Chinese insurance companies have so far paid 18.2 million yuan in claims related to the country's 8.0-magnitude earthquake, amid calls for the speedier establishment of a catastrophe insurance scheme to spread risks.
By May 19, insurance companies had received 103,000 claims, the China Insurance Regulatory Commission said yesterday.
But only 5 percent of the more than $20 billion of damages from the quake is covered by insurance, according to an industry estimate.
"The process of the establishment of a catastrophe insurance scheme will definitely be accelerated as a result of the earthquake," said Yuan Li, a spokesman for the China Insurance Regulatory Commission, adding that this work may begin after the rescue work is concluded.
Though experts said the earthquake was unlikely to have a significant impact on the industry, due to the comparatively low insurance coverage in Sichuan province, calls for a sound catastrophe insurance system have become stronger.
"It is a must, even in the international insurance market," said Gu Wei, general manager of the Claim Department of PICC Property and Casualty Company Limited, the country's largest non-life insurer.
As the occurrence rate of catastrophes, mainly earthquakes, floods and hurricanes, is pretty low, people and businesses are generally unwilling to buy policies. On the other hand, any commercial insurance company can also hardly manage the huge losses caused by natural disasters.
"Catastrophe insurance must be a multilevel system involving insurance companies, domestic and international reinsurance companies, government departments and even capital markets," Gu added.
According to Hao Yansu, an insurance professor with the Central University of Finance and Economics: "The major driver for the system is the sound financial support from the government, whether by offering subsidiaries or preferential taxation policies."
Liu Jingsheng, president of China Reinsurance Group, said the country began researching catastrophe insurance 10 years ago. "(Now) we are expecting to see some material moves soon," he said.
To ensure timely payment, most insurance companies loosened requirements through measures such as simplifying claims procedures and extending claim deadlines. All of them have launched 24-hour claim hotlines.
PICC, for instance, promised to receive claims from all insurance companies, taking advantage of its network of 300 service outlets in Sichuan.
Minsheng Life offered payment to those who had lost their policies, while Sunshine Insurance Group established a special 20-million-yuan fund to ensure timely payment.
(China Daily May 21, 2008)