A UCLA Global Fellow explains how Chinese people's inhibitions about discussing premature death have made it hard, but not impossible, for a life insurance market to develop in the country.
Life insurance is something very different from other commodities, because it's putting a price on human life. No matter where it is, whenever it's new it faces a lot of resistance.
Cheris Chan, an assistant professor of sociology at the University of Pittsburgh, will spend a second year with the UCLA International Institute as a Global Fellow in 2007–08. Chan and six other visiting postdocs will have teaching responsibilities and frequent multidisciplinary seminars with faculty, graduate students, and guests.
Chan, who was educated in Hong Kong before doing graduate work at Northwestern University, is completing a book examining the emergence since the 1990s of a life insurance market in mainland China, where discussion of premature death is taboo.
Q: If you're a life insurance agent in China, how does your approach differ from that of a life insurance agent here in the United States?
I myself didn't study life insurance here in the U.S. One thing I have learned from the literature about insurance agents in the U.S. is that most of them are men. It's a male-dominated profession, because being a sales agent requires you have to go out, to knock on people's doors. It requires kind of thick skin. And you have to be competitive, aggressive.
In China, I found that there are more women engaging in this occupation than men. A lot of women in their 30s to 40s are very successful in this job. And so, that's one of the differences—the gender. In China, the sales agents see selling life insurance as more of a "personal relationship" job, because you're dealing with people, and they find that women may actually be better at that.
In my project, I look at how the insurance companies create a market in China, because it's something completely new to the people there. Life insurance is something very different from other commodities, because—other than kind of being invisible—it's putting a price on human life. No matter where it is, whenever it's new it faces a lot of resistance. I mean even in the U.S. and in Europe, as documented by Viviana Zelizer's Morals and Markets (1979). So I was interested in seeing how people in China respond to this kind of new commodity.
Q: Describe some of the cultural obstacles to the market and to the salesperson in China.
The biggest obstacle I see is that, in Chinese culture, the topic of death is a taboo, especially premature death. It doesn't mean that Chinese people do not recognize or accept that human beings die, or that they are so afraid of dying. But their concept of dying is that one dies when one is old, not premature death that life insurance is designed for.
The Chinese taboo on premature death came from the Chinese concepts of life and death—which I elaborate in my book—rooted in Confucianism, Buddhism, and Taoism. The ideas about death in Chinese philosophies are fundamentally different from that in Christianity. Confucians rarely talk about life after death. It is something unknowable. Then, folk Buddhism and Taoism brought a kind of terrifying notion of death. For example, there is a notion of an 18-layered hell where dead people receive a lot of harsh punishments and tortures. Early death is also, in some superstitious belief, a punishment for bad karma.
So, all these add together to make premature death a big taboo in the Chinese context. And, when we relate that to life insurance, it's very interesting.
Q: Does the industry have to overcome these beliefs, or does it have to go around them somehow?
I found that foreign insurance companies tried to overcome it, or tried to change the way people think, but domestic insurance companies simply accommodated it. The foreign insurance firms trained their agents to teach people the new concept of risk management, but the domestic firms simply redefined the concept of life insurance into something acceptable to the local mentalities and habits. They also offered products that are welcomed by the local people, though these products induced losses to these domestic firms.
Q: And this depends on the company, not the salesperson. The organization has a strategy?
Yeah, they decide what kinds of products to offer, and that affects how the agents sell. But sales agents themselves do have their own strategies to interact with individual prospective buyers, like to gain trust from them and to establish good relationships with them.
Q: How do they try to change people's minds?
There's a pattern. Foreign firms tend to make an effort to change people's perceptions of risk. And Chinese local companies offer something that is less for premature death and more for retirement, like savings plans.
Q: Are the local companies more successful?
Yeah, they sell more policies and have a larger market share. This is mainly because they redefined life insurance from risk management to money management so that the topic of premature death and misfortunes can be avoided. They also offered products that are compatible with the Chinese habit of savings and so their products were once very popular. But as I said earlier, these products induced financial losses. So, it really depends on what we meant by "successful." The foreign firms tap a larger profit margin from each product they sell, but they occupy a smaller market share. The domestic firms have large market share, but their profits may grow slower. Now the domestic firms don't offer these [unprofitable] products anymore, but they have already made themselves a big name.
Q: On balance, have you been more impressed with the power of these cultural inhibitions or their malleability?
Both, actually. My argument is that on the one hand the cultural resistance is very strong, but on the other hand this cultural resistance doesn't really prevent a market from emerging. It's not so strong that the market isn't possible at all. But this cultural resistance shapes the trajectory and the features of the market. It turns the Chinese life insurance market into a money management market.
Why is the market possible? The economic actors that evolved—insurance companies, their agents—try to capitalize on some other cultural elements, such as [the interpersonal ties that come under] guanxi, child-centered ethos, habits of savings, and stock fever, in order to make it possible. So on the one hand we have this taboo about death, but on the other hand there are some other cultural elements that can facilitate your sales. One example is when the local company defines insurance as something like money management, they do it because the Chinese like to save. And also they offer some child policies, and they present it as a gift for the children. That works well in China. Under the one-child policy, the child is the center of attention.
Q: Is there any kind of cultural configuration that could stop a life insurance industry from emerging?
The local insurance companies that offered these savings products were more successful in the sense that they captured more of the market. But defining life insurance as money management was problematic, because then you have to make them more competitive.
When we look at it this way, that means that actually the cultural element was so strong that the insurance companies have to suffer a loss in order to sell. For those foreign companies that were endeavoring to sell risk management products, their growth was much slower. So in that sense you can see the cultural element is actually very strong.
But this cultural element would not stop the growth of the life insurance industry, because even though some products sold are savings products, they still carry an insurance function. That means that if someone dies early, [policy-holders] really get some compensation—even though when people bought it, they didn't buy it for that purpose. So in the beginning maybe they bought it not because of risk management, but then after a time they see some impacts of the insurance that can really give them some risk-management function, and eventually they might come to accept, "OK, insurance is for that."
Q: It's a long-term strategy.
In the long run, eventually the market will change to more like a mix of risk and money management. So eventually the market will emerge.