By Bi Xiaoning and Hu Yuanyuan (China Daily)
Updated: 2008-03-27 09:17

"As a low-profit insurance product, government support can really boost micro insurance's development. The Chinese government pays a lot of attention to the development in rural areas and the policy environment is likely to remain favorable in the near future," said Mathews.

"The nature of micro insurance can vary from country to country," said Li Zhuojie, deputy general manager with American International Assurance Co Ltd's Beijing branch.

In India for example, the formal policy on micro insurance took effect in 2002. Insurers are required to maintain a certain proportion of their annual guarantee slips in micro insurance, otherwise, they are fined and their licenses withdrawn, according to Li.

"We are researching on China's micro insurance market and trying to develop suitable insurance products. We are drawing from India's experience but obviously it can't be simply copied in China." China's micro insurance market has a huge potential. Mathews estimates that there are at least 200 million to 400 million potential clients in the country who can overcome poverty and protect themselves against all kinds of risks under the insurance umbrella.

Distribution channels are generally believed to be the keystone of developing micro insurance. Insurance companies, especially multinationals, are usually located in cities as they target top-tier clients. Some leading Chinese insurers have now extended branches to rural areas and plan to intensify the process.

"China Life plans to increase the number of networks in rural areas to 19,000 and develop 500,000 sales staff there by 2010, aiming to cover most of the rural areas in China," said Wang Tongchao, general manager of China Life's counties life insurance department.

Mathews, however, thinks it is impractical for multinational companies to develop distribution channels by themselves, so Zurich is seeking reputed local partners. "We are considering joining forces with China Post Saving and rural credit cooperatives," he said.

Innovative products, Mathews said, are the biggest advantage of multinationals. "Micro insurance is neither life insurance nor property insurance. It should be a package of insurance with lower fees."

Packaged insurance products seem more convenient for buyers, but there are problems selling them in China. Given the prevailing policy, property insurance and life insurance are best operated separately.

"India's experience could be used for reference," said Mathews. "Regulators in India have accepted the packaged insurance model as long as the products are for micro insurance. World Bank experts have appealed to China for a free hand in mixing operations at a recent international workshop in Beijing."

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