The Chinese insurance market was served only by the People's Insurance Company (PICC) until the late 1980s when the Ping An Investment Company was established in the Shenzhen Economic Zone. The China Pacific Insurance Company (CPIC) was established in 1990. In addition to these three local companies there are eight regional life companies and regional agricultural insurance companies in X in Jiang Autonomous Region.
American International Group has had the first and only licence for a foreign insurer since 1949. On September 29th 1992, AIG's wholly-owned Hong Kong subsidiary, American International Assurance Co Ltd (AIA), was granted approval for a 100 per cent owned branch in Shanghai i to write both life and general insurance.
Many other insurance companies and insurance brokers have expressed interest in entering the, Chinese insurance market and being licensed to do business. Some of them have established representative offices. The market will surely open further to other foreign insurers and insurance brokers in the years to come.
China. has a growing and dynamic economy where a strong competitive insurance industry can play an integral part in the formation of capital, provide increased capacity for insurance protection of assets and contribute to the professional development of the insurance market.
China is still in the process of redrafting the insurance law, the interim insurance regulations approved by the state council in 1985 remains the only document in force governing the insurance 'market. The regulations stipulate that the People's Bank of China is the State Administration organ in charge of insurance. It is also stipulated that all the foreign joint venture companies should only buy insurance from a locally registered insurance company.
There is no published tariff for China. However, the PICC's rating tables have been promoted as reference guidelines. The addition of three new insurance companies has certainly brought competition to the marketplace. This has also promoted greater sophistication in products and has brought about more professionalism in the industry.
It is recommended that the following steps would be good for the prudent insurance buyer:
* Insist on quality advice and service from your local insurance company contact or insurance consultant. It is important that they understand the general risks inherent in your business as well as risks that might be special to the environment your business is situated in.
* Keep in touch with the risk manager of the home office. The local insurance programme should form a complementary part of the company's overall insurance programme. Special attention is required to ensure that no overlaps nor gaps of insurance exist between the corporate and local insurances.
* Remember that the lowest price does not always buy the best in needed insurance coverage. It is critical that the chosen insurer understands your business, has the international experience and financial capacity to provide the necessary insurance coverages as well as the service expected from a quality organisation. *
Karen Hu is the chief representative for the American International Assurance Co Ltd, Shanghai, a member company of the American International Group (AIG). The company is permitted to conduct life and non-life business in Shanghai. AIA, Suite 556 (East Tower), Shanghai Center, PO Box 174, 1376 Nanjing Road (West), Shanghai 200040, China. Tel: +86 (21) 279 8569, Fax: +86 (21) 2 79 8568.
Delay expected on further opening of market
Despite the interest from foreign insurance companies in penetrating the Chinese market, it is deemed unlikely that any will be approved this year. According to reports, PICC officials have made it clear through the state-controlled press that they do not intend to welcome foreign insurance firms as healthy competition. AIG has predicted that the PICC currently controls 97 per cent of mainland insurance market, which is expected to exceed US$30 billion by the year 2000.
The Insurance Law Drafting Group, made up of officials from the People's Bank of China, the PICC, and foreign advisers, is estimated to be two years away from completing a comprehensive nationwide insurance law. The law is expected to set guidelines for foreign insurance firms.
PICC turns to real estate
China's largest insurance company, the People's Insurance Company of China, is investing its reserves from premiums in real estate, according to a recent report in the China Daily.
This is the first time the company has disbursed funds to set up a subsidiary with an emphasis on the real estate market. With assets of US$34.5 million, PICC opened the China Antaeus Insurance Development Company at the beginning of the year and plans to inject a further US$25.9 million through Antaeus into the real estate business later this year.
The company has already bought at least 30 hectares in the Yantai Economic and Technological Development Zone in Shandong and in the Kunshan Economic Technological Development Zone near Shanghai. In the former, the company plans to build hotels, office buildings and apartments this year, and an industrial park in the latter.
Insurance for dangerous transport
The Changnin branch of the People's Insurance Company of China (PICC) has launched a policy to cover dangerous goods transportation. Each truck carrying dangerous goods will have to pay a premium of US$128 a year for the policy. Its repayment could be as high as US$17,200 for third-party life insurance and property damages.
The highest repayment of dangerous goods wil be US$35,000. The policy will only cover Shanghai, and will be welcomed by the chemical and national defence industries, as well as the dangerous goods transportation business.
In 1991, 35 accidents were caused in the transportation of dangerous goods, causing three deaths and a loss of 787,552 yuan. In 1992, the number of accidents was up to 56, and a loss of 637,867 yuan.
PICC looks to global market
The PICC plans to establish four group companies in Hong Kong, Europe, southeast Asia and North America in the 1990s.
The Hong Kong group, called the China Insurance Group Company, was granted approval to operate by the Hong Kong administration last year. The group handles about 20 per cent of Hong Kong s insurance business. The group's company in Europe will be based in London.
The company is also said to be considering an office in New York to focus on the American market.