to control their agents, while the American AIA used a mix of professional and missionary models Why was this

insur-so? By off ering a comparative picture of the labor–management techniques that various insurers deployed, I relate their heterogeneity to the top executives’ cul-tural capital, which, I argue, is in part a product of the institutional and cultural environments of these executives’ home regions and the organizational cultures

of their former workplaces

How sales agents prompt people to buy life insurance is the question addressed

in chapter 4 , which narrates and explains the strategies, dramaturgical ances, and sales discourses of the insurance agents that lead to transactions It describes how Chinese insurance agents facilitated their sales by mobilizing the

perform-local practice of guanxi (interpersonal relationships) and renqing (interpersonal obligation) and by capitalizing on the norm of reciprocity, the Chinese guanxi

hierarchy, and stereotypical gender roles Chapter 4 further investigates how agents from domestic and foreign insurers adopted subtly diff erent sales talks in broaching the need for life insurance It ends with an analysis of how culture of diff erent forms, together with institutions, aff ects the adoption and the eff ective-ness of various sales discourses

Chapter 5 asks what makes people buy life insurance, what kinds of products they buy, and why Th rough studying the intentions and interpretations of their choices, I aim to explain the meaning of buying life insurance from the clients’ perspectives Th e data suggest that while Chinese clients had multiple and muta-ble motives for buying life insurance that shift ed over time, their preferences for money management products were universal and consistent Furthermore, buy-ers from diff erent walks of life shared the same defi nition of life insurance: they all defi ned life insurance as money management I examine how this defi nition and buyers’ preferences were shaped by their shared folklore, values, moralities, and perceptions, and how shift s in prevailing motives over time were brought about by institutional changes

My theoretical argument about how culture matters in creating a market is discussed in chapter 6 Th is concluding chapter includes three parts First, it addresses the questions raised in the introduction It elaborates how, on the one hand, Chinese concepts of life and death as shared ideas and beliefs produce pub-lic resistance to receiving life insurance as risk management and how, on the other hand, insurance practitioners mobilize local cultural symbols and practices to get around this resistance Moving beyond the specifi cs of this case, it proposes a theoretical model that links the two manifestations of culture, one as a coherent meaning system and the other as a fragmented tool kit, to the construction and adoption of a new economic practice Second, this chapter includes a compara-tive analysis of the life insurance markets in Hong Kong and Taiwan to scrutinize the extent to which local cultures and agents wield the power to construct and sustain alternative models of capitalist practices It maintains that the presence of

competitive domestic players in the fi eld is critical to strengthening the agency of the indigenous parties Finally, this chapter reports on the changes in some insur-ance fi rms over the years, discusses how Chinese clients may change their atti-tudes toward risk management insurance, and off ers projections about the market’s future development

1

Is China an Inviting Place

for Life Insurance?

Societal Conditions, the Market,

and Remaining Puzzles

T O E X A M I N E T H E role of culture in the process of market formation, we have to

fi rst delineate the societal conditions, both theoretically favorable and ble, that were present when commercial life insurance was introduced Th is chap-ter is dedicated to this task I fi rst give a brief history of commercial insurance, particularly life insurance, in China and describe the revival of the domestic insur-ance industry and the arrival of the transnational insurance fi rms during the reform era Next, I examine in detail the economic, institutional, and cultural conditions in contemporary China that could aff ect the development of life insur-ance Based on these conditions, I present three potential hypotheses about how culture may or may not aff ect the emergence of a Chinese life insurance market In characterizing the key features of the emergent market, I consider the strengths and weaknesses of these hypotheses and discuss the open questions that remain

Historical Background of Commercial

Insurance in China

Commercial insurance is an imported concept on Chinese soil It was fi rst introduced

by the British during their imperialist reign in China Th e development of the ance industry in China prior to Deng Xiaoping’s economic reforms can be divided into a pre-1949 and post-1949 periods

The Pre-1949 Period

Th e fi rst insurance company to appear in China was a British marine insurer that entered Guangdong, South China, as early as 1805 Th e earliest life

insurance company, Standard Life Assurance Company, British, appeared in South China in 1846 It sold life policies mainly to foreigners residing in China 1 Subsequently from the mid-nineteenth century to the fi rst quarter of the twentieth century, numerous foreign insurance companies landed in China, mostly in Shanghai, Guangzhou, and some other major cities ( Wu and Zheng 1993 )

Having seen that the foreign insurers were making promising profi ts, local businessmen were eager to set up their own insurance companies by modeling the operation of the foreign fi rms At the same time, China’s Self-Strengthening Movement (1861–1895), led by intellectuals, strongly encouraged the public and private sectors to learn from the West, including learning about the insurance business Th e fi rst domestic insurance company, a small-scale marine insurer, was established in Shanghai in 1865 Th e fi rst domestic life insurance company, how-ever, did not come on the scene until 1894, almost 50 years aft er the fi rst foreign life insurer arrived ( Wu and Zheng 1993 )

Th e development of the insurance industry in China reached its climax in the late 1920s and 1930s Nonetheless, the market was dominated by foreign play-ers By 1929, there were more than 30 foreign insurers but fewer than 20 domes-tic ones Th e number of domestic insurers increased to 45 by 1935 Nevertheless, the number of foreign insurers increased even more rapidly to 166, coming from

16 countries, mostly Britain, America, Japan, and Germany At the same time the regulatory bodies were controlled by foreigners Consequently, more than 80 percent of the insurance business was in the hands of foreign enterprises (Xu, Cao, and Zhou 2001 )

In 1925, the first Chinese insurance handbook, Baoxianxue (The

Knowl-edge of Insurance), was published It closely referenced British and American insurance books In the section on life insurance, the authors commented that many people still did not understand the meaning or the benefits of life insurance Citing American and Japanese scholars’ definitions and concepts

of life insurance and supplementing them with some Chinese aphorisms, the authors promoted the idea that life insurance was “for preventing danger”

( Wu and Zheng 1993 ) Beginning with a Chinese aphorism tian you bu ce

feng yun, ren you dan xi huo fu (the sky has unpredictable clouds and winds;

life has misfortunes and fortunes) in the first chapter, the concept of life insurance as a means of risk management was first introduced to the Chinese through this locally published text However, as the circulation of this lengthy insurance handbook was limited to the intellectual elite, so was the idea of life insurance

Th roughout this period of signifi cant growth in the insurance industry, life insurance accounted for only a small proportion of the business ( Huebner 1930 )

Only about one-fi ft h of the insurance companies carried life policies Among these, the China United Assurance Society Ltd., founded by a local businessman

in 1912, was the largest domestic life insurer However, like the smaller domestic companies, it sold mainly group policies ( Wu and Zheng 1993 ) Furthermore, the largest part of the policies sold were endowment for savings purposes rather than traditional risk management policies ( Huebner 1930 ) Foreign life insurers off ered more individual policies, but their clients were mostly expatriates Th ere-fore, life insurance was never popular among the locals at the individual level during the boom of the insurance development in the 1920s and 1930s ( Wu and Zheng 1993 )

With the outbreak of the Sino-Japanese War in 1937, followed by the Second World War, many insurers shut down their operations in China Nevertheless, a number of them resumed their business soon aft er Again, the foreign insurers dominated and completely controlled the regulatory bodies of the industry American International Assurance Company, Ltd (AIA) was the fi rst foreign insurer to restart its business, and it subsequently became the largest and most infl uential insurer in Shanghai until the establishment of the People’s Republic of China (PRC) in 1949 (Xu et al 2001 )

The Post-1949 Period

When the Chinese Communist Party (CCP) took over in 1949, there were still

63 domestic and 42 foreign insurers in Shanghai With no business prospects in sight, all foreign insurers pulled out of China by 1952 A number of domestic insurers merged to become two large companies operating with joint public and private capital and continued to operate into the 1950s In October 1949, the People’s Insurance Company of China (PICC) was founded as the fi rst national state-owned insurer, unifying the former regional state-owned insurance compa-nies Two life insurance products were off ered in 1951, one for groups and one for individuals, and both carried endowments for savings purposes By the end of

1952, only about 100,000 life policies were sold nationwide, of which more than

80 percent belonged to group policies 2

Th e growth of PICC ceased in 1958 when Mao’s aggressive agriculturalization and industrialization campaign, the Great Leap Forward, began From 1959 to

1964, during the campaign and its disastrous aft ermath, PICC’s business meted, and insurance was only sparsely seen in Shanghai, Tianjin, Guangzhou, and Harbin Subsequently, during the widespread political and social upheaval of the Great Proletarian Cultural Revolution in 1966–1976, the insurance industry all but disappeared (Xu et al 2001 )

The Reappearance of the Insurance Industry

Th e reemergence of the insurance industry in the PRC can be divided into two distinct stages From 1979 to 1991, the state-run PICC resumed operations Th e insurance business was closed to foreign fi rms, and PICC practically monopo-lized the business Beginning in 1992, an entirely new scenario emerged New ideas and practices were brought in by the American-owned AIA New private domestic insurers emerged, and a number of Sino-foreign joint ventures appeared

The Revival of Domestic Insurance

As part of its market reforms, the PRC government enthusiastically promoted the reestablishment of commercial insurance In April 1979, the State Council gave authority for the People’s Bank of China to revive PICC’s business In 1982, group life and accident insurance policies were off ered and sold to employers as benefi ts for their employees In the same year, an individual life policy to be sold

to workers in state-owned enterprises (SOEs) and collective enterprises was also available 3 Th is individual policy, called Simple Life Insurance, combined both features of whole life and term life Th e insured amount would be given to the policyholder who survived the term or to the benefi ciary if the policyholder died within the term One of my informants, a woman in her early 50s, said that she

bought the policy in 1984 as an expression of renqing , or interpersonal

obliga-tions None of the workers in her work unit wanted the policy, but about 20 percent of them bought it in order to give face to the department head, who had

a personal relationship with the PICC salesperson Th e general public at large had no concept of life insurance, and PICC did not launch any serious training for their salespersons or any education for the public about this new commodity

As a result, life insurance never became popular when PICC was the only insurance provider

In November 1987, the Bank of Communication (Shanghai Branch) set up

an insurance division Th is division became independent and was named China Pacifi c Insurance Company Ltd in April 1991 With its headquarters in Shang-hai, China Pacifi c was the fi rst private insurer to expand its business throughout the country It started selling life insurance policies in 1995 Another domestic insurer, Ping An Insurance Company (Ping An), was founded in Shenzhen in March 1988 Ping An’s business was initially confi ned to property insurance, mainly in Shenzhen and a few other cities But in September 1992, it was renamed

as Ping An Insurance Company of China and began to expand its business to the entire country It opened a branch in Shanghai in November 1993, and started to sell life insurance in July 1994 In 1997, the company restructured its ownership

into stock shares and adopted the name Ping An Insurance Company of China, Ltd In January 2003, it was restructured into a holding company, and its name was further changed to Ping An Insurance (Group) Company of China, Ltd [Ping An (Group)] Th e life business sector was then taken over by Ping An Life Insurance Company of China, Ltd., which was set up in December 2002 to sub-sequently become a subsidiary of Ping An (Group) (To avoid confusion, I adopt Ping An’s title in 1997–2002 as its offi cial name throughout this volume.) With the emergence of domestic private insurers and the advent of foreign insurers, PICC was under pressure to reform its organization in order to stay competitive

Th is state-owned insurer spun off business to three independent share-holding companies in 1996: China Life Insurance Company, Ltd (China Life) took over its life insurance business, PICC Property Insurance Company, Ltd took over its property insurance business, and China Reinsurance Company, Ltd took over its reinsurance business

The Reentry of Foreign Insurance

Since 1992, China has been permitting foreign access to the emerging ance sector, due to both its new open door policies and pressure from the major players of the World Trade Organization (WTO) Unlike its crippled position

insur-in the face of foreign superpowers durinsur-ing the ninsur-ineteenth through the early twentieth century, Chinese authorities in the 1990s maintained control to avoid falling prey to foreign forces Th ey kept a tight rein on the access of for-eign insurers, especially those selling life insurance Th ey limited their regional access, fi rst only to Shanghai and Guangzhou in 1992 and 1995, respectively A few more cities, including Tianjin, Dalian, Chongqing, and Shengzhen, were added to the list in 1999 Aft er China’s entry into the WTO in November

2001, a dozen more cities were opened to foreign players, including the capital, Beijing In 2004, the Chinese authorities lift ed the regional restriction by open-ing the entire country to foreign entrance However, except for AIA, all foreign life insurers had to join with a local partner and run their business as a joint venture

In 1992, two of the subsidiaries of American International Group, Inc (AIG), AIA and American International Underwriters Insurance Company (AIU), were the fi rst foreign insurers granted licenses to operate in the PRC AIA specialized

in life insurance and AIU in general insurance Since the second half of the 1990s,

a number of foreign life insurers have arrived to form joint ventures Th e life Group from Canada, Prudential from the United Kingdom, the Allianz Group of Germany, American-based Aetna Life Insurance, and the AXA Group

Manu-of France were among them Between 1993 and 2000, six joint ventures were