<p style="text-align: justify;">New China Life Insurance is a Chinese life insurance company known as New China Insurance (NCI). The company was incorporated in 1996 and is based in Beijing, China. The company offers products such as life insurance, health insurance and accident insurance product and services. It operates through the following segments: Individual Insurance, Group Insurance, and Other. The Individual Insurance segment includes the sale of insurance contracts and investment contracts to individuals.</p>
<p style="text-align: justify;">The Group Insurance segment engages in the selling of insurance contracts and investment contracts to group entities. The Other segment engages in asset management and unallocated income and expenses of the group. The company was ranked at 330th place in the World&#8217;s 2000 largest companies in the Forbes ranking (New China Life, 2021). Porter&#8217;s five forces model is a valuable tool to identify threats and opportunities faced by NCI in the insurance sector.</p>
<h2 style="text-align: justify;">Competitive Rivalry in The Market</h2>
<p style="text-align: justify;">The financial services industry is highly competitive in the industry. The Chinese insurance industry is the second largest in the World after the US. NCI is the sixth-largest insurance company in China based on revenue (Statista, 2020). NCI reported 174.57 billion yuan in 2020. Its major competitors are China Life Insurance (CLI), China Pacific Insurance (CPI) and Ping An Insurance. NCI has reported $21.7 billion in revenues and earned a profit of $ 743.9 million (Fortune, 2021).</p>
<p style="text-align: justify;">CLI has reported $131.2 billion and $4.6 billion in revenues and profit, respectively (Fortune, 2021). CPI has reported 385.49 billion yuan in revenues in the financial year 2020 (Statista, 2020). Ping An Insurance, the largest insurance provider in China, is ranked 21st in the global Fortune 500 companies and has reported $184.2 billion and a profit of $21.6 billion (Fortune, 2021). Therefore, the market is highly competitive.</p>
<h2 style="text-align: justify;">Threat of Substitutes</h2>
<p style="text-align: justify;">The financial industry has evolved with time so does the insurance industry. The technological progress is enabling the hybrid companies, financial and technology to provide services in the sphere. These beneficiary companies are taking advantage of the situation and are trying to penetrate the market by providing better services at tailored products. They are using digital distribution channels to provide services to customers. In China, total funding for the insurtech has amounted to EUR 4 billion in 2018 (Dib &; Stamer, 2021).</p>
<p style="text-align: justify;">However, incumbents feel the competitive pressure from these companies; they are taking measures to mitigate the risk by adapting to the changing environment. They are pursuing growth by generic means as well as by strategic acquisitions. The threat of substitutes is moderate in the short term.</p>
<h2 style="text-align: justify;">The Threat of New Entrants</h2>
<p style="text-align: justify;">The threat of new entrants is low to moderate in the industry. There are industry-related limitations associated with the insurance sector. The major obstacles are stringent regulatory framework, high capital requirement and well-established incumbents. The industry has severe regulatory oversight, and the companies have to comply with the strict requirements and incur additional costs. Another deterring factor is the high capital requirement at inception and smooth running of operations; thus, high capital working acts as a discouraging factor. However, it is partially sorted by the availability of financing options.</p>
<p style="text-align: justify;">Insurtech startups have drawn around $17 Billion in investment in the last decade (Deloitte, 2019). There are established entities already operating in the industry, and therefore it is not easy to break through in the industry. Therefore, the threat of new entrants is moderate.</p>
<h2 style="text-align: justify;">Bargaining Power of Buyers</h2>
<p style="text-align: justify;">Buyers can exercise moderate bargaining power. Buyers&#8217; power depends on the associated factors such as their concentration, switching cost, brand loyalty and availability of alternatives. The buyers usually deal individually for insurance unless it is a corporate client and has lower bargaining power. The insurance market is highly competitive, and therefore buyers can bargain for better services. Shen (2000) reports that such growth in product lines and increased market competition among insurers has improved insurance services to commercial (and private) consumers. However, despite no switching costs and low brand loyalty, consumers consider soft costs before switching. Therefore, the bargaining power of buyers is strongly moderate.</p>
<h2 style="text-align: justify;">Bargaining Power of Suppliers</h2>
<p style="text-align: justify;">In the insurance industry and financial services sector, suppliers have moderate bargaining power. Their power is directly associated with the suppliers&#8217; concentration, the importance of supplies for the business, forward integration risk and nature of supplies. The main inflows in the insurance industry are from private consumers, corporate clients and expert human resources. Private consumers&#8217; are an important part of the business but cannot individually affect the business and thus lack bargaining power.</p>
<p style="text-align: justify;">Reliance on multiple sources of inflows reduces the company&#8217;s supply chain risk. On the other side, corporate clients are immensely important as they bring business by giving them, significant clients. They can seek better terms and require the company to lower premiums consequently, affecting the bottom line. Lastly, human experts, actuaries are skilled people and are in scarcity; they are extremely important for the business and thus commend higher bargaining power. When suppliers are in concentration, they can bargain higher buying power (Lin et al., 2020). Therefore, suppliers hold moderate bargaining power.</p>
<h2 style="text-align: justify;">References</h2>
<p style="text-align: left;">Deloitte. (2019). Accelerating insurance innovation in the age of InsurTech. Available at: https://www2.deloitte.com/content/dam/Deloitte/us/Documents/financial-services/us-accelerating-insurance-innovation.pdf<br />
Dib &; Stamer. (2021). Is China winning the insurtech race? Available at: https://www.eulerhermes.com/en_global/APAC/apac-economic-research/Is-China-winning-the-insurtech-race.html<br />
Fortune. (2021). China Life Insurance. Available at: https://fortune.com/global500/2017/new-china-life-insurance/<br />
Fortune. (2021). New China Life Insurance. Available at: https://fortune.com/global500/2017/new-china-life-insurance/<br />
Fortune. (2021). Ping An Insurance. Available at https://fortune.com/company/ping-an-insurance/<br />
Lin, Y., Xue, B., &; Wang, C. (2020). Concentration and diversification: components suppliers’ strategy in utilising external knowledge. Innovation, 1-18<br />
New China Life. (2021). Investor Relations. Company Honors. Available at: https://www.newchinalife.com/spage/en/InvestorRelationsCompanyHonour/48908.html<br />
Shen, Yiming. (2000). China’s Insurance Market: Opportunity, Competition and Market Trends. The Geneva Papers on Risk and Insurance &#8211; Issues and Practice. 25. 335-355. 10.1111/1468-0440.00069.<br />
Statista. (2020). Leading Chinese insurance companies on the Fortune China 500 ranking in 2020, by revenue. Available at: https://www.statista.com/statistics/455112/china-fortune-500-leading-chinese-insurance-companies/</p>