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Home >> Life
UPDATED: 12:26, October 04, 2006
Insurance, bankcard ease farmers' financial woes
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Whether farmers in China stay home to work on the land or are part of the huge group of migrants who criss-cross the country looking for jobs, steps have been taken to ease some of their financial worries.

One of them involves life insurance, a concept that has come to China mostly in the past 10 years. The other involves a bankcard that will allow migrant workers to transfer money from banks in the cities where they work to their hometown co-operatives for only a small transaction fee.

Ji Yueming has a debt of more than 20,000 yuan (US$2,500) but bought a life insurance policy for himself this year, with an annual premium of 910 yuan (US$114).

Because his wife also had a life insurance policy for two years when she died of kidney cancer this year, he received a disbursement of 20,000 yuan from China Life, the country's largest life insurer.

"Without the insurance, I would have had more debt," Ji told China Daily, adding the family had spent around 30,000 yuan (US$3,750) trying to cure his wife.

"It's such a pity that we didn't buy more insurance at that time."

With 1.3 hectares of farmland, Ji's gross income hovers around 10,000 yuan (US$1,250) every year. Having a comparatively strong insurance sense, Ji Yueming is typical of thousands of farmers in Jiuquan, a county in Northwest China's Gansu Province.

Although Jiuquan's annual per capita revenue is only 4,000 yuan (US$500), the premium per person, or the premium density, has exceeded 400 yuan (US$50), beating the country's national average of 368 yuan (US$46).

"Providing more value-added services and enlisting highly talented people for the sales team are the two keys," Zhang Deming, general manager of the Jiuquan branch of China Life, told China Daily.

Some agents, by taking advantage of their wide social relationships, help farmers by selling food or giving them a hand during the peak seasons.

For instance, the agents in the Qingshui sales office help 11 farmers sell 70,000 kilograms of food, easing their pressures and also bringing in thousands of premiums to China Life.

The Jiuquan branch is also hiring for its team. "We usually enlist teachers, veterans and villages cadres, all enjoying high prestige in the counties and villages," Zhang said.

Thanks to these efforts, China Life's Jiuquan Branch saw its premiums from rural areas accounting for 65 per cent of its overall business. The premiums from Dunhuang and Jinta, two other counties in Gansu, have been equal to the revenue of the local government.

With more companies entering into China's insurance sector, the competition in the cities has been fierce. So, more insurers are looking at the rural market a huge, untapped resource.

"Strengthening the foothold in cities and gaining the lion's shares in counties and villages" has been the basis of China Life's business strategy for 2006, said Su Hengxuan, the company's assistant president.

Premium from the rural market, which accounts for 48 per cent of its overall premiums, totalled 54 billion yuan (US$6.75 billion) in the first half of this year, an increase of 21.8 per cent compared with the same period in 2005, Su explained.

Ping An, the country's second largest life insurance company, is also paying more attention to the developing rural market. Nationwide there are around 14,000 outlets in rural areas, covering 30 per cent of towns and villages.

However, the exploitation of the rural market should be done with particular care, said experts.

"Given the power that 'word of mouth' has, insurers should pay more attention to misleading sales or unreasonable refusal of claims, both of which will result in mass disbursement demands and thus damage the local insurance market," said Hao Yansu, an insurance professor with the Central University of Finance and Economics.

Also, the China Insurance Regulatory Commission (CIRC), the country's insurance watchdog, will soon release new rules concerning the development of the life insurance industry in rural areas.

Gong Yisheng, CIRC's director, said the threshold for insurers' entry into rural areas will be even higher than for cities, due to the fragility of the market.

For instance, the insurers should have local outlets to tend to rural residents' needs, and they will not be allowed to flee the market at will.

"All these measures aim to maintain a good environment for insurance development in rural areas," Gong added.

Currently, accident and health insurance are the best sellers in the countryside, but products tailored to farmers are in short supply, especially regarding pensions.

"We want to buy a policy out of concern for our pensions, but it is too expensive," said Chai Cuihua, a 45-year-old farmer who spends 1,900 yuan (US$238) on health insurance every year.

Zhou Fuping, a CIRC researcher, said comparatively high premiums, inflexible payment terms and incomprehensible policy clauses are the major problems in rural insurance.

"Most insurers made little or even no changes to policies in rural areas," he said.

"We have noticed that and has set up a team to develop farmer-tailored products," China Life Assistant President Su Hengxuan told China Daily.

Bankcards for the mobile

It sounded like a foolish question, especially spoken so loudly in a crowded railway station: "Who will dare to steal the 8,000 yuan (US$986) I have with me?"

The answer is a deafening silence. The speaker is Sha Gen, a migrant worker, in his late teens or early 20s, wearing a dowdy gray jacket and still sporting a childlike look.

"See, Sister Wang? Nobody will steal my money," said Sha, who has spent several years working in the city and now plans to go back to his hometown with his savings.

This is a scene from the Chinese film "A World Without Thieves," based on a story between two groups of thieves and a naive farmer-turned-worker.

Although the story is fictional, young Sha Gen represents thousands of Chinese farmers who work in cities and take the money they've earned back to their hometowns during Spring Festival.

Migrant workers about 100 million across China with the number growing by 4 million to 5 million each year carry the money they earn with them even at the risk that it will be stolen on the journey home. They could put the money about 50 billion yuan (US$6.25 billion) to 400 billion yuan (US$50 billion) combined in banks and send wire transfers home, but they dislike the transmission charges.

To solve the problem, the People's Bank of China (PBOC), China's central bank, is offering a bankcard tailored to migrant workers that will enable them to withdraw money at their local rural co-operatives after they deposit it in a bank in a city where they work.

"With a successful pilot experience in Southwest China's Guizhou Province, we aim to expand the business in 11 other provincial-level jurisdictions this year," said Su Ning, PBOC vice-governor.

Guizhou was a logical choice for the pilot project. Four million migrant workers from there last year amassed a total income of more than 30 billion yuan (US$3.75 billion) which accounted for 15.4 per cent of the provincial gross domestic product.

In addition, all the rural co-operatives in Guizhou were integrated into one network last year and joined China UnionPay, the Shanghai-based operator of the country's integrated system that uses bankcards for payment.

The China UnionPay bankcard network for farmer-turned-workers was launched on November 29, 2005. Using a bankcard issued by the Industrial and Commercial Bank of China or the Guizhou branch of the Agricultural Bank of China, the card holder can withdraw money or make deposits at Guizhou's rural co-operatives, including those branches in towns and villages.

At the end of June, statistics from China UnionPay showed that transactions totalling 24.5 million yuan (US$3.1 million) had been made in the first half of 2006, a year-on-year increase of 54.2 per cent in volume.

"The success of Guizhou's pilot project paved the way for the spread into other areas," Su said.

The expansion into the 11 other jurisdictions has been divided into two phases. Hunan, Jiangsu, Shandong, Jiangxi and Fujian provinces and Chongqing Municipality were scheduled to be online by September 30; with Henan, Shaanxi, Sichuan and Yunnan provinces plus the Guangxi Zhuang Autonomous Region following by the end of the year.

According to Lin Caiyi, a China UnionPay senior researcher, the bankcard business for migrants is more like a charity activity than a commercial venture.

"In that case, how to achieve the profitability of card issuers will be a major challenge," Lin said, adding that transaction charges to farmer-turned-workers are lower than those to regular consumers.

"But banks, as a commercial entity, go after profits. Without a market drive, such business is not likely to be durable. And it is unrealistic to ask small rural co-operatives or banks to shoulder the loss from that business."

The best solution, Lin said, lies with the participation of local governments. Through preferential tax rates or fiscal subsidies, the governments can help banks achieve a balance between profitability and social responsibility.

Source: China Daily

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