China's insurance sector is racing against the clock to get ready for the country's entry into the World Trade Organization (WTO).
Regulators have been busy patching up holes in the legislative system. They issued a legally-binding regulation on insurance firms earlier this year, and are nearly ready to issue similar decrees on foreign-funded insurance firms and loss adjusters. An amendment to the Insurance Law is also on the agenda.
Another major task the China Insurance Regulatory Commission (CIRC) has to do is set up a nationwide regulatory network.
In April, the commission introduced its first group of local offices, in Beijing, Shanghai and Guangzhou, the most important local markets in China.
According to the commission's chairman Ma Yongwei, similar offices will be set up in all major cities by the end of the year.
Previously, Chinese insurers could only invest the premiums they'd received in bank deposits and treasury bonds. Consecutive interest rate cuts by the central bank imposed a serious threat to the solvency of these insurers who had been depending heavily on policies with high interest payments.
Last October, insurers were allowed to invest up to 5 percent of their assets in mutual funds. The ratio was 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 increase their equity capital, perhaps by introducing foreign shareholders to the stock market.
This is relatively easy for China's young and smaller insurers, most of which are shareholding companies. But for 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 the company would start a feasibility study later this year to transform the business into a shareholding firm.
He said this would not only improve the firm's financial strength, but also enhance its corporate structure and management.
Chinese insurers are developing a range of new products. Ping An Insurance and Xinhua News Agency Life have both introduced Unit-linked policies, while Pacific Insurance now underwrites cash and jewellery, 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 customers.
Sources from Ping An Insurance said the company earned several million yuan in premiums the first day its unit-linked policies were sold in Beijing.
Chinese insurers have also moved to improve their services. In June, PICC became the first company to open a nationwide hotline providing a 24-hour service to customers. China Life has set up customer service centers in its 3,400 branches nationwide.
(Xinhua News Agency July 29, 2000)
