Relaxation of controls over how and where mainland insurers may invest their funds will lead to increased competition in the finance sector and force insurers to improve their performance, said Wang Xujin, an insurance professor at the Beijing Technology and Business University. The Communist Party pledged at the third plenary meeting earlier this month to let market forces play a bigger role in the economy, and the insurance sector is one target of the move. "Opening up to market access is a correct direction. It will force insurers to improve, and facing increasing competition is a process that insurers have to go through," Wang said. More autonomy for insurers over where to invest their funds would be an important area of the sector's reform to improve investment returns, he added. The China Insurance Regulatory Commission last month sent draft rules to insurance companies indicating it would raise caps on investment in equities to 30 per cent of total assets from the current 25 per cent, and real estate and infrastructure investment to 30 per cent from 20 per cent. Olive Xia, an analyst at brokerage firm Core Pacific-Yamaichi, said the reform was needed since insurers were facing increasing pressure on their profitability after pricing deregulation on life insurance policies. In August, the regulator announced the removal of a 2.5 per cent cap on the annual returns that may be credited by life insurers to their customers' policies, marking a step towards opening up the sector to greater competition. Many mainland insurers have already launched products offering returns of more than 4 per cent in an effort to keep their market share. As the insurers compete to offer higher returns and lower premiums in a bid to attract customers, reform of investment rules was required to boost their income, Xia said. "The relaxation of investment limits has been under discussion for a long time, but we can expect more concrete measures or rules to be launched after the third plenum," she said. Wang said that in the wake of the relaxed controls over investments, insurers should also raise the standards of their staff and agents in order to compete. "Chinese insurers should improve the quality of their services and set stricter requirements on insurance agents and executives," he said. The industry regulator should also set higher thresholds by setting higher qualification standards for insurance workers, Wang said. "While competition is intensifying, the current quality of service is not enough," he said. To take the step towards a more market-oriented sector, insurers were also urged to enhance their information systems to boost competiveness, according to Wang Guojun, an insurance professor at the University of International Business and Economics. Higher standards of risk control would be needed to cater for the opening up of the insurance sector, he said, adding that insurers should also take steps to enhance their solvency to provide a cushion against possible claims.