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Chinese insurance regulators are attaching greater importance to a balanced development of the fledgling industry, pledging greater support for and encouraging insurers to expand coverage in rural and western markets.
"Agriculture insurance is a common practice in market-economy countries to support agriculture, and is an important measure to reduce losses from risks, promote agricultural growth and protect farmers' income," Wu Dingfu, chairman of the China Insurance Regulatory Commission (CIRC), was quoted as saying yesterday by a spokesman at a CIRC conference that ended on Monday.
"The rural markets have enormous potential, and with regard to policy, we will be guiding insurance companies into the rural markets in the central and western areas," he said.
China relaunched agriculture insurance in 1983 as part of its market-economy-orientated reform but the industry tumbled as early as 1993 when claims soared, forcing the People's Insurance Co of China, the then sole agricultural risk underwriter, to withdraw from areas of heavy losses.
Agricultural premiums were below 1 billion yuan (US$120 million) in 2001, as compared with the 210 billion yuan (US$25.3 billion) of total insurance premiums.
But the growing wealth of some farming households in recent years as a result of economic reforms has generated huge demand for insurance coverage, Wu said.
The ongoing drive to promote growth in western areas and a campaign to revitalize the old industrial base of northeastern China also provides room for insurers in those areas, he said.
Growth rates of aggregate premiums in China hovered above 30 percent this year despite the severe acute respiratory syndrome outbreak that seriously disrupted normal insurance operations, prompting concerns about whether such high premium increases are sustainable.
Wu Xiaoping, vice-chairman of the CIRC, said such worries are unfounded, noting that the industry's low base still allows huge room for growth.
"Although there has been vicious undercutting in some points of the industry, there is a lot of unexplored land (in rural and western areas)," he said.
The insurance sector accounted for 2.6 percent of China's financial industry in terms of assets at the end of last year.
The vice-chairman said the insurance industry needs to make some frog leaps to achieve its goal. He added that an innovative spirit is needed to develop new products and services.
He also pointed to the widespread problem among insurance firms of failing to strike a balance between speed and quality in the course of their development.
(China Daily December 3, 2003)
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