The People's Insurance Company of China (PICC) unveiled a new automobile insurance product mix yesterday, leading a string of similar announcements expected from its competitors later this month that will set the stage for the undercutting-crippled market next year.
The company, which now dominates the market with a near 75 percent share, also vowed to do its bit in maintaining market order by upholding high self-disciplinary standards when the different rates tailored by individual insurers became effective on January 1 next year.
Cut-throat competition in auto insurance, which generates more than 60 percent of the country's total property insurance premiums, has forced many smaller insurers to ignore the uniform rates set by the China Insurance Regulatory Commission (CIRC) in order to survive.
Competitive irregularities spiraled late last year when a rate liberalization was trailed in Guangzhou of South China's Guangdong Province and the neighboring boomtown of Shenzhen, creating chaos and crippling the industry with widespread losses.
As property insurers enter the new year each with their own auto insurance products and rates, competition may well intensify but will hopefully not descend into chaos, said Wang Yi, vice-president of PICC and property insurance director of the Insurance Association of China.
A more workable agreement on self-discipline was signed last month among 10 major insurers, which Wang said is unlikely to fall apart as before as the industry has learnt the lessons.
"From the bottom of our hearts, we (the PICC) are willing to (maintain market order)," he said.
The PICC's new package, approved by the CIRC last Friday, differentiates between vehicles used by households and government organizations, both seen as having less risk exposure, and those used for business purposes. It also contains separate clauses on tractors.
John Chen, vice-director of PICC's Actuarial Division, said rates also vary in terms of the driver, length of use and different types and prices of vehicles.
The essence of such details, Chen said, was to better match risk exposure with the price, the relationship between which was largely distorted in the existing rules.
Jia Haimao, director of PICC's Auto Insurance Department, said his company also plans to enhance services as part of an effort to guide competition away from price cutting.
(China Daily December 10, 2002)