China aims to build a mature and comprehensive commercial endowment insurance market by 2020, with endowment polices set to become the main form of family pension plans.
To this end, the State Council which is the Chinese cabinet unveiled an array of incentives and guidelines aimed at boosting the sector at an executive meeting presided over by Premier Li Keqiang last Wednesday.
A statement released after the meeting said that the government will encourage innovation in private insurance services to create tailored products for individuals and families, reported China Daily.
Companies selling commercial endowment insurance will get support to offer customised services to elderly customers. Other forms of insurance will also be promoted, including those covering accidental injury and long-term care for the elderly.
Supportive policies will be granted in this area while the government's supervision will be reinforced to safeguard the legal interests of consumers and to prevent financial risks.
The State Council also decided to test an individual tax-deferral programme, which will encourage people to buy commercial endowment insurance products.
In pension insurance, financial security is the top priority, Mr Huang Hong, CIRC Vice Chairman said at a news briefing last Friday.
"Endowment insurance is what people rely on in old age and in times of illness," he said. "So it's important for endowment funds to have steady financial returns, and they must not face high financial risk."
CIRC is ready to work with ministries to create “green channels” for commercial insurance funds to participate in national strategic and livelihood projects, support the real economy and ensure insurance funds see steady returns, he added.
Mr Huang said China faces a severe shortage of professionals in endowment product design, especially top-tier actuaries.
"Well-designed endowment products need to take a number of factors into account - such as economic cycles and changes in life expectation -- and create a proper balance," he said, adding that colleges and universities should train more actuaries.
China's pension system has three pillars, namely basic endowment insurance, enterprise annuity and personal commercial endowment insurance. However, Mr Huang said, the pillars are not well balanced due to a variety of reasons.
Basic endowment insurance, for instance, makes up the majority of policies and is regarded as the key pension plan for the elderly. Yet it supports only basic subsistence. Individual commercial endowment insurance sees low sales and has been slow to develop compared to the experience in some other countries, Mr Huang added.
Tax deferred pension insurance
A private tax deferred pension insurance plan, to supplement the basic social pension scheme, has been discussed for at least eight years. The delay in its implementation has been attributed to the lack of consensus among the several government agencies and ministries involved.
Mr Huang said that details of the scheme have been worked out and would be submitted to the State Council. A pilot programme would be launched soon. He said that conditions for the implementation of such a programme are “ripe”.