The China Insurance Regulatory Commission (CIRC) last week defended the role of insurance intermediaries as necessary to the industry, as criticism against China's massive ranks of insurance agents continues to grow.

"We should see that insurance intermediaries are an integral part of the insurance market, and will be a new area of growth in the Chinese insurance industry for a period of time in the future," the CIRC's intermediaries department said in a report.

"Actively promoting the development of insurance intermediaries... meets the needs of China's insurance market, and is in line with international insurance trends..." it continued.

In a short three-year history, the number of insurance intermediaries, including agencies, brokerages and loss adjusting firms, grew from zero to 249 at the end of May. Another 570 are in the early preparatory stages. And the number of insurance salespeople, mostly with loose ties to insurance companies, has surpassed 1 million.

Meanwhile, rampant irregularities, including vicious competition between representatives and the misleading or even swindling of consumers have led to sharp criticism among consumers and worrying insurance firms.

"We agree that the intermediaries market should be developed as there is demand," said Hu Xiaoqin, general manager of AIU Insurance Company's Shanghai branch. "But quality should be equated with quantity."

The public anger over misleading promises by many sales agents was one of the main reasons that led to the CIRC's ban last month on new sales of with-profits health insurance policies.

Widespread losses among insurance brokerages and agencies were another major factor fuelling suspicion about the CIRC's intermediaries policies. But the commission said losses in the early stages for intermediaries are normal, noting that most of the 160-plus functioning insurance intermediaries at the end of last year were just in their few months of operation.

"At a time like this, they need understanding and support from all sides," the report said.

Insurance brokerages and agencies contributed a meagre 1.2 per cent of all premiums in the first half of this year.

The healthy development of insurance intermediaries, the commission said, will help insurance companies broaden sales channels and business sources, and is conducive to cost reduction and efficiency improvement.

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