'House-for-pension' a new frontier for insurers?

Uncertainties

But analysts said the prospects for this novel insurance are still uncertain, which may dent the enthusiasm of insurance companies and render this eldercare solution less appealing to China's senior citizens.

"Around the world, [reverse mortgaging] needs powerful policy back-up," Yang said. "The country must offer preferential terms in legislation and tax, and solve the problem of the 70-year leasehold for real estate."

Trial of reverse mortgages gets green light

China to insure elderly homes

In China, public land and private properties can be leased for no more than 70 years. When elders pass away, it is possible that the leasehold may not be far off expiration, while the cost of extensions remains unknown.

Yang identified other problems like a lack of eldercare services, which will affect elders' consumer demands (or their wish for deeding their houses to improve quality of life), and uncertainties in the property market.

China has faced an uncertain property market this year, with many predicting a decline in housing prices, which will bring higher risks for insurance companies dealing in reverse mortgages, said Hu Gang, a real estate researcher and professor with Jinan University.

Though elderly clients can be warranted against potential losses in times of plunging house prices, the lack of regulatory clarity may prompt insurers to lower evaluation of clients' houses as well as the amount of loans they give out, Hu said.

Because of Chinese cultural tropes about elderly care, controversy has raged over the house-for-pension program since last year, when the State Council introduced the concept.

Even prior to that, financial institutions in several cities had rolled out similar services, but all fared badly. It is believed to have clashed with the nation's tradition of relying on children for elderly care and leaving properties to them for inheritance.

By the end of 2013, the number of people aged above 60 in China stood at 202 million, or nearly 15 percent of the total population. Experts have pointed to the huge market potentials in this area, including elderly care and finance, which have remained largely untapped so far.

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