Non-marine insurance is regulated by the Insurance Law of the People’s Republic of China, which came into effect on 1 October 1995. There have been two amendment laws, which came into effect on 1 January 2003 and 1 October 2009 respectively. The insurance law has been supplemented by numerous regulations and guidance notes issued by the China Insurance Regulatory Commission (CIRC).
The insurance supervisory authority is the China Insurance Regulatory Commission (CIRC). This is a ministerial public service department which reports to the State Council.
Admitted / Non-admitted
Non-admitted insurance is not allowed because the law provides that insurance must be purchased from companies licensed to operate in mainland China, excluding Hong Kong, Macao and Taiwan.
The only compulsory insurances which are enforced on a nationwide basis are motor third party liability and nuclear liability. In some cities and provinces, the following classes are compulsory – medical malpractice, personal accident for public transport passengers and personal accident and medical insurance for construction workers.
There are four state insurance companies.
The only tariff class is compulsory motor third party liability, where gross premiums are determined by the China Insurance Regulatory Commission (CIRC).
Premium Taxes and Charges
All non-life and short-term classes are subject to a business tax of 5% and a municipal surcharge of 0% to 0.5% depending on a municipality. The insurer pays these taxes.
In theory all policies must be written in Chinese language although other languages can be used on request.
At the end of 2009 there were 52 non-life insurers, of which 34 were domestic and 18 were foreign branches or subsidiaries.
Most of the domestic industry is state-owned, either directly, as in the case of PICC (Group) Co, or indirectly through the shareholdings of state bodies, municipalities and state-owned enterprises. There are minority foreign shareholdings in seven companies. The non-life market continues to be dominated by PICC, although its market share fell from 77% to 38.2% between 2000 and 2010 as a result of competition from an increasing number of domestic rivals. The foreign insurers had a market share of only 1.1% in 2009.
At the end of 2009 there were 50 life insurers, of which 22 were domestic and 28 were foreign-invested. There were also five pension insurance companies and four specialist health insurers. The Chinese life market is highly concentrated, with the top three insurers writing 55.8% of premiums in 2010. The state-owned China Life remains the dominant insurer, though its market share has more than halved from 70.2% in 1998 to 31.7% in 2010.
In 2009 China was the world’s seventh largest life market, seventh largest non-life market and the seventh largest insurance market overall. In 2008 China overtook Korea to become the second largest life and non-life market in Asia after Japan.
The main distribution channel for large commercial accounts is still direct contact between branch staff and clients. Agents and appointed representatives, including car dealers and travel agents, produce much of the personal lines account.
Bancassurance became the leading distribution channel in 2008, mainly because of its ability to deliver huge volumes of short-term, single premium universal life and endowment policies which are sold as an alternative to a deposit account.