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Preparations for an uncertain future
By Zhang Fengming |
February 10, 2011, Thursday
|
Print Edition
Print Edition
BUYING insurance against fire, death or the possible ravages of old age is commonplace in the West but a relatively new, often ignored concept in China. Sun Guodong is determined to change public perceptions.
Sun is Party secretary of the Shanghai Bureau of the China Insurance Regulatory Commission and sits at the forefront of government efforts to expand public use of insurance and build risk-management safeguards into the industry.
A veteran of the upcoming industry, Sun joined the regulatory body in 1998. Under his aegis, new insurance products have been developed, including fire liability insurance in public areas such as department stores and publicly-financed community insurance, and more initiatives are in the pipeline.
Most Chinese people don't carry -insurance, and many of them still deem it a luxury.
The concepts of preparing for the worst when everything is fine today, preparing for old age and death when one is still young, and preparing for children's futures when they are just starting school have been slow to catch hold in China.
Shanghai is a leader among Chinese cities in the development of the insurance industry.
Sun shared his thoughts on that subject with Shanghai Daily in a recent interview.
Q: What's the plan of action for the bureau in the next five years?
A: We're still finalizing the five-year plan. The draft is done. It takes into consideration the 12th Five-Year Plan (2011-2015) for the Shanghai city government, the status of the local financial services industry and developments in the nationwide insurance industry. But the aim of the plan is clear - to achieve sustainable growth of the industry.
Q: What's your expectation of that growth in Shanghai?
A: The industry should outpace the local economy. Shanghai Mayor Han Zheng has targeted annual economic growth of around 8 percent a year in the 12th Five-Year Plan period, so I expect growth in the local insurance industry of between 10 and 12 percent a year.
Q: As a local lawmaker, what did you propose along those lines during the annual session of the Shanghai People's Congress in January?
A: The apartment complex blaze that killed 58 people in Shanghai on November 15 is a case in point. It turns out only a handful of residents had insurance policies covering their homes and contents. The construction industry got an overhaul after the tragedy, but the issue of construction liability insurance was not addressed. I proposed to introduce more insurance coverage into the construction sector.
Q: It seems that the affluent are more aware of the benefits of insurance, and more vulnerable, low-income people are less savvy or even less concerned.
A: It's a matter of circumstances. Only when one gets past the point of having to worry how to make ends meet today will he or she start to worry about tomorrow. The tragic apartment complex blaze did trigger more insurance demand from the general public. What we are endeavoring to achieve is the higher awareness of the significance of precautions arrangements such as insurance.
Q: On the personal insurance front, the insurance industry is anticipating a government pilot project on deferring taxes on retirement accounts. Could you comment on that?
A: The trial was mentioned as an initiative in the State Council's guidelines to build Shanghai into a global financial and shipping center by 2020. We have made our efforts to introduce it in Shanghai, which is already common in the Western markets.
Those are accounts where working people put so much money in every year, and insurers or other financial services firms invest the money so that it hopefully grows in value by the time a person retires and begins collecting payments.
The money that goes into the accounts is not taxed until it's withdrawn at retirement and the person doing the withdrawing is in a much lower tax bracket.
Q: What are the benefits of such a program?
A: For those who invest in these accounts, it would mean more preparation for an uncertain future. The aim of the trial program is to encourage more people, especially young and middle-aged workers, to set aside money for their old age. In cities with aging populations like Shanghai, it's essential. People who are older than 60 are estimated to account for 23 percent of Shanghai's population in 2010 and the figure is expected to grow rapidly.
Besides, for Shanghai, the money invested in such a program would help boost the liquidity of capital markets. It makes a benign circle.
Q: What is the timetable for the launch of such a pilot project?
A: We started research on the issue as early as 2004. It has gained support from other local financial authorities, such as the Shanghai Financial Services Office in 2007. All relevant bodies in Shanghai agree on the need for such a program. Now all the technical preparation needs to be done. Once the central government gives us green light, the program can be launched.
Sun is Party secretary of the Shanghai Bureau of the China Insurance Regulatory Commission and sits at the forefront of government efforts to expand public use of insurance and build risk-management safeguards into the industry.
A veteran of the upcoming industry, Sun joined the regulatory body in 1998. Under his aegis, new insurance products have been developed, including fire liability insurance in public areas such as department stores and publicly-financed community insurance, and more initiatives are in the pipeline.
Most Chinese people don't carry -insurance, and many of them still deem it a luxury.
The concepts of preparing for the worst when everything is fine today, preparing for old age and death when one is still young, and preparing for children's futures when they are just starting school have been slow to catch hold in China.
Shanghai is a leader among Chinese cities in the development of the insurance industry.
Sun shared his thoughts on that subject with Shanghai Daily in a recent interview.
Q: What's the plan of action for the bureau in the next five years?
A: We're still finalizing the five-year plan. The draft is done. It takes into consideration the 12th Five-Year Plan (2011-2015) for the Shanghai city government, the status of the local financial services industry and developments in the nationwide insurance industry. But the aim of the plan is clear - to achieve sustainable growth of the industry.
Q: What's your expectation of that growth in Shanghai?
A: The industry should outpace the local economy. Shanghai Mayor Han Zheng has targeted annual economic growth of around 8 percent a year in the 12th Five-Year Plan period, so I expect growth in the local insurance industry of between 10 and 12 percent a year.
Q: As a local lawmaker, what did you propose along those lines during the annual session of the Shanghai People's Congress in January?
A: The apartment complex blaze that killed 58 people in Shanghai on November 15 is a case in point. It turns out only a handful of residents had insurance policies covering their homes and contents. The construction industry got an overhaul after the tragedy, but the issue of construction liability insurance was not addressed. I proposed to introduce more insurance coverage into the construction sector.
Q: It seems that the affluent are more aware of the benefits of insurance, and more vulnerable, low-income people are less savvy or even less concerned.
A: It's a matter of circumstances. Only when one gets past the point of having to worry how to make ends meet today will he or she start to worry about tomorrow. The tragic apartment complex blaze did trigger more insurance demand from the general public. What we are endeavoring to achieve is the higher awareness of the significance of precautions arrangements such as insurance.
Q: On the personal insurance front, the insurance industry is anticipating a government pilot project on deferring taxes on retirement accounts. Could you comment on that?
A: The trial was mentioned as an initiative in the State Council's guidelines to build Shanghai into a global financial and shipping center by 2020. We have made our efforts to introduce it in Shanghai, which is already common in the Western markets.
Those are accounts where working people put so much money in every year, and insurers or other financial services firms invest the money so that it hopefully grows in value by the time a person retires and begins collecting payments.
The money that goes into the accounts is not taxed until it's withdrawn at retirement and the person doing the withdrawing is in a much lower tax bracket.
Q: What are the benefits of such a program?
A: For those who invest in these accounts, it would mean more preparation for an uncertain future. The aim of the trial program is to encourage more people, especially young and middle-aged workers, to set aside money for their old age. In cities with aging populations like Shanghai, it's essential. People who are older than 60 are estimated to account for 23 percent of Shanghai's population in 2010 and the figure is expected to grow rapidly.
Besides, for Shanghai, the money invested in such a program would help boost the liquidity of capital markets. It makes a benign circle.
Q: What is the timetable for the launch of such a pilot project?
A: We started research on the issue as early as 2004. It has gained support from other local financial authorities, such as the Shanghai Financial Services Office in 2007. All relevant bodies in Shanghai agree on the need for such a program. Now all the technical preparation needs to be done. Once the central government gives us green light, the program can be launched.
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