Incontestable Clause Not Affects Insurance Prices

China's new insurance law took effect from October 1 and it has become a focal point whether the accession of incontestable clause will cause insurers in the country to raise prices of their products.

The accession of incontestable clause indicates that the nation attaches more importance to protecting insurance consumers' interests and rights, said a top executive of China Life Insurance Co., Ltd. (SHSE: 601628 and SEHK: 2628). It will deliver some impact on insurers' management. Objectively speaking, it will help reduce insurers' fraud cost. But there may be moral risk. So it is not suitable to solve the problem via raising premium. It will not affect the product prices in the short run and whether it will affect the prices in the future will mainly depend on the market.

In order to meet revised items of the law, insurers in the country suspend sales of some products involving dreadful disease insurance, participating insurance, and universal life insurance and upgraded some others in succession. Premium of the upgraded ones will be higher as consumers could gain more security by then, said sources.

Source: www.cnstock.com (October 09, 2009)

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