Vehicle insurance reform intended to encourage market competition will have little impact on premiums when it is rolled out on Wednesday.
Premiums could rise or fall as a result of the new policy, said Guo Shengchen, vice chairman and president of PICC Property and Casualty Ltd (PICC P&C, 02328.HK), said.
But he expects the changes to proceed “steadily, with no be big jumps or falls [in premiums]“, and bring benefits to large companies because of their cost advantage.
Six provinces — Heilongjiang, Shandong, Guangxi, Chongqing, Shaanxi and Qingdao — have been chosen to pilot the new policy.
Gu Yue, chairman and chief executive of China Pacific Insurance (Group) Co. Ltd (CPIC, 02601.HK), said the market will be stable despite volatility in some of the pilot provinces.
“The levels of maturity of the insurance market in the six pilot regions are different… so the impact on these companies will be in varying degrees,” he said.
“Some pilot regions may experience volatility, but overall, the market will be stable.”
The reform is beneficial to the development of the market and gives better protection to consumers while improving business efficiency, they said.
It allows insurers greater freedom to set rates for vehicle insurance and flexibility to devise a method for collecting premiums.
PICC said net profit rose 43 percent year on year to 15.12 billion yuan for 2014, with the group posting a 96.5 percent combined ratio, a measure of profitability where a score below 100 percent means an insurer’s underwriting business is profitable.
CPIC had a net profit of 11 billion yuan, up 19 percent, despite incurring the first underwriting loss in its property and casualty business in six years, largely due to adjustments in provisions.
It had a combined ratio of 103.8 percent.
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