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New policies seen spurring personal insurance

Chen Jia
Updated: Apr 07,2021 08:26 AM    China Daily

China is expected to adopt new policies to improve the personal insurance system, a former financial regulator said.

Such improvement might come about through tax incentives, to encourage individuals to invest in commercial endowment insurance products, said Zhou Yanli, a former vice-chairman of the China Insurance Regulatory Commission and a member of the 13th National Committee of the Chinese People's Political Consultative Conference.

In a recent interview with China Daily, Zhou said the nation's commercial endowment insurance pilot program, which is supported by preferential taxation and fiscal subsidies, should be expanded. "That will be feasible."

The pilot program was first rolled out in Shanghai and the Suzhou Industrial Park in Jiangsu province, and in Fujian province, in May 2018.

Through the pilot, a part of the pre-tax premium income could be deducted, a measure to encourage people to buy such insurance products.

"But this trial is very limited now," said Zhou, adding new policies should increase the pre-tax deduction of the premium and enlarge the group of individual investors of commercial endowment insurance.

The former financial regulator's expectation is in line with the government's work plan this year as China is developing a stronger public health system, and the statutory retirement age will be raised in a phased manner.

"The multi-tiered social security system will be improved, with coverage of basic old-age insurance reaching 95 percent of the population," said this year's Government Work Report.

In terms of deepening reforms in the fiscal, taxation and financial systems, the report highlighted "strengthening the role of insurance in protecting against risks and providing services".

The government has pledged to increase basic pension for retirees and subsidies and living allowances for groups entitled to such benefits, and work toward unified national management of old-age insurance funds.

Commercial endowment insurance serves as the third pillar of China's pension system. The personal insurance market has seen sound and rapid development in recent years in China.

The market achieved considerable coverage nationwide. Yet, problems like insufficient supply and low level of protection still exist, analysts said.

As the special functions of insurance — risk management, economic compensation, financing and social management — cannot be replaced by other services, it is necessary to expand the coverage of the nation's insurance system, Zhou said.

With the expected new policies likely to be designed to support the personal insurance sector, China will command a huge market in commercial endowment insurance with enormous potential, he said.

In December, an executive meeting of the State Council, China's Cabinet, called for stepping up the development of commercial insurance.

Commercial medical insurance products that suit the needs and paying capacity of the elderly shall be developed. Insurance companies will be encouraged to incorporate certain medical expenses that are within a reasonable range, yet outside of basic medical insurance catalog, into insurance coverage.

As for life insurance, the development of economy and society, and rising personal incomes, require improvement in the level of assurance, including medical treatment and income compensation, to limit the impact of diseases and accidents on people's personal finances and general well-being, Zhou said.

The COVID-19 pandemic has not disrupted China's insurance industry so far, he said. In 2020, the total premium income reached about 4.53 trillion yuan ($690.8 billion), up 6 percent year-on-year.

Life insurance premium income totaled 3.33 trillion yuan, up 7.5 percent year-on-year, according to data from the China Banking and Insurance Regulatory Commission, which has since incorporated the CIRC that Zhou co-led.

"The sound development was due to the promotion of artificial intelligence, internet technology and digitalization in the insurance industry," Zhou said.

Given the growing retail demand and measures to accelerate the opening-up of China's insurance sector, foreign asset managers are likely to enter the onshore market at a faster pace, said Wang Lan, an analyst of the Financial Institutions Group at Moody's Investors Service (Hong Kong) Ltd.

"Some foreign players may also seek to enter or expand their presence in the Chinese institutional market, including by winning mandates from State and corporate pension plans," said Wang.