The insurance watchdog is working on health insurance regulations to boost the sector which is seeing a growth in premiums but also a lot of losses due to a lack of specialized firms.

"The relevant regulations are expected to be released next year," said Chen Wenhui, director of the life insurance regulatory department of the China Insurance Regulatory Commission (CIRC).

China's health insurance sector, like so many others, has seen strong growth in recent years. Premiums paid increased by an average of 46 percent annually from 2002, hitting a total of 25.99 billion yuan (US$3.2 billion) last year. Premiums from health insurance in the first ten months of this year reached 26.7 billion yuan (US$3.3 billion), up 15.5 percent on the same period last year.

There is a huge demand for health insurance in the world's most populous country. As many as 65 percent of Chinese residents list illness as one of their three greatest concerns, some statistics said. According to unofficial estimates, the market could grow to 300 billion yuan (US$36 billion) by 2008.

However, despite the growth potential, commercial health insurance presently plays a minor role in the domestic market, covering only 10 percent of Chinese residents' total medical costs.

Currently there are only two specialized health insurance companies in China: PICC Health Insurance Co Ltd and Ping An Health Insurance Co Ltd.

"Compared to the strong market demand, the supply of specialized health insurance services is rather weak," Chen said, speaking at an International Symposium on the Development of Health Insurance and Third Party Administration.

"This is partly because of the high technical requirements and potential risks of health insurance."

"A lack of specialization is the major reason for the risks," said Wang Xujin, an insurance professor at the Beijing Technology and Business University. "Health insurance, which is hugely different from life insurance in terms of actuarial analysis, risk control and other factors, must be offered by specialized providers."

Many of China's health insurance providers said they were frustrated by the high risks in the business. Loss ratios for health insurance have been as much as 200 percent for some insurers in recent years. Some even reportedly suspended the sale of health insurance products earlier this year.

All Chinese life insurance companies can underwrite health insurance policies and since last year property insurers have been allowed to sell short-term health insurance. This is part of the problem, some experts said.

(China Daily November 23, 2005)