China Insurance Regulatory Commission (CIRC) has been criticized for increasing auto insurance rates in a draft measure announced on June 15.

The Measures on Floating Premium Rates for Compulsory Vehicle Liability Insurance will be implemented on July 1. It has triggered much dissent.

"CIRC will extensively listen to suggestions and improve measures to make sure they are scientifically and reasonably effective," Yuan Li, spokesman of CIRC said yesterday.

CIRC has received 482 complaints via e-mail and seven via fax in the past five days following its announcement of the draft measures.

According to the new policy, auto premium rates will be allowed to float within a range of 30 percent, related to traffic accidents and breach of traffic rules. The rates will be set according to the severity and frequency of accidents in which drivers are involved.

But since it is difficult for a driver to have no violations within a year, many said the floating mechanism would increase auto insurance rates.

Yuan said: "Rates for some drivers will increase and for others decline. Drivers with good safety records will pay lower rates. The measures will serve to protect drivers' benefits while maintaining safe traffic in the city and protecting citizens' security and benefits. The measures will benefit most people."

Many said increasing rates would be like a second punishment. They would initially be punished by traffic administrators for violations.

Yuan said: "CIRC is setting rules based on international practice and the State Council.

"The new measures are aimed at cracking down on traffic violations, reducing the dangers of driving, and easing the problem of traffic congestion by means of an economic lever."

CIRC plans to have more discussions about the measures with insurance professionals and traffic management experts on Monday.

Shanghai, which has implemented the floating premium rates on a trial basis, reported a 65.96 percent decrease in traffic accidents and a 9.27 percent decrease in traffic deaths in 2005.

(China Daily June 22, 2007)