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Insurers to alter price policies as lifespan increases
2005-12-23 03:45:07 XinhuaEnglish

Beijing, Dec. 23-- The fact that Chinese people are now living longer has forced the government to recalculate life expectancy levels to help insurers price policies more appropriately.

The revised China Life Insurance Mortality table, a statistical table showing probable death rates in each age group, will take effect from the beginning of next year, the China Insurance Regulatory Commission(CIRC) announced yesterday.

China released the first such life insurance table in 1995. The CIRC began compiling statistics for the new table from insurance records in August 2003.

The revised table is split into two parts: non-pension business and pension business.

This has been done because the mortality rate of people buying pension policies is generally lower than for those buying non-pension products.

The new table shows the average life span for men who buy non-pension products is 76.7 years, up 3.1 years from 1995.

Women in this category can expect to live until 80.9, also up 3.1 years.

In the pension business, these two figures are 79.7 for men and 83.7 for women, an increase of 4.8 years and 4.7 years respectively.

"The launch of the new table is good news for us as an accurate life mortality chart will help insurers guard against potential risks," a manager with Ping An Insurance Group told China Daily."And its impact on the price of products will vary accordingly."

Chen Wenhui, director of the life insurance regulatory department at the CIRC, also shared the manager's viewpoint.

He believed that the price of safeguard-oriented products, such as fixed-time life insurance policies, would fall.

The price of savings-oriented products that are seldom affected by mortality rates will see very little change.

For life-long pension products, the price will maintain its upward trend, as insurers have to pay more as people live longer.

Chen said the new table will have only a limited impact on the price of insurance policies, and it should not necessarily trigger a buying spree because of the following two reasons:

First, the revised mortality table is for reference only and is not mandatory for insurers when pricing their products.

Second, even before the publication of the new mortality table, life insurers had already noticed people were living longer and had taken that into account when pricing their products.

"Moreover, the use of the new mortality table will mark a big move towards a market-oriented process when setting premium rates," he added.

Differing from the original table that was mandatory for insurers when pricing their products, life insurance companies can now follow the new guidelines, the old ones or their own mortality table.

They can adopt different mortality tables for different types of products, and target customers and specific areas.

Customers can expect to see different prices for the same product from different insurers.

(Source: China Daily)

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