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BIZCHINA / Center

Life insurance lusterless after interest rate hike

By Shangguan Zhoudong (chinadaily.com.cn)
Updated: 2007-07-26 10:45

Traditional savings-type life insurance is becoming less attractive as
the interest rate hike as of July 21 takes effect this year. The
soon-to-be-implemented interest tax reduction policy beginning August 15
may also affect demand, the Hangzhou Daily reported.

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The People's Insurance Company (Group) of China's Huaibei branch in Anhui
Province. Traditional savings-type life insurance is?becoming lusterless
as the interest tax cut?will be implemented soon.?[newsphoto]

The current ceiling on expected proceeds from savings-type insurance
products is limited by the insurance regulator at 2.5 percent, while the
current after-tax one-year deposit interest rate has reached 2.664
percent and will hit 3.1635 percent on August 15 as a result of the
interest tax reduction from 20 percent to 5 percent.

Insurance insiders said that the China Insurance Regulatory Commission
(CIRC) is speeding up plans to bring expected proceeds more in line with
market trends. Some insurers have answered the policy by lowering
long-term insurance policies' premiums, in an effort to improve
competitiveness.

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PICC Health Insurance Co Ltd, for example, recently launched two
insurance policies featuring lower premiums. According to Wu Lijun, head
of personal insurance section of the insurer's Zhejiang branch, the
premium reduction is due to consideration of lower costs as high cure
rate of some major diseases and interest rate hike expectations.

"Interest rate hike and interest tax reduction will have impact on some
bancassurance products, but long-term life insurance policies focus on
coverage and not yields," Xie Weiran, vice general manager of Pacific
Life Insurance Co Ltd's Zhejiang branch.

He also said the interest rate hike is not bad news for the insurance
sector, but instead will help it operate more reasonably in the capital
market.

(For more biz stories, please visit Industry Updates)

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