Boston - Although its financial services sector is still small compared to the United States, Europe, or Japan, China's rapid growth rates and huge potential make it a critical arena for expansion for both insurers and solution providers, according to Celent Communications. In its latest report, Insurance in China: Market and IT Overview, Celent predicts IT spending by insurers in China will jump from $2 billion in 2005 to more than $5 billion in 2009.
Since 2000, the Chinese insurance market has tripled in size to about $60 billion in premiums, and Celent estimates that it is on track to exceed $100 billion by 2009. IT spending currently accounts for approximately 3.5% of premiums. As insurers continue to build out their increasingly complex IT infrastructures, however, Celent projects that this will rise to 5% of premiums by 2009.
"As Chinese and foreign companies compete in this market, they face different organizational and technological challenges," says Matthew Josefowicz, manager of Celent's insurance group and lead author of the report. "Chinese companies have an advantage with their market knowledge and especially with their relationships with regulators, but are hampered by underdeveloped business practices and technology. Foreign entrants are typically further advanced in those areas, but must adapt to a new market which operates differently from the more mature markets."
Chinese insurers old and new are both starting from an early stage when it comes to building a mature IT infrastructure. Given this position, they are generally free from the "legacy problem" that bedevils the U.S. and European insurance industries. Celent believes that insurers in China must think strategically about the task ahead in order to minimize the risks of creating their own legacy problems in the future.
Editor's Note: All monetary figures are in U.S. dollars.
Source: Celent Communicaitons
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