Insurance companies in China apply different business models in regard to retirement businesses. Some insurance companies focus on individual annuities; some extend retirement businesses horizontally, selling corporate annuities, group pensions and individual annuities; while some other companies extend their retirement business vertically, such as entering into the retirement apartment business.
In China, reverse mortgages face cultural opposition, and will not be popular in the next five years. The main reasons are:
• Old people want to leave their apartments to their children after death
• There is no legacy tax in China
(The target market for reverse mortgages is people who have more than one apartment or no child. There is no insurance company or bank that provides this kind of business yet.)
• The possibility of apartment prices going down is the main factor worrying financial institutions
• Banks do not have sufficient data for life expectancy
• Regulations are not complete: China's land usage is limited to 70 years. If it is not renewed or does not get approval, then, theoretically, the land reverts to the state.
So the more acceptable method for old people is to sell their apartment and move to a cheaper one. Another way is living in retirement apartments and renting their own apartments out to provide income and cover the cost. The problem is that retirement apartment facilities are not good as of yet.
For this reason, some insurance companies are extending retirement business value chain, and have started to invest in retirement communities. For example, Taikang Life is building a retirement community in a suburb of Beijing, and Union Life is building a retirement health care community in a suburb of Wuhan.
For more, see Celent new report
This blog has been reprinted with permission from
Wenli Yuan is a senior analyst in Celent's Asia Research Group.
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