Dai Yongheng never imagined he would make history. But he did just that on September 3, 2008. The middle-aged farmer from north China's Shanxi Province procured a fixed-term life insurance for all five members of his family. He paid 150 yuan (US$21.9), becoming the first micro-insurance deal in rural China.

The insurance policy pays 75,000 yuan if something happens to Dai's family in Dongpao Village, Qixian County, China Life Insurance, operator of the policy, said.

One day later, all 1,017 residents from Xishantou, Macha and Huaishu villages of neighboring Qixian County took out a group insurance policy for accidental injury. If anyone in the village gets hurt, there is a total of 50 million yuan to cover expenses. For example, every villager put 10 yuan into the pot. The insurance company guarantees each of them a 5,000 yuan payment. The total is higher because the villagers bought the policy together, the first group policy of its kind in the country.

"The moves are significant because they strengthen our confidence to supply rural areas with group insurance," said Wang Tongchao, county insurance department general manager of China Life Insurance. "They also give us an opportunity to experiment with the micro-insurance mode in rural areas."

Per capita annual income in Xishantou amounts to only 900 yuan. Many villagers there drive farm vehicles along steep roads prone to accidents. In the past, if something happened, such as a death, families would have received nothing. The insurance policy changes that.

By Sept. 20, 112,000 rural Shanxi residents took out micro-insurances in groups with China Life Insurance. Most were low income people from poverty stricken areas. The scheme also covered 106 administrative villages and three townships as a whole.

"Our Shanxi branch experiment of family-based or group-based modes has explored a way for us to promote micro-insurance in rural areas. We will popularize the mode to counties with similar conditions," said Wang Tongchao.

Since China Life Insurance got approval from China Insurance Regulatory Commission (CIRC) to offer a simple life insurance service in rural areas in August, the insurer has launched nine products for experimentation. The service first covers counties and villages in the nine provinces of Shanxi, Heilongjiang, Jiangxi, Henan, Hubei, Guangxi, Sichuan, Gansu and Qinghai.

Experiment

China has a rural population of 737 million, 56 percent of the national total, but few insurance products were designed for them. The market is quite huge there, as many analysts believe.

The government decided to experiment with the micro-insurance scheme this year.

"China will develop a tailor-made, multi-level rural insurance system with wide coverage," said Wu Dingfu, CIRC chairman.

"CIRC will develop various customized property insurance, life insurance and other insurance products and encourage cooperation between the government and insurance companies."

Wu Yan, People's Insurance Company of China president, suggested the government crank up financial payment as premium subsidies of agricultural insurance and benefit farmers via insurance mechanisms.

Pacific Insurance became the second, after China Life Insurance, to pilot micro-life insurance products in rural areas in four provinces.

Taikang Life Insurance, the third to go ahead with the micro-insurance, has tested a 50 yuan premium for 50,000 yuan of accidental injury insurance coverage in 19 counties of seven provinces.

Tailor-made

The group-based micro-insurance products are tailored for low-income people, as they require a relatively lower annual premium compared with insurance products designed for their urban counterparts.

To achieve a sustainable and healthy development of micro-insurance, the CIRC said it would establish an evaluation mechanism for micro-insurance products. It would also explore more distribution channels to promote such products, while at the same time encourage insurers to introduce more of these products.

There were already a range of similar micro-insurance products available on the market, though not group-based, as insurance companies came up with new products to grasp opportunities in the vast rural areas.

By example, a micro-life insurance product developed by China Life Insurance, the country's largest life insurer, offered an eight-time refund on an annual premium of 100 yuan for farmers to guard against fatal accident.

Such products were more affordable for farmers, if compared with regular products that would ask for an annual premium of several thousand yuan or more.

The per capita net income of farmers reached 4,140 yuan in 2007, according to Chinese officials, however, it still fell short of more than 10,000 yuan on average for urbanites.

China Life Insurance 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' homes, farm machinery and 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 are involved to improve insurance coverage in rural areas," said Chen Wenhui, CIRC's chairman assistant.

Currently, more than 90 percent of life insurance products are provided and managed by commercial insurers.

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

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

It's anticipated a series of policies will be rolled out this year to boost the development of agricultural insurance.

"Overall research work will be conducted on the insurance premium in planting and breeding sectors, and efforts will be made to establish a reinsurance system in agriculture and disaster insurance system," said finance minister Xie Xuren.

CIRC will also coordinate with the Legislative Affairs Office of the State Council, China's Cabinet, and other relevant departments to form regulations on agricultural insurance.

(Xinhua News Agency October 12, 2008)