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Insurers do U-turn on price hike talk 

By Hu Yang (chinadaily.com.cn)
Updated: 2009-09-29 14:46

Insurance companies are denying the wide-spread rumor that they will raise prices of their life insurance products after the new insurance law takes effect on October 1, as the industry regulator uttered a serious warning.

A 10 to 20 percent price hike had been widely claimed by insurance agents and confirmed by high-ranking managers from several insurance companies, it is said to be based on the grounds that the new law will further protect the policyholders' interests, thus adding operating costs for insurers.

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The China Insurance Regulatory Commission (CIRC) is denying the possibility of a price hike. Yang Huabo, director-general of the Legal Affairs Department of the CIRC, said on September 16 that the implementation of the new insurance law has nothing to do with an insurance price hike and a price hike linked to the new law is prohibited.

The once seemingly impending price hike, strengthened by the fact that many life insurance products have been suspended or withdrawn to make necessary revisions according to the new law, had greatly spurred consumers' desire to buy.

An insurance agent surnamed Wang said a withdrawing policy of his company collected more than 60 million yuan ($8.7 million) in premiums in just several days.

Reporters from the Shanghai Morning Post consulted eight insurance companies and 11 insurance agents on September 28 pretending to be customers. All eight companies said prices will remain basically the same after October 1, and of the 11 agents questioned, only two implied a possible price hike.

Besides the warning from the CIRC, another possible reason contributing to denials of a price hike is that sale targets of many policies were met during the time when word of a possible price hike was circulating.

The price hike might have been a rumor let out by the insurance companies to pitch their products, according to Liu Jiahui, a lawyer with the Derun Law Firm of Beijing.

Bei Zhengming, a veteran insurance lawyer, said the U-turn attitude of insurances companies is understandable, and insurers can still manage even if the operation costs rise, as profits from some insurance products are considerable.

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The full text is available in the September Issue of China Insurance. Please visit E-Shop for more subscription details.