Increased use of liability insurance will not only improve workplace safety, but also reduce the impact of the growing number of accidents on the nation's economic growth and social stability.

This was one of the proposals made at a high-profile forum on Saturday, convened to look at ways in which liability insurance can be promoted in China.

The forum, co-sponsored by the China Insurance Regulatory Commission (CIRC) and the State Administration of Work Safety (SAWS), looked at strengthening cooperation among relevant departments to speed up the growth of liability insurance.

"CIRC encourages the establishment of specialized liability insurance companies, and will support existing insurance companies' innovative efforts to increase liability insurance coverage," CIRC Chairman Wu Dingfu told the forum.

"Developing liability insurance is conducive to ensuring the orderly functioning of the national economy and maintaining social stability," Wu said.

Liability insurance can force businesses to raise work safety standards by charging higher premium rates on those with worse safety records, said Wu. He added that it can also help cut the accident rate with the insurers' professional risk management expertise.

The official said that the government's financial burden can also be relieved by liability insurance, as the State currently plays the predominant role in China in dealing the aftermath of all accidents and paying compensation.

The huge cost to the government was clearly illustrated by a fire which devastated a shopping mall in Northeast China's Jilin Province in February, which killed 123 people.

The mall, a public place, "did not buy any liability insurance coverage, and all the huge expenditure on the victims had to be covered by the government," he said.

The death toll from accidents in China rose by an annual average of 6.28 percent between 1990 and 2002, official statistics indicated.

The total accident toll was 136,340 last year, which cost a staggering 250 billion yuan (US$30 billion) in economic losses, equivalent to 2.5 percent of the nation's gross domestic product.

And the nation's incidence of occupational diseases is among the world's highest, with some 700,000 people falling victim to work-related illness every year.

SAWS Director Wang Xianzheng said China is at the stage of economic development where the incidence of work safety accidents is the highest - with its per capita GDP falling into the US$1,000-3,000 range.

"What happens in the eastern coastal areas and the Pearl River Delta also illustrated that, with industrialization accelerating and the economy expanding, the incidence of accidents rose significantly," Wang told the forum.

Only a minor number of those accidents is covered by liability insurance, with China's total liability insurance premiums amounting to a meagre 3.5 billion yuan (US$421 million) last year, accounting for just 4 percent of all property insurance premiums, compared to a global average of 15 percent.

A shocking 90 percent of shopping malls and entertainment venues in five major Chinese cities, including Beijing, have no public liability insurance coverage, Wu said, citing a recent survey.

Inadequate legislation is one of the reasons China's level of liability insurance coverage is so low, said speakers at the forum, who said this makes it difficult to attribute liabilities in many circumstances, resulting in a low awareness of the need to protect a third party's interests among potential policy buyers.

China's insurance industry also has difficulty providing the expertise and professionals required to ensure expeditious growth in the highly specialized liability insurance sector.

A rise in premium rates after the 2001 terrorist attacks in the United States has made it difficult for Chinese insurers to make reinsurance arrangements, further restricting the domestic underwriting capacity for liability risks, said Jiang Caishi, a senior manager at PICC Property and Casualty Insurance Co.

Wu from the CIRC called for the establishment of a mandatory liability insurance system, under which operators of public facilities are legally required to buy liability insurance, and urged support from fiscal authorities for favorable tax treatment.

(China Daily June 7, 2004)