China's life insurance industry is catching up with its international counterparts with the growing popularity of new-generation products, said top insurance regulatory officials.

The new insurance products include participating policies and unit-linked products. Different from traditional insurance products which render fixed returns to the insured, the new products provide flexible returns according to the firm's investment returns.

For participating policies, insurance companies are to offer dividends to policy holders regularly according to the companies' own profits. For unit-linked products, insurers would invest the premium for insured and give back the investment returns after deducting a commission.

The first new product, a unit-linked type, was developed in October last year in Shanghai by the Ping An Insurance Company of China. The first participating policy was unveiled later by the China Life Insurance.

Two insurance companies in China have already offered unit-linked products while most have developed their own participating policies, said Chen Wenhui, director with the life insurance department of China Insurance Regulatory Commission (CIRC), at a recent seminar organized by CIRC and the US-based insurance group New York Life.

Moreover, sales of the new products have been sound with customers applauding them unanimously, Chen said.

Ping An sold 92,896 unit-linked policies from January to July this year, 37.4 per cent of the total new policies. Premium income from unit-linked products in the period stood 340 million yuan (US$ 41 million), 62.3 per cent of the newly increased premium.

The New China Life Insurance Co Ltd, another insurer with unit-linked products, also enjoyed a booming market. The firm sold over 500 policies valued at 10 million yuan (US$ 1.2 million) from June to September this year, Chen said.

However, developing the products has also posed great challenges to the fledgling insurance market.

The lack of mature capital market has been a major snag, he said.

"China still has very strict limitations on investment insurance funds,'' Chen said.

So far, insurance companies still cannot directly access the stock market, which is a major income resource for overseas insurers.

Industry insiders have been calling for the opening the primary stock markets and the housing markets, but CIRC officials said they are still communicating with related departments on the issues.

Excessive tax charges is also hindering the development of new products, said Wu Xiaoping, CIRC vice-chairman.

Investment returns of China's insurance industry have been lingering at a low level.

The management and technology of domestic insurers are also too low to fit in with such complicated products, Chen said.

Retailers are not qualified either, he added. Many of the sales persons are not well educated and management regulations concerning sales agents remain incomplete.

China's separated supervision of the financial sectors including insurance, banking and securities has also given rise to supervisory problems of unit-linked product as it involves not only insurance, but also securities markets, said Wu.

(China Daily 11/12/2000)