Shenzhen has marked the launch of China’s first catastrophe insurance program on a pilot basis with a 36-million-yuan (US$5.7 million) deal between the Shenzhen branch of PICC Property and Casualty Co. Ltd. People affected will be insured for up to 2.5 billion yuan.
“The government-funded insurance is aimed at covering costs for medical treatment, disabilities and deaths caused in catastrophic disasters,” Du Peng, head of the city’s civil affairs bureau, said at yesterday’s press conference.
The insurance will cover 15 kinds of disasters. Among them are heavy winds, torrential storms, floods, mudslides, landslides, lightning strikes, tsunamis, earthquakes with a magnitude of 4.5 or above and waterlogged property, according to Du.
The maximum compensation for an individual in a single disaster is 100,000 yuan. The ceiling on a single disaster is 2 billion yuan.
In addition, the insurance will cover victims in the event of nuclear accidents caused by any of the aforementioned disaster situations. Individual compensation in a nuclear accident will be no more than 2,500 yuan.
All policy-holders who are staying in Shenzhen when a catastrophe happens will be compensated.
Shenzhen will also establish 30-million-yuan catastrophe fund as a supplement to the insurance policy. Therefore, catastrophic losses will be covered by government subsidies, insurance companies and the fund. Donations to the fund will be encouraged.
“Commercial insurance institutions are expected to be encouraged by the move (government-funded insurance) to develop more products related to catastrophe insurance,” said Xiao Zhijia, vice director of Shenzhen’s financial service office.
Xiao added that the catastrophe insurance starts with a focus on life, so there will be a big potential for property insurance in a catastrophe.
Shenzhen’s government has been trying to establish catastrophe insurance since 2011 and was approved by China Insurance Regulatory Commission (CIRC) last year as the first city to pilot the program.
Eighty percent of Shenzhen residents responding to an earlier survey by the CIRC said they have a need for insurance covering losses from rainstorms, earthquakes and typhoons. Twenty percent said they would buy such policies if they are introduced. Most of the respondents hoped disaster insurance would include both life and property insurance.