NU Online News Service, April 19, 10:25 a.m. EST
PHILADELPHIA—Doing business in Asia is very different from the United States or Europe in both cultural and business terms and understanding that difference can avoid personal embarrassment or imprisonment.
“Things are just done differently and you have to be ready for it,” says Debra Rodgers, senior vice president, global risk management for Aramark, a food services company for sport and entertainment events.
She was discussing the company’s experience with setting up to handle the 2008 Beijing, China Olympics and unique issues the company faced doing business there.
Her comments came during a panel discussion on “Doing Business in Asia: What You Need to Know” held here at the 59th annual meeting of the Risk and Insurance Management Society this week.
Rodgers says that while the company was excited about the contract and had a presence in the country, along with its own supplier, one of the first challenges they encountered was that they were obligated by the Olympic committee to use suppliers outside of their traditional supply chain.
Upon inspection of these suppliers Aramark found that some were not up to the company’s health standards and alternatives had to be found.
Other issues surfaced. The company had to train more than 3,000 people in proper food handling and safety issues. Aramark also needed to build storage facilities and related infrastructure.
When it came to insurance, Rodgers says the company opted to purchase domestically. But a major underwriting and risk analysis challenge was that there was little data available to evaluate risk.
She says one take away from this experience for a company doing business in China is that they need to think about the scope of the insurance program they need and what their deductibles should be.
Reginald Peacock, head of customer and distribution management for Zurich Insurance Co., Hong Kong says that producing a commercial insurance contract in Asia can sometimes take a couple of years based on the customer’s desire, contract certainty, payment of premium and working to avoid fines over tax issues.
Typically in Asia, the relationship requires a great deal of negotiation and the development of a relationship with the parties involved.
The regulatory environment can differ in its philosophical approach from country to country, but it is evolving and evolving rapidly, he says. However, regulations throughout Asia are complex and violations can not only result in fines but in some cases it means jail time for an executive that violates the rules. Especially involving the non-admitted market that is barred by many Asian countries.
“The most effective plan is to deal with someone that understands the market,” says Peacock.
Roger Wilkinson, chairman and chief executive officer Asia, Pacific, Mid-East and Africa for Willis International says there is a certain etiquette that one must follow that is different from one nation to the other to avoid insulting someone.
This can be as simple as handling a business card, which in Japan involves taking it with both hands, looking at it and placing it anywhere other than in a wallet.
“It is far from a homogeneous place,” says Wilkinson. “The people are different and each culture is different.”
Insurance regulation also varies from country to country.
China’s regulator, the China Insurance Regulatory Commission, he called, “mystifying, but supportive;” Korea and Japan he says are “insular, but more interested” in supporting the insurance marketplace; and he calls India “frustrating in many ways.”
The primary marketplace is property insurance with growing casualty marketplace in Asia. There is also a “vibrant terror market,” he says.
Singapore stands out as the only real regional marketplace, with 22 markets, while many of the other Asian nations focus on developing a domestic insurance marketplace. By and far, most Asian countries are dominated by three to five domestic insurers.
China’s insurance market is dominated by motor insurance, and with pressure from the World Trade Organization, that $70 billion premium market is beginning to open its doors to foreign insurers, says Wilkinson.
One of the frustrating aspects of doing business in India, he says, is that any foreign insurance business capitalization is capped at 26 percent ownership. There is a promise that the number will rise to 49 percent, “but we’re still waiting,” says Wilkinson.
For China, he says, relationships are very important to doing business and “everything is a negotiation.”