No. 29, 2014, the State Council
As an important industry in modern economy and a primary means of risk management, insurance is a symbol of the development of a society’s civilization, economy and social governance capability. Since the beginning of reform and opening up, the rapid growth and expansion of services of China’s insurance industry have made great contribution to China’s economic and social development, and have played a big role in the protection of people’s livelihood and productivity. However, China’s insurance industry is still at the preliminary stage of development, and it is not adequately meeting the needs of the Chinese economy and society in the drive of comprehensively deepening reform and development. To accelerate the development of a modern insurance service sector bears great significance in improving modern financial system, creating employment opportunities, upgrading economic growth, innovating in social management, safeguarding social stability and security, and improving people’s livelihood. In the spirit of the 18th National Congress and the 2nd and 3rd plenums of the 18th CPC Central Committee Meeting of the Party, and based on the decisions of the CPC Central Committee and the State Council, the following opinions are hereby issued to accelerate the development of a modern insurance industry.
I. Overall requirements
1. Guiding ideology. The development of a modern insurance industry should be guided by Deng Xiaoping Theory, the important thoughts of “Three Represents” and the Scientific Outlook on Development. It should be considered in the grand plan of economic and social policy management in order to modernize the social governance system and management capability, meet the public’s increasing need for diversified insurance services, improve the economic compensatory mechanism of insurance, upgrade the industry’s key function of risk management, and raise the efficiency of asset allocation. We shall strive to reform and innovate, further open up, strengthen the market, improve the market environment through better policies so that we can develop a more competitive, innovative and vigorous modern insurance service industry, and make insurance a pillar in a sound financial system, a key protection for better livelihood, a new means of efficient social management, an engine for the improvement of economic quality and economic growth, and a boost for the transformation of government functions.
2. Basic principles. First, the development of a modern insurance industry should be market-oriented and guided by policy. For commercial insurance businesses, it is important to create an environment of fair competition so that the market will play a decisive role in resource allocation. For insurance business that is for social welfare and national welfare purposes, an environment of low cost and policy support are necessary. For insurance business that is currently weak but is beneficial to the promotion of economic growth and economic quality upgrade, the government should provide better guidance. Second, reform and innovation should continue and opening up be expanded. A comprehensive reform of the insurance mechanism and system must be carried out. Opening up must be expanded both domestically and internationally, so that advanced ideas and technology will be injected into the industry for continuous innovation and sustained development. Innovation is to be promoted in products, services and technology. Differentiated competition and personalized services is to be encouraged. Third, continuing attention should be paid to regulation perfection and risk prevention. The legal system governing insurance should be updated and insurance regulation be modernized for better market order and stronger protection of the insurance consumers’ rights and interests. The relations of fast growth and risk control must be dealt with carefully and no systemic, regional financial risk should occur.
3. Objectives. By 2020, a modern, compliant, trustworthy, stable, innovative and internationally competitive insurance industry is to be in place to provide comprehensive protection and exert functions needed in economic development and social progress. China, at that time, will not only have a big insurance industry but also a strong one. Insurance will be a primary means of risk management and wealth management for the government, the business and the household. It will be an important way to enhance people’s protection and an effective tool to improve the extent and quality of public service and social management. At 2020, China’s insurance penetration will be 5%, and density will be 3500 Yuan. Insurance will be an effective stabilizer of the society and a booster of the economy.
II. To make insurance a part of the multi-layered social security system
4. To make commercial insurance a pillar of the social security system. Commercial insurance institutions should become the main undertaker of protection plans for individuals and families, an important supplier of pension and health plans initiated by employers, and an active participator in the market-based operation of social security funds. Support will be given to eligible employers to set up commercial pension plans and health insurance plans. Insurance institutions will be encouraged to expand enterprise annuity business. In this way, commercial insurance will supplement basic pension and basic medical insurance.
5. To innovate pension products and services. Pensions should be tailored to the needs of different groups. While stepping up savings type pensions for individuals, house-for-pension pilot programs should also be carried out. Efforts should be made to develop protection plans for one-child families and explore new ways to provide protection for old people who have lost their only child. Liability insurance products for nursing homes should be developed. Eligible insurance institutions will be encouraged to invest in aging care service industry to achieve integrated development of the two industries.
6. To develop diversified health insurance services. Insurance companies will be encouraged to develop products such as medical insurance, disease insurance and disability income insurance to supplement basic medical insurance. Long-term care products should be developed. Health management services such as disease prevention, health maintenance and chronic disease management are encouraged to be provided in tandem with commercial health insurance products. Insurance institutions should become a part of the health service industry by establishing their own medical institutions or participate in the reform of public hospitals through equity interest investment or strategic partnership.
III. To exert insurance risk management functions and improve social governance system
7. To use insurance mechanisms to provide new style public services. The government should improve its efficiency in social management by procuring insurance services or incentivize qualified commercial insurance companies to undertake administrative and agency services related to pension and medical insurance, fully utilizing the market mechanism. In the drive to expand major illness insurance for urban and rural residents, commercial insurance companies should undertake their responsibilities as trustees, improve their work mechanism and try to enhance the level of protection. The authorities should encourage the development of new businesses such as public security insurance and comprehensive community insurance. They should support insurance institutions' participation in public security services via equity interest investment, strategic cooperation, etc.
8. To fully utilize functions of liability insurance in resolving conflicts and disputes. The growth model of liability insurance, which is a combination of government guidance, market operation and legislative guarantee, should be further developed. Fields closely related to the public interests such as environmental pollution, food security, medical liability, medical accident, intern safety and campus security should be given priority and pilot programs for mandatory liability insurance should be carried out. The development of liability insurance for travel agencies, product quality and various professions, as well as product liability and public liability, should be accelerated. The functions of liability insurance in risk prevention, risk control, and claim settlement should be fully utilized to resolve civil disputes.
IV. To perfect the economic compensation mechanism of insurance and increase insurance participation in disaster relief.
9. To include insurance in the disaster and accident prevention and relief system. Efforts should be made to improve the public awareness of using commercial insurance to cope with disaster and accident risks. Enterprise property insurance, engineering insurance, motor vehicle insurance, household property insurance, accident insurance, etc. should be promoted to enhance the society’s capacity to withstand risks. Premium rates should be fully leveraged to encourage good risk control so that there will be safer production, fewer disasters and accidents, and better emergency response.
10. To establish catastrophe insurance mechanism. To better protect and improve people’s livelihood, a catastrophe insurance mechanism should be established on the platform of commercial insurance with multi-layered risk sharing. Research on establishing a catastrophe insurance fund and catastrophe reinsurance should be conducted, to gradually form a multi-level diversification mechanism with fiscal support. Effective protection models against disasters such as typhoon, earthquake, landslide, mudslide, flood, forest fire should be explored according to local risk features. Rules and regulations on catastrophe insurance should be formulated. Catastrophe liability reserves for nuclear risk insurance should be set up. A data base for catastrophe risk management should be established.
V. To promote insurance for agriculture, farmers and rural areas, and innovate methods to support and benefit them.
11. to promote agriculture insurance. Based on the principles of protecting major crops and covering costs with central government support, protecting local characteristic production with local governments support and guaranteeing price and revenue where possible, farmers and various new types of entities should be encouraged to participate in agriculture insurance so that its coverage and protection will be expanded. Pilot programs on agriculture revenue insurance should be promoted. New products and services such as weather index insurance should be explored. Catastrophe risk reserves for agriculture insurance should be implemented. The cooperation between insurance institutions and disaster forecast agencies and agriculture regulatory authorities should be improved.
12. To proactively broaden and deepen the development of insurance for farmers, agriculture and rural areas. Based on the specific situations, local governments should support insurance institutions to provide affordable and easy-to-understand products for farmers, agriculture and rural areas with moderate protection. Products for financial inclusion purpose should be actively promoted, such as rural micro-credit insurance, farm house insurance, agriculture machinery insurance, agriculture infrastructure insurance, forest insurance, farmers pension and health insurance, rural micro-life insurance, etc.
VI. To expand the functions of insurance and facilitate economic upgrade.
13. The distinct advantage of insurance long-term funds should be put into full play. Under the precondition of security and profitability, innovation in insurance fund investment is encouraged for higher efficiency of fund allocation. Investment of insurance funds in projects such as infrastructure construction, shanty town renovation, urbanization and national major projects through fixed-income type and equity-type investment plans will be encouraged. Insurance companies should be encouraged to provide financial support to technology enterprises, small and micro companies, strategic emerging industries, etc. through equity interest investment, bond investment, funds, asset-backed plans, etc. with the precondition that risks are properly controlled. Work on policies for insurance funds to invest into venture capital funds should be carried forward.
14. The insurance market should be developed in coordination with money market and capital market. The role of insurance institutional investors should be fully played to support the long-term stable development of stock market and bond market. The establishment of insurance asset management institutions specialized in investment of real estate, infrastructure and aging care projects will be encouraged. They will be allowed to set up private equity funds such as mezzanine funds, buyout funds and real estate funds. The pilot program for insurance companies to establish fund management companies should be carried out. Insurance institutions are to explore investing in asset securitization products or initiating these products themselves. The development of bond credit insurance should also be explored. Alternative investment market are to be cultivated.
15. To play a bigger role in the adjustment of economic structure. An insurance system should be established and improved to provide products and services for scientific and technological innovations. An insurance risk compensation mechanism for new equipment made in China should be promoted to encourage domestic enterprises to make scientific and technological innovations and put them into production. The development of credit insurance and loan guarantee insurance are to be accelerated to facilitate the financing of small and micro enterprises. Individual consumption loan guarantee insurance are to be encouraged to unleash the residents' consumption potential. The insurance industry should help to facilitate related professions such as consulting, law, accounting, evaluation and auditing. Also, in order to promote development of the tertiary industry, efforts should be made to boost cultural industry insurance and logistics insurance, and to explore emerging business such as art performance and exhibition liability insurance.
16. To give support to "going out" enterprises. Export credit insurance should play an important role in promoting stable growth and transformation/upgrading of foreign trade. The support of export credit insurance to self-owned brands, self-owned intellectual property rights, and strategic emerging industries should be beefed up, with focus on high-tech and high value-added mechanical and electrical products and large sets of equipment by streamlining examination and approval procedures and others. The development of overseas investment insurance should be accelerate with focus on energy and mineral resources, infrastructure, high and new technology and advanced manufacturing, agriculture and forestry by developing new products and expanding coverage. The control over the short-term export credit insurance market should be relaxed step by step to allow more players enter the market. Shipping insurance should also be beefed up. Overseas investment classes of insurance funds are to be expanded.
VII. To promote the reform and opening up for better development of the insurance industry
17. To deepen the reforms of the insurance industry. Efforts should be continued to deepen the reform of insurance companies, accelerate the establishment of a modern insurance enterprise system and improve corporate governance. The market-oriented reform of life insurance rates are to be deepened and market-oriented reform of commercial auto insurance rates be steadily carried out. The insurance market entry and exit mechanism should be further reformed. The insurance market system is to be improved by encouraging the establishment of regional and specialized insurance companies, and by fostering specialized credit insurance institutions. Merger, acquisition and restructuring of insurance companies should be better regulated. Eligible insurance companies are to be supported in domestic and overseas IPOs.
18. To enhance the opening up of insurance industry. Both domestic and international opening up are encouraged. Reform and development will be promoted by "taking in" and "going out" in tandem. Chinese insurance companies should be encouraged to "go out" through various channels and in various means to provide greater protection for Chinese overseas businesses. Chinese insurance companies will receive support in raising funds in international capital markets through various channels. Efforts will be made to expand exports of insurance services. Foreign invested insurance companies should be encouraged to introduce advanced experience and expertise into the Chinese market.
19. To encourage the development of innovative insurance products and services. Independent innovation will be emphasized to create new business growth engines. The use of the internet, cloud calculation, big data, mobile internet and other new technologies for new distribution channels or service modes will be encouraged. Easy-to-understand clauses and standardization of services are to be promoted. Insurance companies should provide personalized, customized products and services to reduce inefficient competition of homogeneous products. Insurance companies should adopt a new mode of development featuring service of good quality, low operating cost, attractive products and trustworthy practices.
20. To accelerate the development of the reinsurance market. More market participants will be introduced. Regional reinsurance centers are encouraged. There should be more innovative reinsurance products and technology. Reinsurance should play a bigger part in the protection for large and special risks such as in agriculture, transportation, energy, chemical, water conservancy, aeronautics and astronautics, nuclear power, subway and other national key projects. Reinsurance should also play a bigger role in risk diversification of natural disasters as well as in supporting China’s overseas enterprises. China’s pricing power and voice in the global reinsurance market should be enhanced.
21. To give full play to the role of the insurance intermediary market. Insurance intermediary institutions should enhance their expertise and play an active part in risk pricing, disaster prevention, risk consulting, loss adjustment and claim settlement, providing value-added services. The structure of the market should be optimized and market order be standardized. Reform of the insurance sales system is to be steadily promoted.
Ⅷ.To enhance and improve regulation for better risk prevention and mitigation
22. To step up regulatory modernization. Institutional and functional regulation, macro-prudential and micro-prudential regulation should be combined. So should. A risk-oriented regulatory system must be cemented. Efforts should be taken to strengthen the corporate governance and internal control of insurance companies, to improve market conduct and to facilitate the construction of the China Risk-Oriented Solvency System (C-ROSS). The legal system and IT system of insurance regulation should also be improved. Self-discipline organizations such as the Insurance Association of China should fully play its role. Regulatory authorities, making full use of their resources, should strengthen supervision at the local level.
23. To strengthen protection of insurance consumer rights. The laws and regulations regarding insurance consumer rights protection should be improved. Efforts should be made in the exploration for all kinds of settlement channels of disputes. A sound insurance dispute mediation, arbitration and litigation mechanism should be established. Efforts should be intensified to make sure that insurance institutions fulfill their obligations and never get off with consumer rights infringements unpunished.
24. To make sure that no systemic or regional financial risks occur. Efforts should be made to strengthen comprehensive risk management of the insurance industry, to establish and improve risk monitoring and early warning, to perfect risk contingency plans and risk response procedures. The accountability of stakeholders should be strengthened and market discipline should play its role to prevent risk accumulation. Regulatory coordination should be enhanced within the financial industry to prevent cross-sector risk contagion. The cooperation mechanism between the insurance regulator and the local governments, public security, justice, and press departments should be improved. The management and operation of the Insurance Security Fund should be improved.
Ⅸ. To strengthen infrastructure construction for a better development environment of the insurance industry
25. To promote the insurance credit system comprehensively. Effort should be made to strengthen credit information infrastructure, to make credit records more inclusive, and to set up a credit information sharing mechanism. Insurance institutions should be guided to adopt differentiated premium rates to encourage promise-keeping behaviors. It is also needed to improve the credit file system of insurance practitioners and the credit evaluation and punishment mechanism of insurance institutions.
26. To strengthen the infrastructure of the insurance industry. Risk database should be set up and mortality table and morbidity table should be updated. Basic platforms such as asset custody center, insurance asset trading platform, reinsurance exchange and disaster and loss prevention center should be established. The development of China Insurance Information Technology Management co., LTD should also be accelerated. All these are to promote the risk management capacity and support the transformation and upgrading of the industry.
27. To raise the public awareness of insurance. News media including the radio and television, print media and the internet should play a positive role in publicity. They should be encouraged to devote some channels or programs to insurance topics so that everybody can learn, understand and use insurance. Insurance awareness education should also be strengthened in primary and secondary schools and vocational schools.
Ⅹ. To improve the policy support for modern insurance service development
28. To establish an insurance regulatory coordination mechanism. Cross-sector communication and coordination will be strengthened to promote better connection of commercial insurance with social security, social management, and government administration. An information sharing mechanism should be established to gradually realize data sharing and enhance the risk identifying and management capability of relevant departments. An information request mechanism is to be put in place for public security, justice and audit departments to use data from the insurance database.
29. To encourage government procurement of insurance through a variety of ways. Local governments, based on their conditions, should be encouraged to use insurance institutions’ risk management function, distribution network, and expertise to reduce the running cost of public service. The government can entrust insurance institutions with the administration of public services to improve its efficiency, or buy products and services directly from them. The government should give support to insurance services beneficial to public welfare but hard to break even without the support.
30. To conduct research on improving supportive tax policies. Tax policy concerning health insurance should be improved. Pilot projects of tax deferred pension should be carried out in due time. Steps should be taken to implement and improve the corporate income tax policy regarding the premium of supplementary pension and supplementary medical insurance paid by businesses for their employees. Preferential tax policies for agricultural insurance should be implemented. Study should be done in the tax policy on deduction for Research & Development insurance expenses in tandem with improving the policy of R&D costs deduction in corporate income tax.
31. To secure the land supply for aging care and health services industry. Governments at various levels should consider the demand for aging care and health services industry development in the overall plan of land utilization, secure and expand the land supply for aging care facilities and health services. Meanwhile, they should reinforce the supervision of land usage for such purposes and prevent the land from being used differently. Qualified insurance institutions should be encouraged to invest in aging care industry and health service institutions.
32. To improve financial subsidies policy for agricultural insurance. The support to agricultural insurance should be enhanced by increasing the financial subsidies from the central and provincial government for insurance of main crops, while reducing or eliminating county level subsidies in major grain-producing areas. An agricultural insurance catastrophe risk diversification mechanism with state support should be established.
Each region and department should fully realize the importance of accelerating the development of modern insurance service, taking it as an important task in promoting economic transition, transforming government functions, enlarging employment, improving social management and protecting people’s livelihood, and work closely together for this purpose. Relevant departments should formulate measures to implement the policies mentioned in these Opinions. Provincial governments should develop detailed plans to promote the orderly and sound development of the modern insurance industry in their jurisdictions.
