What types of insurance is important in China, and what sectors are the most at risk?

What are types of insurance do foreign companies in China absolutely need?

Every company in China needs property all risks, business interruption insurance, public liability insurance, product liability insurance, and employer’s liability insurance.

Companies providing services may need professional liability insurance or professional indemnity insurance.

These are the basic insurance coverage a company in China needs. If a company has shareholders, they may need directors and office liability to protect the manager.

In which industries do companies need to invest the most in insurance in China?

All of the manufacturers and all industries are at risk.

Why? First of all, business owners, shareholders invest in physical assets such as expensive equipment. No matter the risk level of the activity; it can cost a lot. For instance, the mechanical industry is not very hazardous, although the equipment can cost hundreds of millions. In the chemical industry, which is more hazardous, physical assets can cost a lot as well. So, as long as a company has an investment, physical assets, they need to take out insurance.

What kind of insurance should a company purchase? Once again, it is to protect your physical property or business interaction, to protect the revenue of the company and to make sure that in case of a major accident, the company will not go bankrupt.

Another type of insurance which companies in China need is employer’s liability insurance to cover labour accidents. In China, especially in manufacturing, labour accidents occur very often and employers are requested by injured employees to pay for the medical expenses and any expenses related to labour accidents. 

What should people pay special attention to when signing an insurance contract in China? 

First, what companies need to be careful about is making sure that all information disclosed to the insurance company is relevant.

Basically, usually this kind of information is recorded or is reported in the proposal form. Therefore, the applicant has to make sure that the proposal form reflects the actual situation of the company in terms of assets, such as the physical description in terms of the area, the construction that is used to build up the buildings.

Businesses should also ensure safety devices like fire extinguishers and fire hydrants are in place. If not, they need to declare so. It is of utmost importance that the insurer has a full and accurate description of your activity.

Second, is to make sure that the sum insured are sufficient. You have to have a very detailed and accurate assessment of your assets and the cost of your assets. Of course, not only the equipment, but also the stocks, and the building.

Last is to make sure you have a good understanding of what is excluded in your policy. Businesses have to be aware, in terms of an accident, what they should pay from their own pocket.