Mon, Apr 24, 2017 - Page 16 News List

FEATURE: China officials look to stem its mounting disaster losses

PILOT PLANS:Guangdong and Heilongjiang provinces are covered for tropical storms, and the China Earthquake Administration is promoting earthquake insurance

Thomson Reuters Foundation, BANGKOK

This is a smart move, said Guo Peiyuan (郭沛源), cofounder of SynTao Co Ltd (商道縱橫), a Chinese consultancy specializing in socially responsible investment.

“This makes a lot of sense because disaster and catastrophic insurance is still quite new in China and the people who have the needs don’t have the awareness or the availability to pay,” he said.

China’s historically low insurance penetration can be traced back to the bad experiences of customers in the 1990s when the general insurance market grew rapidly, but laws and regulations were not enacted or enforced, Wang said.

Insurance to protect against natural disasters is an even newer concept, with most people regarding disaster relief and recovery as the government’s responsibility, he said.

The success of agricultural insurance shows what is possible.

In 2007, China’s central government introduced a national policy to promote agricultural insurance in a bid to stabilize crop output and food prices, and stem the tide of people abandoning farming for higher-paid jobs in cities, Wang said.

The pilot covered six provinces, but became nationwide within seven years, he said.

By 2012, premiums amounted to 18.6 billion yuan (US$2.7 billion at the current exchange rate) and 64.6 million hectares were insured, according to a 2015 paper that Wang coauthored.

The involvement of central government and the high subsidies it paid for the voluntary scheme — up to 80 percent in some places — helped to ensure their widespread acceptance, he said.

The long-term sustainability of heavily subsidized insurance schemes is a concern, but government intervention at the beginning is crucial for success, Wang said.

“China has a strategic plan to develop urbanization and its agricultural base, but these zones for development are in high risk areas,” he said.

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