show that in 2001, rural households spent an average of only 3 yuan ($0.43) on insurance premiums annually. This was only 2.3 percent of the country's average per-capita premium expenditure of 127.7 yuan ($18.35).

The CIRC set up a rural insurance project group in May 2007 to determine how to structure the program. The group examined existing commercial life insurance businesses in rural areas, as well as the practices of other developing countries similar to China.

Besides setting prices that make insurance affordable for low-income farmers, the commission has ensured that policy clauses are stated in simple language and exclusions are kept to a minimum. It also has made underwriting procedures and claim settlements simple and convenient.

The CIRC plans to sell the policies through small financial institutions and farm produce retailers that do business with low-income farmers on a daily basis. By linking the sales of the insurance policies to related transactions, the CIRC will be able to reduce management costs to some extent.

To design the insurance program, the CIRC worked for one year, surveying nearly 10,000 rural households in 432 villages in eight provinces and autonomous regions in central and west China, whose family members did not include government workers or employees of financial institutions.

Costly, but in demand

The survey results indicated that 78.9 percent of these families knew about insurance, but only 29.8 percent had purchased it in the past. It also found that those at the bottom end of the low-income scale were less inclined or not at all inclined to purchase insurance coverage. Among those surveyed, 55.2 percent said the premiums were too high; 12.4 percent said insurance products suitable for them did not exist; and nearly 12 percent said insurance services were poor.

But the survey also indicated that there was strong demand for injury and accidental death insurance policies in rural areas of central and west China, Chen said. About 45 percent of those who participated in the survey said their main concern was that their family members could suffer from accidents. This was followed by concerns about their children's education and family medicare.

Before the program was launched, some insurance companies had been targeting at rural areas. Except for China Life Insurance (Group) Co., other life insurance companies such as Ping An Insurance (Group) Co. of China (China Ping An) and Taikang Life Insurance Co. Ltd. have been offering policies in rural areas. Yet, they have not done enough in rural markets and by and large have neglected low-income farmers. They have merely transferred the same products and sales methods targeted at urban consumers to rural areas, where only wealthier farmers can afford to buy the policies. And they have ignored the farmers with low incomes and unstable cash flows, who need the insurance the most, Chen said. This group tends to face risks that never happen to urban insurance buyers and, with limited savings, they cannot withstand great financial risks.

"The survey carried out by the CIRC, together with a series of natural disasters that have occurred this year, makes us more deeply understand that the development of rural microinsurance for health is necessary and urgent," Chen said, referring to the heavy snowstorms that buried most of the southern part of the country earlier this year and the deadly earthquake in Sichuan Province in May. After the severe snowstorms in