Insurance sector warned against blind pursuit for premium increases

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Last updated at: (Beijing Time) Tuesday, April 06, 2004

Insurance sector warned against blind pursuit for premium increases

The Chinese insurance watchdog Monday warned the industry against blind pursuit for premium increases when the country is pursuing balanced and sustainable growth.

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The Chinese insurance watchdog Monday warned the industry against blind pursuit for premium increases when the country is pursuing balanced and sustainable growth.

The irrational pursuit for premium growth has led to such problems as inadequate reserves in insurance companies and increased business risk, Wu Dingfu, chairman of the China Insurance Regulatory Commission (CIRC), told Xinhua Monday.

Two leading Chinese insurance companies, People's Insurance Company of China (PICC) and China Life, were listed abroad last year and all 35.4 billion yuan financed through the stock market went to their reserves.

"The situation is being improved with the listing," Wu said.

According to the CIRC, another two Chinese insurance companies,New China Life Insurance and China Ping An Insurance, will be listed on the stock market within the year.

The government hoped the fair competition among insurance companies would change the growth pattern of this industry when joint stock and foreign insurance companies join the market, Wu said.

He urged a development of not only premium but also efficiency and credit in the industry.

"The insurance business neither met the needs of society nor played the role it should though it grew rapidly in recent years,"he said.

Government assistance remains the major method for disaster relief in China, while in some developed countries insurance companies play the main role, he added.

The industry has still contributed to a small proportion of thecountry's economy, Wu said.

Premiums in China's insurance industry totaled 338.04 billion yuan (40.87 billion US dollars) in 2003, a year-on-year rise of 27.1 percent, while the industry's total assets were worth 912.28 billion yuan (110.31 billion US dollars) by the end of last year.

The CIRC will work more hard to improve the supervision and create a favorable environment for fair competition, he added.

Source: Xinhua

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