China's insurance regulator Thursday expressed firm support for the nation's struggling insurance agencies, pledging tolerance towards minor mistakes.

While the Chinese insurance agency industry remains in its infancy, its growth is in the interests of the entire local insurance industry, currently facing fierce competition from foreign companies following the lifting of restrictions governing them.

"We are not afraid of a little disorder in the early stages of the agency industry. Development will come as long as we keep moving," said Wang Jian, director of the Insurance Intermediaries Department of the China Insurance Regulatory Commission (CIRC).

"Minor mistakes in their operations can be tolerated... but serious misbehavior that harms the interests of the insured and the reputation of the industry will be punished," he said yesterday at the First Annual Conference of China's Insurance Agencies, sponsored by the Insurance Association of China.

Nearly 1,300 insurance intermediaries, including agencies that sell policies for insurers and brokerages that represent policyholders as well as appraisers, have been set up in the past few years.

The majority of them, particularly agencies, are struggling to make a profit, largely because of low professionalism levels and the fact that Chinese insurers still prefer individual agents and banks for distribution.

Many have said the situation is a result of excessive competition due to the rapidly growing number of agencies, but Wang said his commission will continue to approve new agencies as the growing competition among insurers and the increased professionalism of the industry will stimulate demand for agencies.

"The number of insurance intermediaries is not too big, but too small," he said, citing the fact that there are 8,000 insurance intermediaries in Australia.

The official clarified a key policy, saying it is not illegal for insurers to give agencies commissions greater than 8 per cent of the premiums they collected.

The 8 per cent ceiling set by the Ministry of Finance only caps the amount of commission expenses that are tax deductible, he said.

"As long as the insurance company thinks it is necessary, it can go well beyond 8 per cent," Wang said.

The clear stance cheered agencies, which said insurers have been using the ceiling as a strong reason not to raise commissions.

"This is good for agencies," said Li Hao, assistant general manager of Sichuan Pusheng Insurance Agency Co Ltd.

"Although many have already crossed the 8 per cent line, now it becomes legal," he added.

But Wang said agencies should not rely on government support, insisting they should improve their professional services to increase their commission income.

The official ruled out the possibility of allowing professional agencies to charge higher commissions than banks and others that also sell for insurers.

(China Daily May 13, 2005)