Drought Insurance Not Included in Forest Insurance

Currently, the forest insurance does not cover the insurance for drought, according to available information.

Actually, the forest insurance covers the insurance for fire accident, flood, rainstorm, hailstone, snowstorm, typhoon and so forth, but the drought is not included in the coverage of such insurance. As for the southwest Chinese province Yunnan, where the drought is unprecedentedly terrible, the forest insurance mainly refers to the fire accident insurance.

Currently, the forest coverage ratio of Yunnan is as high as 49.9%, thus ranking the third place in the country. By this March, the total areas of the drought forestland were 30.1 million mu (1 mu = 667 square meters), with the economic losses of about CNY 2.98 billion.

As a Hong Kong-listed insurer, PICC Property and Casualty Company Limited (PICC P&C, 2328.HK) currently is mainly responsible for the agricultural insurance in Yunnan. Since the autumn of 2009, PICC P&C has totally compensated CNY 201,000 for 126 insurance accidents arising from the drought. The total property losses of these drought accidents are calculated to be CNY 11.32 million. In the first two months of this year, there might have been CNY 200,000 losses caused by the fire accidents within the underwriting range of the property insurer.

With more insurers launching special insurance products for wealthy people, such wealthy people-targeted insurance is thriving this year. Not long ago, Allianz China Life Insurance Co. launched a kind of wealthy insurance in partnership with HSBC. This is single-premium insurance product with the minimum threshold of CNY 1 million. Lately, China's biggest life insurer China Life Insurance Co. just launched similar product with the minimum premiums of CNY 1.5 million, paid on a regular basis for five years.

Still, there is controversy about such upscale insurance products. Some believed that this is just a choice for those wealthy people; while some others thought that domestic wealthy insurance actually cannot meet the diversified demands of customers.

For instance, an insurance professor pointed out that the wealthy insurance provides another tool for rich people to allocate their financial assets. An insurance manager expressed the same opinion, saying that different life insurance products have different functions. The wealthy insurance just targets the high-end customers.

In addition, the wealthy insurance can be helpful for wealthy people to evade paying the inheritance taxes. With the upcoming taxation policy about the inheritance tax, more wealthy people are guessed to buy such insurance service.