The year 2001 is the first year of China's Tenth Five-Year Plan for National Economic and Social Development. At the end of the year, China entered and became a member of the World Trade Organization. Under the correct leadership of the Central Committee of the Communist Party of China and the State Council, and strong support given by the governments at all levels and related departments, China's insurance industry has been deepening its reform and enhancing the construction of its own. The year's insurance industry kept a good development situation and made important contribution to stability of the people's life, supporting the construction of disaster areas and normal operation of our national economy.

I.     Demand of the insurance market

1.    Overall situation: The year 2001 witnessed the fastest increasing rate of China's insurance industry with an aggregate insurance premium income of RMB210.94 billion yuan, a net increase of RMB51.35 billion yuan than the year 2000 and the increasing rate of the corresponding period is 32.2%. The total insurance premium income of Chinese-funded insurance companies was RMB207.61 billion yuan, the increasing rate than the year of 2000 was 32.15%. The total insurance premium income of foreign-funded insurance companies was RMB3.33 billion yuan, and the increase rate was 34.51%. The insurance depth is 2.2%, with an increasing rate of 0.4 percent point than the corresponding period of 2000. The insurance density was RMB168.8 yuan with an increase of RMB41.1 yuan. The total assets of insurance companies amounted to RMB459.1 billion yuan with an increase of RMB121.7 billion yuan than the corresponding period of 2000 and the increasing rate was 36.1%. The insurance industry realized a profit of RMB5.06 billion yuan. The increasing rate than the corresponding period of 2000 was 34.9%. The business tax turned over was RMB5.77 billion yuan with an increase of RMB0.18 billion yuan more than the corresponding period of 2000. During the past year, all insurance companies paid RMB59.825 billion yuan of insurance indemnity with an increase of RMB7.09 billion yuan more than the corresponding period of 2000. After a series of critical natural disasters, such as the windstorm in Xinjiang and the landslide in Wulong, Chongqing, the insurance companies paid indemnity in time and played an important role to stabilize the people's life, to restore production and develop economy.

2.    Personal insurance: In 2001, the total national personal insurance premium was RMB142.4 billion yuan with a net increase of RMB42.65 billion yuan, the rate of increase was 42.8% than the year 2000, amounting to 67.5% of the total insurance premium. This is the first time amounting to 2/3 of the total premium since 1997 when personal insurance premium exceeded property insurance premium. The life insurance trade raised 28.36 percent points than the year 2000 and contributed 26.72 percent points for the total insurance premium income. Most noticeable matter was that insurance new products such as the investment-linked insurance and dividend insurance had become the new increasing point. Following those joint stock insurance companies as the Chinese Ping An, Pacific, Xinhua, Taikang, the largest share China Life Insurance Company also issued dividend policies since 2001. The sale of new products of the whole trade rose as if it was an engine pushing the life insurance trade. In 2001, the premium income of investment-linked insurance and dividend insurance reached RMB41.23 billion yuan, covering 32.2% of the life insurance premium income, realizing an increase rate of 28.8 percent point. New life insurance premium income was RMB70.11 billion yuan, covering 49.2% of the life insurance premium income; increase rate was 8.9 percent point. The life insurance business expense rate was 8.7%, decreasing 0.6 percent point. The total profit was RMB2.04 billion with an increase of RMB0.31 billion yuan. Total life insurance indemnity in 2001 was RMB26.532 billion yuan with an increase of RMB4.358 billion yuan, the rate of increase was 19.84%.

 3.    Property insurance: In 2001, the total income of the national property insurance premium reached RMB68.54 billion yuan, increased RMB8.7 billion than the income of 2000 and the rate of increase of the same period was 14.6%, occupying 32.5% of the total insurance premium. As to the structure of the insured property, the insurance premium of motor vehicles was increasing steadily and the premium reached RMB42.21 billion yuan, covering a share of 61.6% of the total property insurance premium. The total insurance premium of other types of insurance was RMB26.33 billion yuan, covering 38.4% of the total insurance income of property insurance. The property insurance business expense rate was 19.9%, realizing a decrease of 0.9 percent point and the profit was RMB3.02 billion, and the increase of the corresponding period was RMB1.01 billion. Total property insurance indemnity in 2001 was RMB33.293 billion with an increase of RMB2.704 billion yuan, the rate of increase was 8.84%.

II.    Insurance market supply

1.    The number of the business main body of the insurance market increased. In 2001, the number of the business main body of the Chinese insurance market increased greatly. The reason is that in response to the promise of the Chinese government to the WTO on China's insurance industry, Sino-foreign joint venture insurance companies and foreign insurance companies have been allowed to gradually enter the Chinese market. In the year 2001, six Sino-foreign joint venture insurance companies and four foreign insurance companies were allowed to open business in China. Three Chinese life insurance companies (Heng-An Life, Shengming Life and Dongfang Life) were approved to set up joint venture companies with foreign insurance companies. At the same time, the Taiping Life and Taiping Property insurance companies were approved to resume their life and property insurance business on China's mainland. In 2001, China's first policy insurance company, China Export and Credit Insurance Corporation announced its opening in Beijing. On the other hand, the business main body of the insurance intermediary market has been developing rapidly. In that year, 82 more insurance agency companies, seven insurance broker companies and 20 insurance assessment companies were founded, as well as some branches of joint stock insurance companies. Up to the end of 2002, there were altogether 52 insurance companies in our country (including 11 companies in preparation). Among the 52 companies, five are State-owned insurance companies, 15 are joint stock companies, 19 Sino-foreign joint venture insurance companies (including eight companies in preparation), 13 foreign insurance companies (including three in preparation). There were 170 insurance intermediary organizations in all (including 106 in preparation). Among them, 127 are insurance agents (including 79 in preparation), 17 insurance broker companies (including seven in preparation), and 26 insurance assessment companies (including 20 companies in preparation).

2.    Business of the Chinese-funded insurance companies was maintaining a situation of large scale increasing. On the whole, the four principle insurance companies of China, the China Life Insurance Company, the People's Insurance Company of China, the Ping'an Insurance Company of China and the China Pacific Insurance Company, were "taking the lead in advance." The other 48 insurance companies (including 11 companies in preparation) only occupied about 4.5% of the whole market share.

 See Appendix 1 showing the business conditions (including insurance premium, rate of increase and market share, etc.)

 Appendix 1: Table of business development of China-funded insurance companies (2001)

Name of the company        Income of insurance premium (100 million)       Increase rate compare with 2000(％)       Market share   (%)

1. China Life Insurance Company                                                81.236    26.22       38.51

2. The people's Insurance Company of China                                50.541    8.69        23.96

3. Ping An Insurance Company of China                                       46.802    71.78       22.19

4. China Pacific Insurance Company                                            22.856    49.90       10.84

5. Xinjiang Production Construction Corps Insurance Company        0.496     29.50       0.23

6. New China Life Insurance Co., Ltd.                                            2.07       37.45       0.98

7. Taikang Life Insurance Co., Ltd.                                                1.616      124.4       0.77

8. Huatai Property Insurance Co. Ltd.                                           0.635      35.11       0.30

9. Dazhong Insurance Co. Ltd.                                                     0.398       17.06       0.18

10. Tian An Insurance Co. Ltd.                                                     0.400      50.94       0.19

11. Hua An Property Insurance Co. Ltd.                                        0.354      31.60       0.17

12. Yong An Property Insurance Co. Ltd.                                      0.162      92.86       0.08

Note: China's reinsurance companies, branches in China's mainland of Hong Kong insurance companies and foreign insurance companies not included in Appendix 1.

According to the analysis of market share of insurance premium, the State-owned insurance companies are still taking the lead. The total insurance premium income of 2001 of the China Life Insurance Company, the People's Insurance Company of China and the Xinjiang Production Construction Corps Insurance Company occupied 62.7% of the total national insurance premium income. With an income of RMB81.236 billion yuan, the China Life Insurance Company occupied a share of 57% of the life insurance market. With an income of RMB50.541 billion yuan, the People's Insurance Company of China occupied a share of 73.74% of the property insurance market. The actual cause is that the State-owned insurance companies have built up an insurance network around the whole country both urban and rural districts. Most enterprises and individuals have confidence in the brand names of State-owned insurance companies, which are their first choice. Looking from the changing trend of market structure, and since the first joint stock insurance company appeared in China in 1988, the market share of the State-owned insurance companies were dropping year by year caused by market competition and multiple choices of the applicants. For example, the market share of the first two insurance companies decreased than the year 2000. The market share of the China Life Insurance Company decreased by 1.82 percent point and the People's Insurance Company of China decreased by 5.18 percent point. As the joint stock insurance companies have made a breakthrough on market promotion, backing support and value-added service, more and more people choose joint stock insurance companies as their sustenance for their whole life. In 2001, total insurance premium income of the Ping An Insurance Company of China reached RMB46.802 billion yuan, the rate of increase was 5.12 percent point. The income of life insurance was RMB40.12, covering a share of 28.18% of the national life insurance market. The market share of the China Pacific Insurance Company increased 1.29 percent point than the year 2000, and the market share of the Taikang Life Insurance Company increased 0.32 percent point and the Xinhua Life Insurance Company increased 0.04 percent point.

3.    Business risk controlled effectively, and reform promoted steadily: In the respect of business risk control, the insurance companies firstly got rid of the risk of interest differential loss. All life insurance companies raised target, plan and measures to get rid of the risk of interest differential loss, and secondly prevented in time the risk brought by new products. All life insurance companies, according to "The Provisional Administration Measures on the Information Publication of Life Insurance New Products" and "Announcement on Some Items of Life Insurance New Products" formulated by the China Insurance Regulatory Commission, enhanced the information publication and reminded the applicants about the risk of investing dividend-type life insurance so as to prevent wrong operation. The property insurance companies, according to "Notice about Enhancing Administration on Individual Housing Loans and Housing Loan Insurance," jointly formulated by the China Insurance Regulatory Commission and the People's Bank of China, corrected illegal activities in the insurance of housing loans and prevented risks.

All insurance companies have been carrying out reform. The State-owned insurance companies are actively exploring the road of reform of joint stock system. Some State-owned insurance companies (mainly the China Life Insurance Company, the People's Insurance Company of China and the China Reinsurance Company), through deep investigation and study, and soliciting opinions from all sides, have found major problems restricting the development of solely State-owned insurance companies and the principle causes, and proved the necessity and feasibility of carrying out the reform of joint stock system. They also raised basic thinking and tentative program for reform of joint stock system, and provided necessary basis for the State's decision. On the other hand, joint stock insurance companies promoted the reform of separate industry management. The China Pacific Insurance Company and the Xinjiang Production Construction Corps Insurance Company have been approved to realize separate industry management. The separate industry management of the Ping An Insurance Company of China is now being implemented. Up to the end of 2001, the system of separate industry management of China's insurance industry has been founded.

III. Supervision on the insurance market

1.       Rectification of market order was successful. In 2001, the China Insurance Regulatory Commission, aiming to carry out the thrust of "the National Conference on Rectifying and Regulating the Market Order," linked the reality of insurance industry, by self-checking, self-correction and key-point checking, achieved great effectiveness. The China Insurance Regulatory Commission has found the main problems of the insurance market, prosecuted illegal activities and carried out rectification. The order of the insurance market turned better, and promoted the healthy development of business.

2.    Insurance laws and regulations were perfected. In 2001, the China Insurance Regulatory Commission checked up the laws and regulations and department rules, which did not conform to the regulations of WTO, concerning 22 items. "The Administrative Regulations on Foreign-Funded Insurance Companies" has been approved and issued by the State Council. The China Insurance Regulatory Commission also issued 58 documents including "The Administrative Regulations on Insurance Agent Organizations," "The Administrative Regulations on Insurance Broker Organizations," "The Administrative Regulations on Insurance Assessment Organizations." At the same time, necessary preparations have been made for amendments of "Insurance Law."

3.       Transparency of supervision on insurance industry was improved. The China Insurance Regulatory Commission made clear the working procedures and methods of supervision through formulating "Rules of on the Spot Checking." The China Insurance Regulatory Commission timely announced supervision documents through issuing "China Insurance Supervision Administrative Documents" and "Reference on Insurance Supervision." Publication of information on insurance supervision was improved.

4.    Supervision on pay ability started. The China Insurance Regulatory Commission analyzed the pay ability of insurance companies during 1998 – 2000, and found out the situation so as to make the supervision according to their classifications.

The major problems of the 2001 insurance market were: The problem of system of State-owned insurance companies not yet solved; the administrative level of insurance companies should be raised; the problems of practicing fraud, misleading the clients and the chaotic market order were still protrusive; the task of getting rid of the risk of interest differential loss is still very hard; the staff members of insurance industry should raise their level of quality; insurance supervision should be improved and enhanced. All these problems should be paid great attention to and be solved conscientiously.