Chinese regulator calls off smog insurance allegedly over ‘lottery-esque’ terms

Expert casts suspicion on policy and its difficult-to-meet terms

PUBLISHED : Tuesday, 25 March, 2014, 7:05pm
UPDATED : Wednesday, 26 March, 2014, 11:12am

The mainland’s insurance regulator has reportedly suspended China’s first smog insurance policy just a week after it was introduced, as sources said its terms and conditions raised suspicions.

The People’s Insurance Company of China (PICC), the country’s largest non-life-insurer, confirmed with the South China Morning Post today that it had stopped offering the insurance – the first of its kind – which was introduced as a pilot scheme on Monday last week.

The insurer officially declined to say why the scheme was cancelled, but one of its employees told a respected financial news outlet that it was due to questions over the product’s terms and conditions, which made it seem more like a gambling scheme.

“We received notification from the China Insurance Regulatory Commission in recent days requesting us to stop selling the smog insurance,” a PICC employee was quoted by as saying. “[The staff were told] the product is more like a lottery than insurance.”

Repeated phone calls to the commission went unanswered.

Hao Yansu, who heads Central University of Finance and Economics’ School of Insurance, agreed the terms raised questions and the insurance should be suspended.

“Insurance is all about probability … the current unavailability of scientific data on smog weather and smog-related diseases make the product suspicious, [such as] whether its premium is set too high,” Hao said in a telephone interview with South China Morning Post.

“It does look like a lottery to some extent, especially considering its low charge,” he said.

The country only started monitoring the toxic inhalable particle PM2.5 last year, and there is still a dearth of studies directly linking smog to particular diseases.

The smog insurance was available only to Beijing residents between the age of 10 and 50 from a premium ranging from 78 yuan (HK$98) and 154 yuan.

Clients who land in hospital due to smog-related illnesses such as respiratory disease within a year from buying the insurance can claim 100 yuan per day for up to 15 days.

Policyholders are also offered a one-off compensation up to 300 yuan, if all 12 official monitoring stations in Beijing’s urban districts record air quality index (AQI) pollution levels exceeding 300 for five straight days.

The probability of this happening is slim. Even when Beijing was hit by severe smog for seven straight days last month – the worst in a while – the 300 AQI readings lasted for no more than two days.

Smog blanketed 15 provinces across the nation last month, covering an area of 1.8 million square kilometres, according to Environmental Protection Ministry. Experts have blamed the factory and vehicle emissions, and construction site dusts for the pollution.

Air pollution often reaches hazardous levels, fuelling public discontent. Last month, a resident of Shijiazhuang in Hebei province sued the local government for 10,000 yuan in compensation for air pollution. The case is still pending.

Last year, only four of the 74 major cities met the pollution standards, prompting the Communist Party to launch a “war on smog”.

Beijing mayor Wang Anshun vowed to spend a staggering 760 billion yuan to curb smog and promised to improve the city’s air quality by 2017.