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China's Insurance Sector Prepares for WTO Accession
China's insurance sector is racing against time as the country prepares to enter the WTO.
Regulators have been busy patching up holes in the legislation system. They issued a decree on insurance firms early this year, and are nearly ready to issue decrees on foreign-fund insurance firms and loss adjusters. An amendment to the Insurance Law is also on the agenda.
Another major task before the China Insurance Regulatory Commission (CIRC) is the establishment of a nationwide regulatory network.
In April this year, CIRC inaugurated its first group of local offices in Beijing, Shanghai and Guangzhou, the most important local markets in China.
According to CIRC chairman Ma Yongwei, similar offices would be set up in all major cities by the end of the year.
In the past, Chinese insurers could only invest their premiums in bank deposits and treasury bonds. Consecutive interest rate cuts by the central bank imposed a serious threat to the solvency of Chinese insurers who had been depending heavily on policies with high interest payments.
Last October, insurers were allowed to invest up to five percent of their assets in mutual funds. The ratio were raised to 10 to 15 percent for a few insurers this year.
Experts said opening the securities market to insurers is consistent with international practice.
An urgent task before the regulators and the insurers is to make Chinese insurers financially strong as soon as possible.
Regulators will allow insurers to raise their equity capital including introducing foreign share holders and listings on the stock market.
This is relatively easy for China's young and smaller insurers, most of which are share holding companies. But for solely-state- owned giants such as China Life and the People's Insurance Company of China (PICC) there is a lot more work to do.
Wang Xianzhang, the general manager of China Life, said recently that his company would start a feasibility study later this year to transform the company into a share holding firm.
According to Wang, this would not only improve the firm's financial strength, but also improve its corporate structure and lead to better management.
Chinese insurers are developing a range of new products. Ping An Insurance and Xinhua Life both introduced Unit-linked policies, Taikang Life and China Life introduced participating policies, while Pacific Insurance now underwrites cash and jewelry, which used to be rejected by all insurers.
The new products have been well-received by the market, as they meet the changed needs of society and customers.
Sources from Ping An Insurance said the company earned several million yuan in premium income on the first day when its unit- linked policies were sold in Beijing.
Chinese insurers also moved to improve their management and services. In June, PICC became the first company to open a nationwide hotline providing 24-hour services to its customers.
China Life established customer service centers in its 3,400 branches nationwide and reshuffled its branches in provincial capitals.
While speaking of the prospect for Chinese insurers after the country's accession to WTO, CIRC chairman Ma Yongwei said that though Chinese insurers are lagging far behind their foreign counterparts in services and management, "if they work harder, they will surely catch up in the near future."
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