China is encouraging its insurers to quicken the development of the health insurance sector, which is in its infancy, as the country begins to dismantle its welfare system and seeks to urge households to buy their own insurance.

"Though China's health insurance sector has achieved some progress since the 1980s, there are still gaps when compared with developed markets," said Wei Yingning, vice chairman of the China Insurance Regulatory Commission.

Premiums generated from the sale of health insurance policies reached 32.1 billion yuan (US$3.87 billion) on the Chinese mainland last year, compared with 22.27 billion yuan a year earlier, according to the CIRC.

However, only around 3 percent of the 1.3 billion population on China's mainland are enjoying benefits from buying health insurance policies, compared with 63 percent in the United States, said the CIRC.

Recognizing that life and health insurance services are two very different businesses, domestic insurance companies are planning to set up separate health insurance firms, said Wei.

Beijing-based New China Life Insurance Co is the first Chinese life insurer to apply for approval from the CIRC to set up a separate company which will only deal with the sale of health insurance policies.

Currently, 29 life insurance companies and 8 property insurers on China's mainland are selling health insurance policies.

"The health insurance business plays an important role in the social security system with the continuous growth of China's economy and people's increasing attention on their health," said Wang Guoliang, chairman of China Pacific Insurance (Group) Co.

China Pacific collected premiums worth 2.02 billion yuan from the health insurance sector last year, which represented 7.26 percent of its total life insurance premiums.

"We are currently drawing up the regulations governing the health insurance business," said Wei.

"We will identify market entry rules for insurers who wish to enter the health insurance sector."

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