(China Daily)
Updated: 2008-02-28 11:04

It is better to use the tools of the market, such as insurance, to manage and resolve the risks associated with various types of disasters, says an article in People's Daily. The following is an excerpt:

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Statistics recently released by the China Insurance Regulatory Commission have left us with a bittersweet feeling. We are pleased to learn that despite the many insurance claims springing from the recent snow disaster, insurance companies have showed their sense of responsibility by paying 1.04 billion yuan ($142 million) in compensation so far.

What makes us sad is that despite the active performance of insurance companies, the compensation fees they paid accounted for less than 1 percent of the 111 billion yuan worth of damage caused by the bad weather.

When disaster strikes in developed countries, the compensation fees paid by insurance companies can account for 30 percent or even 60 percent of the total losses. Having a systematic and scientific insurance system helps ensure the economy grows smoothly and that people are able to return to normal life as quickly as possible.

Compared with the campaigns initiated by the government to help the disaster-hit regions, market-oriented means such as insurance cost less and are more efficient. The disaster-relief effort requires the large-scale deployment of both human and physical resources, placing great administrative and financial pressure on the government. Donations from the public are important, but not a permanent solution.

The insurance industry is financially stronger than government relief programs and private donations. But at present, China's industry is weak and few people are aware of the important role insurance can play.