The China Insurance Regulatory Commission (CIRC) has issued a circular on strengthening the management of aviation accident insurance, and ending the unified pricing system for related insurance products, according to the 21st Century Business Herald.
The windfall from aviation accident insurance stimulated the reform. The CIRC decided to encourage insurers and normalize the aviation insurance industry by allowing market mechanisms, rather than stubbornly confining the premium rate.
The previous guidelines to aviation passenger accident casualty insurance, issued early in 2003, was jointly designed by China Life, China Pacific Life, and Ping An, three leading insurance players in China.
The former guidelines ruled rigidly that "The aviation accident insurance premium is counted in shares. For each share, the premium is 20 yuan (US$2.66) and the insured amount is 400,000 yuan (US$53,241). The maximum insured amount for each insured is two million yuan."
The latest document ended stiff pricing regulations beginning November 1 this year. At that time the insurance companies will be able to lower their premiums, raise the insured amount, lengthen insurance periods, or develop substitutive products.
However, they are still subject to the Administrative Measures on Examination, Approval and Filing of Personal Insurance Products and the Administrative Measures on the Insurance Articles and Premium Rate of Property Insurance Companies, according to the circular.
Meanwhile, as the new guidelines shift pricing responsibilities to insurers, the CIRC required all insurers to prepare reinsurance plans for air accident insurance and submit the plans to the CIRC annually, in an effort to minimize disastrous accident risks.