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China will continue to open up its insurance market in line with its World Trade Organization (WTO) commitments, a top regulator said Monday.
According to Wu Dingfu, chairman of the China Insurance Regulatory Commission (CIRC), the local insurance industry has already benefited from foreign expertise and know-how.
"Foreign insurance companies' management methodologies, know-how, and products have undoubtedly given a lift to the Chinese insurance industry, which is still in an early development phase," he said.
"At the same time, foreign insurers themselves have witnessed fairly good development," he told reporters at the CIRC-sponsored China International Insurance Forum.
"Although the opening up of the insurance sector under the WTO commitments has been fairly broad, insurance appears to be among the sectors that has benefited (from the opening up)," he added.
China lifted nearly all geographic and business scope restrictions on foreign insurers near the end of last year, basically fulfilling commitments made more than three years ago upon entry into the WTO.
CIRC officials said negotiations are under way on the removal of remaining restrictions on foreign insurers, including the right to offer motor vehicle third party liability insurance and set up wholly owned foreign life insurance businesses.
Thirty seven foreign insurers have entered the hugely promising Chinese market, which has averaged 30 percent annual growth over more than than 20 years. Although they hold a less than 3 percent market share, foreign insurers' growth has been accelerating in recent years, particularly in relatively wealthy coastal areas such as Shanghai.
But regulators do not appear to be worried about the rapid growth of foreign insurers, which some analysts predict could, on the back of years of preparation and the newly-obtained freedom, grab as much as a 10 percent market share in the coming five years.
In response to a question of whether he sees any excessive competition between foreign and local insurers in the coastal areas and any need to protect the mostly weaker local players, Wu said: "We will stand by the principle of fair competition.
"We believe that we must open up if we want to grow. We don't protect the laggards."
In an effort to promote co-operation with foreign insurance firms, the CIRC invited regulators and companies from more than 40 countries and regions to yesterday's forum to exchange experience on issues such as how to promote health, liability, agricultural and pension insurance.
But Wu said over-concentration of insurers in coastal cities will not benefit the growth of the industry, adding that his commission will encourage foreign insurers to invest in the less-developed central and western parts of the country.
Some foreign insurers are already making headway in the west, which is a natural result of the fierce competition in cities like Shanghai, he said.
"The market mechanisms are already prompting some adjustments," Wu said. "And we will be quicker with approvals (for investment) in the west. The favorable treatments from local governments will also be attractive."
On a related front, Meng Zhaoyi, director of the CIRC's International Department, said that while most foreign insurers complied with Chinese laws and regulations, there were also irregularities that have alerted regulators.
"Compliance of foreign insurance companies is generally good, as most of them abide by Chinese laws in their operations," Meng told China Daily. "But there are problems with some of them."
Some foreign insurers operating in China were found helping their overseas sibling firms sell policies on the Chinese mainland, which is illegal and disturbs order in the local market.
Foreign insurers were also found selling policies without having obtained a licence to do so, Meng said.
(China Daily May 24, 2005)
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