SCIO briefing on performance of banking and insurance sectors
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E-mail China.org.cn, January 15, 2020
CNR:
The Spring Festival is coming and the issue of banks attracting deposits has become a hot topic again. Small and medium-sized banks may face difficulties in winning over savers. My question is what measures are the China Banking and Insurance Regulatory Commission taking to deal with this. I noticed that the auto insurance was talked about specifically at the recent 2020 national banking and insurance working conference. Why was the issue of the marketization of auto insurance ratio raised, but not of health insurance and commercial pension insurance? Are there any specific measures to help develop and improve the "third pillar" of China's pension insurance system? Thanks.
Huang Hong:
You asked three questions. I will give the floor to Mr. Xiao for the question about banks' attracting deposits. And I will answer the other two.
Xiao Yuanqi:
The race to attract deposits and win over savers is not as serious as in the past. Because we have regulations and require banks, especially small and medium-sized banks, to enhance their ability to manage assets and liabilities, there has been much letup in such race these years. You mentioned that there would be a "war to attract deposits," which reminds us to study our measures taken during the holiday period. On the one hand, we must ensure that there is enough capital in the market to meet the peoples' demand during the holiday. At the same time, banks, no matter big or small, should have sufficient and reasonable liquidity because of the demands during the holiday. According to the regulatory data, small and medium-sized banks' indices of liquidity are good, and indices such as liquidity coverage ratio are well above the regulatory requirements. However, we will pay more attention during this period. In the matter of attracting deposits, we have requirements and regulations. Banks should not do anything in violation of these provisions and a red line must not be crossed in an effort to win over savers. There are stiff penalties for offenders who fail to maintain the normal order of the deposit market.
Huang Hong:
Let me answer the latter two questions. We are all familiar with motor vehicle insurance or auto insurance for short. Motor vehicle insurance has long been a main type of insurance for property insurance companies. In terms of the actual figures last year, the incomes from auto insurance premiums reached 818.9 billion RMB, accounting for 63% of the total premium of property insurance. In other words, 63% of the premiums of property insurance companies came from auto insurance. Auto insurance plays a crucial role in people's daily travel, and it is a very important issue for millions. In recent years, the CBIRC has strengthened its supervision of auto insurance. Although our supervision is relatively stricter than before, the long-standing deep-seated problems have not been fundamentally resolved. The media often reports that the problems of high prices, high fees, extensive management, disorderly competition, and distortion of data still exist. Hence, accelerating auto insurance reform is an urgent task for the CBIRC. Therefore, in 2020, we are placing the regulatory work concerning auto insurance system on the agenda. Auto insurance system has undergone some reforms over the years, but I think they have not been enough. The reforms that really touch on the fundamental interests and that target deep-seated issues, have in truth not yet begun. In 2013, we carried out a thorough reform of our health and pension insurance systems, that is, the reform of the life insurance rate formation mechanism. The auto insurance system reform should also be market-oriented, that is, it should adhere to the direction of market-oriented reform.
In general, to undertake the next steps of reform, we need to first understand the overall requirements for reform. The basic principles of the reforms should be to keep the auto insurance system market-oriented, supervised, and guided. We should adjust the total volume, optimize its structure, expand the scope of guarantees, improve the efficiency, streamline its administration and coordinate its promotion with other reforms. The second issue is to pay attention to the main content of the reform. We need to coordinate and adopt a combination of reforms in the compulsory insurance for vehicle traffic accident liability and commercial insurance, a combination of terms and exchange rate reforms, a combination of guarantee and service reforms, as well as a combination of market and regulatory reforms. The third is to ensure the pace of reform. At present, we are formulating a specific plan for the comprehensive reform of auto insurance system, and this plan is being widely consulted. The CBIRC will formally implement comprehensive auto insurance system reforms at an appropriate time this year. This is the answer to your second question.
The third question you raised is about the reform and development of the third pillar of the pension system, the individual commercial pension insurance. In the speech I made at the FORTUNE Global Forum on Saturday, I spoke about opinions and suggestions for the next step of reform of the third pillar. To sum up:
First, we must accelerate the top-level design of the third pillar reform to incorporate it into major national reforms, at the same time, taking the development of the third pillar as a key national strategy and incorporate it in the "14th Five-Year Plan" .
Second, we must strengthen policy support. In recent years, some policies have been introduced on the construction of the third pillar. For example, pilot programs for individual tax-deferred pension insurance schemes that the media has concerned about have officially been launched in Fujian, Shanghai and Suzhou.
Third, we must increase our efforts to promote the third pillar, especially individual pensions. We have not done enough in this area in the past.
Fourth, we must establish an individual pension system. On the first working day of 2020, I attended a policy briefing here, during which I gave some opinions on the development of commercial pension insurance. I would like to emphasize again today that the development of the third pillar, the establishment of various types of pensions, is both an opportunity and a major challenge for commercial insurance institutions. The liability cycle of personal pensions is very long, it has to cross multiple economic cycles and undergo a series of tests such as longevity and interest rate risks. Therefore, the capacity building of commercial insurance institutions is the main task currently facing the CBIRC, which includes investment capacity, actuarial pricing and professional team-building ability. These are four aspects of work related to the third pillar of the pension system.
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