Laying groundwork for micro insurance

The mainland's average peasant may own little more than a hut and simple farm tools, but losing those possessions can leave a family without food if they have no safety net to fall back on.

For the world's middle class that safety net is often an insurance policy, and now some of the world's largest financial companies are exploring ways to offer similar insurance to China's poor. Micro insurance follows the trend of micro finance, pioneered by Nobel Peace Prize winner Muhammad Yunus and the Grameen Bank.

'All of the various classes of insurance that individuals would buy are important in every economic segment. The poor have kids going to school, life events that they save for and want to achieve, and they also have properties that they own,' said Brandon Mathews, head of micro insurance at Zurich Financial Services.

Zurich has hired United States and mainland universities to research the potential of the Chinese market before it launches its first micro-insurance products. 'We are investing in research and time and working with regulators and other stakeholders to find the right time to launch. I would like to launch [next year],' he said.

'The standard micro-insurance product is normally credit-linked, credit life. We would like to get beyond that, but that's sort of the standard.'

Micro insurance has already proven successful in India, South Africa, Mexico and Uganda, but on the mainland even the middle class is a largely untapped insurance market. Although the country has 20 per cent of the world's population, it accounted for only 1.4 per cent of global non-life insurance premium income in 2005. Domestic players control what business there is, with foreign insurers or foreign joint ventures accounting for only 1.31 per cent of the market, according to data from AIG.