The paper from ICFO Seminar in Qingdao, China 25 – 29 October 2000
Status and the Developing Trend of Chinese Fisheries
Shipowners’ Mutual Insurance
(Chinese Association of Fisheries shipowners Mutual Insurance)
The article demonstrates the necessity for developing fisheries shipowners’ mutual insurance in China. Fishing industry is a high input and high risky industry. If a serious perish happened, the owner of fishing vessel operated in joint venture or individual would lose all of his property or life. In this case, fishermen not only hardly to restart their production and it would impact the social safety of the fishing areas. For the owners of small size fishing vessels, they urgently need the safeguard of insurance, but they can not bear high insurance fee. Most of commercial insurance will not undertake the insurance of small size fishing vessel. There are the best way is the mutual insurance.
The article also introduces the status of Chinese Association of Fishing Vessel Owner Mutual Insurance. The purple of the association is to provide the substance safeguard when the member suffers from the lost of life and property, to offer the service for members to work safely, to enhance member’s ability of preventing from calamities and counteracting calamities, to guarantee the proper right of its members and to promote the sustainable development of fisheries production by conducting the mutual insurance among the members. During the recent 6 years, the association has gained a good achievement, it shows in the following aspects: 1) Mutual insurance range expanded. Fishing vessel owner mutual insurance plays more and more important role in settling down risks, putting the operation in order and making people easy. 2) The range of mutual insurance enlarged, fees was cut down, the benefit of fisheries shipowners be improved. 3) Insisting the policy of serve to quickly, correctly and rationally to do work in time. To get over the difficulties of the government, to come over handicaps of fishermen and to set up the credit standing. 4) Enhanced safe management, settled down disputes, improved salvage and lifted the safe operation level of fisheries industry.
The article also analyzes the future development of fishing vessel owner mutual insurance industry, and points out the main problems to be resolved.
Insurance is a product of commercial economy. It is a most important part of the composition of the market economy. With the rapid development of economy, the accumulating of social and individual property and the enlarging of production scale, the natural risk, economy risk and social risk that in front of every industry, even every person are increasing, and many risks are inescapable. Therefore, how to avoid and cut down the economic lost which caused by these risks becomes the urgent problem for people. To help each other and to let a community share the risk of an individual, is the most economic and rational way to avoid and cut down the lost caused by risks. That is called insurance.
Mutual insurance is one of the key methods of insurance. Mutual insurance body consisted of the people who have the same requirement to be met. Whenever one member suffered from calamity, other members would share his lost. As most of the mutual insurance bodies are not seeking for profit, to invest in these kind of insurance body has the advantage of low cost. Besides this, because the members are both acts as a policyholder and a person to be ensured, they are well aware of self-ensure and self-service, and they can serve for the members better. Fisheries shipowners Mutual Insurance is a way for mutual insurance within fisheries industry.
In China, Chinese Association of Fisheries shipowners Mutual Insurance is responsible for fishing vessel owner mutual insurance. The association established in September 1994. It is a non-benefit body consisted of voluntary fisheries shipowners, under the professional direction of the Ministry of Agriculture and superintendent and management of the Ministry of Civil Affairs. The purple of the association is to provide the substance safeguard when the member suffers from the lost of life and property, to offer the service for members to work safely, to enhance member’s ability of preventing from calamities and counteracting calamities, to guarantee the proper right of its members and to promote the sustainable development of fisheries production by conducting the mutual insurance among the members. In 6 years, under the direction of fisheries authorities of each level, and with the support of all relative departments, fisheries shipowners mutual insurance started in a very poor condition, the association worked hardly and fought out a new way to establish and complete the system of self-guarantee of industrial risk. It contributed a lot for the sustainable economy development of fisheries and fishing village.
Fishing industry is a high input and high risky industry. The risk of fishing vessels sailing out to operate at the sea is far beyond the other industries on land. Besides the natural calamities, improper operation and other man-made factors often damages the vessels and hurt the crews, and there are also the risks of being captured by foreign countries and attacked by pirates. Besides this, while the vessel suffer from damage, it would be something happened that impact on others, and have to compensate, such as collided other vessels nearby or oil pollution. According to the statistics of our association, during the five years from 1995 to 1999, 798,400 persons (times) attended the mutual insurance, 1670 person died and 3805 person crippled. The death rate is 2.1% and crippled rate is 4.8%. The total number of fishing vessel attending the insurance was 25,600 vessel (time), sank 286 vessels, 3568 vessels were partly damaged, the rate of sunk vessels is 1.1% while the rate of partly damaged rate is 13.9%. The average annual compensation paid for the damaged fishing vessels is 10.02 million yuan If according to the average signed rate of 70% per vessel, the direct lost is near 13 million yuan. Now the average annual number of signed insurance fishing vessel is over 5100, takes only 1.1% of total power fishing vessels of the national, or 1.8 of marine power fishing vessels. It estimated that the annual direct lost of marine power fishing vessel would reach at 700 million yuan. Perhaps the number is not so correct, but it shows that the risk of marine fishing operation is very high. If a serious perish happened, the owner of fishing vessel operated in joint venture or individual would lose all of his property or life. In this case, fishermen not only hardly to restart their production and it would impact the social safety of the fishing areas. Therefore, if there is no a completed insurance safeguarding system, the development of fisheries productivity will be restricted.
China has near one million fishing vessels and power-fishing vessel took 470,000. Of them, small fishing boat with the main power of 44KW (60-horse power) takes 86.3%. The average tonnage of these boat is only 5.6 tons and the average power is 10.6 kW (about 15 horsepower). Among 280,000 marine power fishing vessel are small size vessels takes 77.5%. Most of the small size vessels are operated by individual. Both the skill and quality level of crews and the vessel condition are low so that they are easily come into troubles. And the income of the owner is low and unsteady. For the owners of small size fishing vessels, they urgently need the safeguard of insurance, but they can not bear high insurance fee. Most of commercial insurance will not undertake the insurance of small size fishing vessel. There are the best way is the mutual insurance. It organized all the owners of small fishing vessels to share the power of collective, and rely on the advantage of the industry management. They make insurance of each other to cut down the lost to minimum, so that everyone will avoid the serious economic lost.
The practice of 6 years proved that to conduct fisheries shipowners mutual insurance meet the requirement of the reality of Chinese fisheries industry, meet the requirement and the right of most of fishermen, and meet the requirement of fisheries management. In 1997, while the State Council signed the document of Ministry of Agriculture of “suggestion of further accelerate the development of fisheries”, it pointed out that: “We must actively and steadily to establish fisheries mutual insurance and all service bodies, to continue enhancing the self-protect and self-develop capacity of all fishermen in the socialist market economic.” The direction shows that it is important and necessary to conduct fisheries shipowners mutual insurance.
Chinese insurance industry experienced a very hard developing period after the establishment of P.R. China. China People’s Insurance Company founded on October 20th 1949. It was the symbol of the start of New China’s insurance. But in October 1958, influenced by the movement of “great leap forward”, people thought that since they are in “ the people’s community”, all of the lost of disease, death and the lost caused by natural calamities will be supported by the nation or the collectives, insurance in China was not necessary. Therefore the domestic insurance business was stopped then. In 1964, some region recovered their domestic insurance business, but they stopped again when “ the Cultural Revolution” began in 1997. After China carried out reform and open-door policy, Chinese political system and economical system has been improved. The commodity economy developed quickly and the living condition of people improved. Insurance became a necessary way to develop economy and to ensure people’s living standard. In 1979, the Ministry of Finance, the Bank of China, the Bank of China Agriculture issued a United notice to recover enterprise property insurance business>. On January 1st, 1980, Chinese People’s Insurance Company formally covered their domestic insurance business.
Fishing vessel insurance developed after the reform and open-door policy, as well. Fisheries economical system reform began relatively earlier than other industries, and the procedure was fast, as well. At the beginning of 1980s, the ownership of fishing vessels has been turned from mainly relying on the public and collective to mainly relying on individual or family group. Economical system reform greatly aroused most of fishermen’s productive enthusiasm. The number of fishing vessels increased quickly from 80,000 in earlier 80s to 280,000 now, and the output of aquatic products increased greatly, too. With the rapid development of fisheries production, the shortcoming of individual economy in the capacity in preventing from calamity and overcome damages became an important problem. It makes the necessity to introduce insurance mechanism, and to establish and complete the safeguard system of fisheries risk. In December 1983, the former Ministry of Agriculture, Husbandry and Fishery united with Chinese People’s Insurance Company issued a notice “ to conduct domestic fishing vessel insurance”. Both Bureau of Fisheries Management and Fishing Port Superintendent of the former Ministry of Agriculture, Husbandry and Fishery and the department of countryside of Chinese People’s Insurance Company had two national fishing vessel insurance meeting in Qingdao, Shandong Province and Fuzhou, Fujian Province to encourage the owners to signed insurance. 1986 is the year that most of marine fishing vessels signed insurance, the number reached 26,000, took 10.9% of the total marine fishing power vessel number of that year, which was 239,000. But it is pity that in the over one decade after then, insurance for fishing vessel did’t not expand, but declined year by year. The main reason for that was the compensation rate was too high, the commercial insurance operation had a serious lost. Now, there are only a few thousand of marine power fishing vessels take part in commercial insurance, most of them are fishing vessels of big and middle size or fishing assistant vessels.
In order to make up the shortage of commercial insurance, Chinese Association of fishing vessel owner mutual insurance began to conduct fisheries shipowners mutual insurance in 20 Provinces (Cities and Regions). Now 23 offices with 359 agencies have been set up in these provinces. Up to the end of August this year, fishermen signed mutual insurance totaled 957,000, fishing vessels totaled 32,000; the insurance fee collected over 220 million-yuan. And the association has settled 15,000 issues, paid the compensation of 96 million yuan.
A. Mutual insurance range expanded. Fishing vessel owner mutual insurance plays more and more important role in settling down risks, putting the operation in order and making people easy. When Chinese Association of Fishing Vessel Owner Mutual Insurance established, it was just the time that the national enhanced the reform and open door in insurance industry. The old pattern that only Chinese People’s Insurance Company operated insurance business was broken up. Many joint-stock insurance companies emerged. Insurance for property and life were separated. Foreign funded insurance companies were allowed to come into Chinese insurance market. All of these make the competition in Chinese insurance market became very severe. Under the situation of short of fund, experience and experts, the association began their work according to the principles of serve for fisheries, thinking of fishermen. They strengthened propagandize and education, took the advantage of the industry management and developed their business by good service. The association continued to develop, now the number of fishermen and fishing vessels, who signed insurance are beyond those attended commercial insurance. In Hebei Province, fishermen operating in the sea signed insurance reached over 60% of the total. Fishermen in most of main fishing areas in Shandong, Zhejiang, Liaonin, Guangxi and Hainan provinces are relying on mutual insurance. In the Chengyan Exploitation Zone of Qingdao City, Shandong Province and Chensi County, Zhejiang Province, all fishermen signed mutual insurance, and “mutual insurance village” emerged there. In Chaohu district, Anhui Province, almost operating fishermen signed mutual insurance. At the beginning, the association conducted their work with the help of administrations. Now, fishermen in many areas realized the necessary of mutual insurance, more and more owners of fishing vessel accepted this way of insurance, and more and more owners signed insurance voluntarily. In 1996, there are over 230,000 fishermen and 8000 fishing vessels signed mutual insurance, that was 2.7 times and 3.8 time compared with 1995.
B. The range of mutual insurance enlarged, fees been cut down, the benefit of fisheries shipowners be improved. With the development of mutual insurance and the increase of stock fund, the capacity of the association to undertake insurance has been greatly improved. Now the business has been expanded from the accident hurt of human body to medical insurance, foreign affair issues in Nansha and Beibu Bay insurance and the accident hurt of distant fishing labors, the average insurance fee has been cut down 25%. As for fishing vessel insurance, the business also expanded from the whole damage insurance to all kind of insurances, and added foreign affair issues in Nansha and Beibu Bay insurance. Insurance range expanded from the fishing vessels with its main power of over 120-horse power to over 40-horse power. It takes over the small fishing boats which cant not sign their insurance in commercial insurance company and meets the urgent need of the owners of small and middle size fishing vessel. That is the advantage of mutual insurance.
C. Insisting the policy of serve to quickly, correctly and rationally to do work in time. To get over the difficulties of the government, to come over handicaps of fishermen and to set up the credit standing. Dealing compensation is one of the important works to show the mutual insurance purpose of serve for the fishermen, it is also the most comprehensive work. They must both pay the compensation quickly and correctly, and must prevent from paying the compensation as a favor or being ill legally cheated. In recent years, the association insists the above policy, trained the staff, improved service quality, and established a completed inspection system. Meanwhile, the association released the compensation inspection right to local offices, put some fund prepared for compensation, so that the compensation work gained an achievement. In 1995, a serious shipwreck took place in Wenlin County, Zhejiang Province, the grief family members of dead and injured ran to the owner’s home. Having received the news, the association sent its staff to the spot in time with 140,000 yuan for compensation and assisted the local government to deal with the following works. , which is appreciated by the fishermen and relative department. In 1997, another serious shipwreck took place in Potuo District, Zhejiang Province; the association not only gave out 600,000 for compensation but also offered 30,000 for the local government to deal with the issue. In 1998, in Wendeng City, Shandong Province, a fishing vessel sank, the association sent out over 300,000 yuan for compensation in time and it praised by the local authority. In 1999, cyclone hit Dalian City on April 13th, five fishing vessels sank down, and 34 fishermen died or disappeared. All of the fishermen and fishing vessel signed insurance got their compensation in time. Fishermen’s emotion had been smoothed down; it facilitated the dealing of the following works. Both the local government and fishermen all felt that it was good for them to sign insurance. In May 1999, a fresh –keeping fishing vessel of Yuhuang County, Zhejiang Province collapsed and sank. The association had an investigation and sent 500,000 yuan for compensation within one week to help them returned to operate. As the association did their insurance well, many local authorities encouraged fishermen to sign insurance, and some fishermen took part in it because they witnessed what had happened around them. Up to now, the association has settled down over 150,000 issues, paid compensation over 94 million yuan. Meanwhile, they check out 163 cheating issues, avoid a lost of 2.04 million yuan for the association, and 3 criminals got their punishment.
D. Enhanced safe management, settled down disputes, improved salvage and lifted the safe operation level of fisheries industry. When the association conduct its work, the staffs keep the conception of combined safety with mutual insurance closely in mind. They conduct their insurance business as well as to improve safety management. The main methods are the following: 1) required all the fishing vessels will sign insurance must pass the safety navigation inspection. They encourage fisheries shipowners voluntarily to obey the rules of safe operation by setting safe award, adjusting fee rate or cutting down compensation. 2) In order to get the compensation in time, fishermen who have signed insurance would report quickly when the accident happened, and assisted the safe control department master what had happened quickly and correctly. Therefore, the issue could be settle down in time. It improved the situation of low reporting rate of fishing vessel accident in the past. 3) Fishermen signed insurance, they are guaranteed in economic compensation, the disputes had been cut down, the relative department could be easier in investigating and dealing with the accidents. The order of operation in the sea has been improved. 4) Promoted the rescue work in the sea. To encourage the action of rescue, according to a certain rate, the association paid the cost of the rescue. In recent few years, 135 fishing vessels of insurance were rescued, the association paid over 2 million for rescue cost. The association also plans to take out a certain fund from stock for conducting rescue in the sea. Now, we coordinate with Bureau of Marine and Fisheries of Liaonin Province to set up the fisheries rescue in the sea in Liaonin Province.
4. Promising future and hard task of fishing vessel owner mutual insurance. Insurance industry is realized as a sunshine industry in the new century. Chinese commercial insurance developed quickly after it recovered in 1979. In 1999, the income of commercial insurance fee reached 139.3 billion yuan, took 1.67% of GNP. But in general speaking, insurance in China is just at a primary phrase. It can not meet the requirement of the development of economy and the improving of people’s living standard. With the rapid development of the nation, particularly when China enter WTO, Chinese insurance industry will face to both challenges and opportunities. It is forecasted by Bank of the World that the insurance abundance in the nation will be 200-250 billions yuan, the result is wildly accepted in insurance field. But some experts forecasted that it would reach 260 -420 billion yuan. Chinese fisheries shipowners mutual insurance industry also stays at the primary phrase. Last year, over 230,000 fishermen signed insurance (including fishermen in inland waters) took 1.8% of the total fisheries labors of 12.37 million persons in the whole nation. Over 8,000 fishing vessels signed insurance (including fishing vessels of inland water, took 1.7% of total marine power fishing vessel of that nation, which was 470,000. The income of mutual insurance fee was 53 million-yuan, took 0.02 of total fisheries productive value of 251.5 billion yuan. We can see from above that the markets of Chinese fisheries shipowners mutual insurance are with a great potential. With the further development of fisheries economy, demand of fishermen for insurance increasing, the future of fisheries shipowners mutual insurance industry will be more prosperous.
To further develop the industry of fisheries shipowners mutual insurance, there are some important problems to be resolve:
A. The nation is necessary to complete the laws and regulations for insurance, to make up clear provisions of the nature, organization form, operation method, superintendence and management for mutual insurance. Law of Insurance People’s Republic of China has put into force on October 1st, 1995, but it only covers commercial insurance. In the No.150 section in the law provides that “another law and administrative regulations to be made for the insurance bodies other than the insurance companies covered in the law.” It is five years past, the nation has not’t made out the laws and regulations for mutual insurance, therefore, and there are no suitable laws and regulations to be relied on while we conduct fisheries shipowners mutual insurance. As for the management system, as an social society, we must to register in the Ministry of Civil Affairs, as for fisheries industry, the authority of the association is the Ministry of Agriculture, and as for insurance business, the authority is the national insurance inspection management committee. There is no suitable management system for fisheries shipowners mutual insurance management. The cross management of three departments is difficulty for the nation to manage the fisheries shipowners mutual insurance industry.
B. The nation must help and support the fisheries shipowners mutual insurance industry in the aspects of the policy, fund and risk guarantee. Fisheries shipowners mutual insurance belongs to agricultural insurance. It is an industry of public welfare. We think that the government must support it. Now the government has no any subsidies for the fishermen signing insurance. Although fisheries shipowners mutual insurance is not profitable industry, in many regions, the mutual insurance fee must pay for the tax. There are also not any subsidies for the association of fisheries shipowners mutual insurance. In Japan, the government gave a strong support to fishing vessel insurance, made out Law of fishing vessel insurance, and provided that fishing vessel mutual insurance is free from tax. The government gave subsidy for fishermen in insurance and even gave double insurance to these fishermen.
C. Necessary of further improving fisheries safe production condition. Most of fishing vessels of China was made in 80s. They are over ten years old. And almost them are made of wood. According to an informal statistics, the number of fishing vessels with the length under 24 meters, main power under 110KW (150 horse power) is about 600,000, about 60% of the total. A great number of these fishing vessel are made in “beach shipyard”. The quality of these vessels is low, and they have not been suitable prepared for many years. It is difficult for them to fit for navigation. Most of shipwrecks took place in these vessels. There is high risk to ensure these vessels. Therefore, it is necessary to establish a system for fishing vessel reject, to give up small wooden fishing vessel step by step, to ban “beach shipyard” so that to improve fisheries operation condition. Besides these, we must progressively enhance the basic constructions of safe operation, such as fishing port, and fishing navigation mark and their management, to enhance the skill training of crews in fishing vessel, which is an important point to cut down accidents. Only if we continuously to improve fisheries safe operation condition, fisheries shipowners mutual insurance can go on smoothly.
to further research on the conception of fisheries shipowners mutual insurance,
to standardize the management of each aspect.
Because fisheries shipowners mutual insurance is a new industry, we have now
existing management experience, management model, and available professional
knowledge to learn. We can only find out and collect manage experiences by gradually
practice and research. As for the association work, we are also new in the aspect,
and must study and to complete the system. Therefore, we summarized up the experiences
of mutual work of these years’ practice, to study it, and give it a scientific
definition, finally to form a management conception of ourselves. Then we try
to apply the authority to go on the legislation procedure, which to regulate
fisheries shipowners mutual insurance in a higher level.
Now, Chinese Association
of Fisheries shipowners Mutual Insurance has past its carving out period,
and steps into a consolidation, improvement and steady development phrase.
The main tasks are to establish a system to regulate management, to complete
management mechanism and enlarge the force of the association therefore to
serve for the fishermen in all aspects. The purpose in details are the following:
Base on 1999, the number of fishermen and fishing vessels signing insurance
will reach at an average annual rate of over 10%. The all kinds of compensation
rate will be controlled under 50%. The mutual insurance method will be more
various to meet the requirement of fishermen and owners of fishing vessels.
In order to play more important role in complete fisheries risk guarantee
system and to better serve for fishery and fisheries economy, the association
of fisheries shipowners mutual insurance must gradually establish the special
institutions and force, to complete all kinds of rules and system, to train
a group of high quality skill staffs, to improve the management and service
level. The association hopes fisheries
authorities of all levels and the relative departments and persons in fisheries
field continue to pay attention to and support to the development of fisheries
shipowners mutual insurance industry, enhance the direction and superintendence
on the association’s work and help the association to resolve some existing
problems and difficulties. So the industry of fisheries shipowners mutual
insurance, which benefits people and the nation can develop smoothly, and
make more contributions for Chinese fisheries development in the new century.
Now, Chinese Association of Fisheries shipowners Mutual Insurance has past its carving out period, and steps into a consolidation, improvement and steady development phrase. The main tasks are to establish a system to regulate management, to complete management mechanism and enlarge the force of the association therefore to serve for the fishermen in all aspects. The purpose in details are the following: Base on 1999, the number of fishermen and fishing vessels signing insurance will reach at an average annual rate of over 10%. The all kinds of compensation rate will be controlled under 50%. The mutual insurance method will be more various to meet the requirement of fishermen and owners of fishing vessels. In order to play more important role in complete fisheries risk guarantee system and to better serve for fishery and fisheries economy, the association of fisheries shipowners mutual insurance must gradually establish the special institutions and force, to complete all kinds of rules and system, to train a group of high quality skill staffs, to improve the management and service level.
The association hopes fisheries authorities of all levels and the relative departments and persons in fisheries field continue to pay attention to and support to the development of fisheries shipowners mutual insurance industry, enhance the direction and superintendence on the association’s work and help the association to resolve some existing problems and difficulties. So the industry of fisheries shipowners mutual insurance, which benefits people and the nation can develop smoothly, and make more contributions for Chinese fisheries development in the new century.