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China Promotes Micro-insurance to Extend Coverage in Rural Areas

Chinese farmers, who are not well protected against all kinds of risks for lack of proper insurance products, can expect to see more of them come under the insurance umbrella as the country started to promote micro-insurance products in rural areas.

The micro-insurance products are tailored for low-income people, as they require a relatively lower annual premium. China's insurance regulator said the country's micro-insurance products would mainly target farmers and low-income urbanites.

Despite some progress in the fledging sector, "the country's current micro-insurance products were not fully matching the demand of farmers," Wu Dingfu, the China Insurance Regulatory Commission (CIRC) Chairman, said earlier.

Relevant services were also lagging behind, and the situation was compounded with a lack of long-term policy support for micro-insurance and dull distribution of such products in rural areas, he added.

The commission was currently considering support policies for micro-insurance to achieve the sustainable and healthy development of it, said CIRC's vice chairman Li Kemu on Wednesday, echoing a statement posted on its website a few days ago which vowed to "do its best" to promote micro-insurance.

The commission said it would establish an evaluation mechanism for such micro-insurance products and explore more distribution channels to promote such products, while at the same time encourage insurers to introduce more of such products.

However, it did not elaborate on what measures would be taken to motivate the insurers.

There were already a range of such micro-insurance products available on the market, as insurance companies came up with new products to grasp opportunities in the vast rural areas.

For instance, a micro life insurance product developed by the country's largest life insurer China Life offered an eight-time refund on an annual premium of 100 yuan (US$13.8) for farmers to guard against fatal accidents.

Such products were much more affordable for farmers and low-income urbanites, if compared with regular products which would ask for an annual premium of several thousand yuan or more.

The per capita net income for rural residents was expected to surge by 7 percent to stand at 4,000 yuan in 2007, according to Chinese officials, however, it still fell short of more than 10,000 yuan on average for urbanites.

China Life covered 1.2 million farmers with such life insurance in 2007, according to the CIRC.

There were also other micro-insurance products specifically targeting different sectors, such as planting, livestock breeding, farmers' houses, farm machinery, farmers' household property, as well as micro medical insurance and insurance against micro-loans, a practice adopted in rural areas to provide more financial products there.

At present, both government agencies and commercial insurance companies were involved to improve insurance coverage in rural areas, according to Chen Wenhui, CIRC's chairman assistant.

More than 90 percent of life insurance products were provided and managed by commercial insurers.

The new cooperative medical insurance and family planning insurance were provided by government agencies and commercial companies were only responsible for managing the fund collected.

"Joint efforts of government and companies were multilaterally beneficial to parties involved," Chen said, "The government was partly relieved from pressure to extend insurance coverage for low-income people; insurance seekers were better guaranteed due to involvement of government agencies; and insurers were able to tap the market potential."

He said the commission would also learn from international practices to boost micro-insurance in rural areas.

The commission kicked off an international seminar on micro-insurance in Beijing on Wednesday, with more than 250 senior insurance managerial staff and regulatory officials from 20 countries and regions attending the conference.

Li made the comment while addressing the conference.

(Xinhua News Agency January 17, 2008)

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