000 yuan would be paid to the farmer

In 2008, PICC’s rural insurance premium income accounted for more than half of the industry’s total, although it only contributes 5 percent to the total premium income of the company.


Recent Progress


Early this year, a new government policy was issued aimed at bolstering agricultural productivity by requiring rural insurance providers to expand coverage as well as product diversity.










China's policymakers and insurers have been trying for years to build a market system for rural insurance. The building continues.






As a result,louboutin pas cher, premiums and payouts have climbed dramatically. Last year, total premium income from rural insurance topped 11 billion yuan and claim settlements topped 7 billion yuan -- double the respective levels in 2007.







It’s not always easy for government check-writers and private commercial operations to work together. In fact, it’s basically a game theory played out as government agencies set policy objectives and insurance companies set pricing.

The reality is that rural insurance very much depends on the availability of government funds, said a senior executive with major insurer PICC. And annual increases in fiscal subsidies have provided the incentives insurers need to expand into more rural areas.




Yet the changes have improved the system’s stability. For example, the sector’s claim settlement ratio -- the percentage of claim settlements in total premium income -- has held steady at less than 70 percent for the past two years.



Since the turn of the century, the government at the behest of the Communist Party Central Committee has tried several new policies in hopes of speeding the transition. But success has been slow to come, and the architects are still at work.
“Some farmers whose pigs and cows died did not get insurance payments for dead animal losses,adidas foot,” said one insurance expert on condition of anonymity. “Instead, the money went to the pockets of local officials.


With the expansion to another 16 provinces and Xinjiang’s special settlement regions last year, central government funding for premiums increased again to 6.05 billion yuan.


























“So we need government subsidies,” the source said. “After farmers earn more money, we will withdraw the subsidies.”
Insurance companies disperse risk by purchasing policies from reinsurance firms. But this presents a challenge for rural insurance providers.

But business floundered, farmers resisted and cronyism crept into the process. Policymakers doubtless wondered whether they’d ever reach the ultimate goal – a fully market approach to rural insurance – and eliminate the need for government support.


Better oversight is a long-term problem that will require technical support as well as resources. That’s something the architects must still work out.


However, regional branches of the CIRC only monitor provincial operations. For now, monitoring rural insurance at the grass roots level is limited.




CIRC has been working to build these relations since 2007, when it tried to coordinate reinsurance by bringing together insurance companies and the China Reinsurance Group.
“We should not think rural insurance has to be government-led,” said a financial expert at the World Bank. “If insurance companies can develop proper products and offer reasonable prices, it should be run like a business.”



Last year, for example, the finance ministry discovered that some insurance companies ########d weather records in a bid for government subsidies. And farmers have been cheated.
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1 yuan = 14 U.S. cents






If insurance fraud and subsidy siphoning becomes widespread, said a regulatory source “the entire rural insurance system will be futile.”









“For example, if an insured cow dies,adidas football chaussures, 5,000 yuan would be paid to the farmer,adidas f50,” the expert said. “But the insurance company may give 500 to 1000 yuan to the local government to settle the case.”




Regulators are taking action to correct these wrongs. CIRC said recently it will crack down on fraud and misconduct of all kinds in insurance claims.

Reinsurance and Ethics




When promoting products, insurance companies need to work hard to build networks to reach out to farmers scattered across rural China. PICC’s business development manager Xiang Caiyun said his company invested 200 million yuan to set up 11,franklin marshall,000 service windows for their rural networks.
The Ministry of Finance officially supports a system based on commercial operations, voluntary policyholders and fiscal funding.
The same source said, “Some local officials even came to me,franklin and marshall, wanting to insure 10,000 animals that were totally nonexistent.”




“Agricultural production has a relatively stable cycle,” said Dong Bo, an official at the China Insurance Regulatory Commission (CIRC). “No large-scale, high-risk disasters have broken out in the past several years. As a result, rural insurance has developed rather quickly,chaussure louboutin pas cher, and business has been rather stable.”


“We want to develop rural insurance in a commercial style because it is more efficient,” said a source at the Ministry of Finance, which oversees subsidy payments. “However, prices purely based on the market are too high, and some farmers cannot afford insurance.


But reinsurance is not a silver bullet for ethical risks that confront the rural insurance system. One danger is that rural insurance can be used for milking the public treasury.


Insurers have mixed feelings about the push. A senior executive at one insurance company said that, after offering policies in the countryside for several years, insurers have seen the good and bad.

“Insurance companies earn insurance premiums and have no indemnity risks,” the source said. “But they run ethical and legal risks. The motivation of these officials is simple: They profit from fiscal subsidies and commission fees from insurance companies.”

A pilot project for rural insurance expanded over the past two years and now covers all of China’s agricultural regions. Last year’s expansion spread the project to an additional 16 provinces as well as the Xinjiang Production and Construction Corps in China’s far northwest.





By staff reporters Chen Huiyin and Li Weiao
They tried funding the system by mixing government subsidies with small premiums farmers could afford. They encouraged insurance companies to dispatch sales agents to remote villages down dusty lanes. And they combined local funding with central government support.
(Caijing Magazine) Architects of China’s insurance policy framework spent most of the 1990s trying to build a workable system that would insure millions of farmers with modest incomes across vast rural areas.
The current form of rural insurance ramped up slowly starting in 2004 with a new central government policy. Under the policy, central government subsidies were made available as long as farmers paid premiums and local governments contributed funds as well. Premium prices were to be set by the market.



But even inside the ministry, some officials think insurance companies should be solely responsible for running the rural insurance business. “Otherwise, we do not need insurance companies,” said one ministry official. “Why not give money to farmers directly?”
“If there is no complementary reinsurance or disaster insurance, rural insurance cannot be helped with dispersing risks,” said PICC President Wu Gaolian at a Caijing’s conference in December.

“They enjoy closer relations with different layers of governments and farmers,” said the executive, accenting the positive. “But they find rural business scattered and tiring.”

Sometimes ethical risks surface, especially when subsidies are excessive and supervision lax. Running a rural insurance business in a market-oriented style is challenging, requiring grassroots data as well as back-ups from reinsurance groups and providers of major disaster coverage.
Full Article in Chinese: http://magazine.caijing.com.cn/templates/inc/chargecontent2.jsp?id=110075382&time=2009-03-01&cl=106
The system kicked into gear three years later when the Ministry of Finance provided 1 billion yuan to subsidize premiums in six regions -- Inner Mongolia,franklin et marshall, Xinjiang, Jiangsu, Sichuan and Hunan. As a result, premium income that year totaled 5.19 billion yuan – six times the 2003 level.


Goals and Realities


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