A select number of foreign insurers eyeing the potentially vast Chinese insurance market may get good news this year.

''The speed of opening China to foreign insurance companies will grow in 1998, especially because the country wants to get into the World Trade Organization,'' said August Chow, the president of Hong Kong-based Prime Consulting Company Ltd. The company helps some foreign insurers set up in China.In 1997, German firm Allianz, French insurance group AXA-UAP and U.S.-based Aetna gained permission to do business in China. They joined AIG of New York, Tokio Marine & Fire Insurance, Manulife Insurance (International) Co. of Canada and Winterthur of Switzerland.This year, Mr. Chow said, Beijing will probably give the go-ahead to a British and an Australian firm. There is also a chance that another U.S. insurer and a second European company will get permission in 1998.


The main British candidates are Royal Sun Alliance, Prudential and Eagle Star, Mr. Chow said. Colonial Mutual and National Mutual are the Australian insurers most likely to get license.

Chubb and Lincoln Mutual appear to be at the head of the list for U.S. firms. Improving relations between Holland and China may give Dutch firm ING an opening, Mr. Chow said. China was miffed in 1997 when Holland supported a United Nation's resolution critical of Chinese human rights practices. Shanghai will continue to be the base for most overseas insurers. There is a huge backlog of foreign companies clamoring to do business in China. A total of 84 overseas insurers from 13 countries have set up 144 representative offices in China.

Companies must have a rep office before they apply to do business. There is no formal requirement, but foreign insurers are well aware they also must demonstrate their commitment to help China develop its economy. Pioneering American International Assurance, a subsidiary of American International Group, of New York, played up its China roots: its parent company was founded in Shanghai in 1919 by C.V. Starr.

Prior to getting the first license to offer life insurance in China in 1992, AIA showed its sensitivities to Chinese feelings by purchasing an expensive work of art that had been looted by Western forces in the late 19th century and returning it to Beijing.

The company also invested heavily in the landmark Shanghai Business Center, a plush hotel and convention center. It promised to reinvest all profits from the first 10 years back into its China business. AIA also conducts training programs for Chinese insurance company and central bank staff members. Foreign companies focus on the rapidly growing life insurance market. Overseas insurers can sell life policies to Chinese but must restrict general business policies to companies with foreign investment. Beijing insists that new foreign life insurance operations take a domestic partner. Non-life companies can operate as a branch.

Many foreign insurers will take advantage of China opportunities through bases in Hong Kong, said Mr. Chow. For example, the Hong Kong office of AXA subsidiary National Mutual Asia will support AXA's move to the mainland.


Opportunities are ample. The value of premiums in Shanghai, China's commercial center and focus for insurance industry development, surged 53.6 percent in 1997 to $1.05 billion. Life insurance accounted for $687 million in premiums.

And there is plenty of room for more growth in China. Given the late start, and low per capita income, China's current per capita expenditure on insurance is a mere $5 a year, compared with $3,000 in Japan. China has only about 30 insurance companies; the United States has some 5,000. Experts estimate the value of premiums is jumping about 40 percent a year in China. The World Bank said that in 1995 China's total insurance income was $7.2 billion and that the figure should rise to at least $24.1 billion in 2000.

With its late opening to foreigners, China is not yet a gold mine for overseas insurers. AIA hit its target of breaking even in five years and is now making money. The other foreign operations in China are either too small or too new to make significant profits, Mr. Chow said.


Not surprisingly, headlong growth and lack of experience in commercial insurance have caused some problems. The situation is made worse because manufacturers, retailers and other non-insurance companies have been lured into the market by promises of rich profits. Competition has become cut-throat, giving insurance a bad reputation among many Chinese and raising risks for insurers. Regulations limit commissions to 10 percent of premiums, but some companies were paying commissions as high as 40 percent for life insurance and 65 percent for auto insurance, Agence France-Presse reported. PICC President Ma Yongwei said: ''These unhealthy measures can only disrupt market order and raise the companies' risks.''