China is expected to launch another two specialized agricultural
insurance companies in northeastern regions to better serve the
local demand for agricultural insurance, the country's insurance
regulator said Thursday.
One of them, the Jilin Anhua Agricultural Insurance Co, to be
located in Jilin
Province, is in final preparation and should start operations
before the year's end.
The company, a joint-stock one, will sell comprehensive insurance
packages concerning property, casualty, short-term health care and
farming to farmers.
And the other, still waiting for final approval from the State
Council, will be a cooperative agricultural insurer in Heilongjiang
Province, the first such company to adopt a cooperative model
in China, said Guo Zuojian, deputy director of the Property
Insurance Regulatory Department of China Insurance Regulatory
Commission (CIRC).
Both companies will be in commercial operation.
They come after the first specialized agricultural insurer,
Shanghai Anxin Agricultural Insurance Co Ltd, was approved in March
and established in Shanghai last month.
The authorities will also choose more pilot regions to try other
operational models for agricultural insurance, including some
adopted from overseas practices and policy-oriented companies, said
Guo.
More policy stimulus is expected to encourage insurers and
enterprises to take part in the agricultural insurance business,
whose capacity is lagging behind market demand.
"We will start with pilot regions and companies and gradually
expand the sphere of experiment," said Guo at a press briefing
Thursday in Beijing.
He said that it should take three to five years to promote the
coverage of agricultural insurance to a certain scale and make it
available for the overall agriculture sector and rural
households.
Right now, the business is still underdeveloped, as insurers are
often reluctant to underwrite such policies because of risks and
small chance of profitability, though the rural population of 800
million underlines market potential.
Premiums from agricultural insurance were a meagre 460 million yuan
(US$55 million) last year, accounting for only 0.5 percent of all
property insurance premiums, official statistics said.
The State-owned People's Insurance Company of China (PICC), the
major agricultural insurance provider in the country, has hardly
harvested net profit from the business since 1982 and has virtually
been withdrawing from the market.
Regulatory approval to launch Shanghai Anxin is a ground-breaking
move to revive the business, which can also be profitable, experts
said.
Both agriculture and farmers need insurance to be better protected
from risks. And that concerns the stability of the entire economy
and livelihood of the people, said Guo.
"In the past, agricultural insurance was stereotyped as a business
that could only be policy-supported, but that is actually only one
way of operation," he said. "Insurance policies covering economic
crops and high value-added products, for example, can also be
commercialized."
Insurance companies should be more flexible and design relevant
products and rates according to the market demand.
Overseas insurance companies can also provide expertise in this
aspect, though it has to be combined with local conditions.
French property insurer Groupama, among the first foreign companies
to show an interest in agricultural insurance in the Chinese
market, is expected to formally launch a branch in Chengdu, capital
of Southwest China's Sichuan
Province, to conduct agricultural insurance business within the
month, Guo says.
Groupama will also offer inspiration to new Chinese agricultural
insurance companies that will be launched soon, he said.
"We will not follow a single model for agricultural insurance
development but will build up a multi-level system," said
Guo.
Each region may choose its own model to expand agricultural
insurance coverage according to its fiscal strength and natural
conditions.
Some local governments, for example, have been working together
with insurance companies to develop agricultural insurance that
combines fiscal and policy support with commercial
operations.
(China Daily October 22, 2004)