China's latest reform proposals are likely to spur business development and benefit credit profiles in the domestic insurance industry, international rating firm S&P said in a report on Friday.

However, these benefits may take several years to materialize and depend on details and implementation, it said.

"We expect business risk profiles in the Chinese insurance industry to improve gradually, given the central government's intention to strengthen social security and medical systems," said Standard & Poor's credit analyst Chen Xiaohong.

At the recently concluded Third Plenum of the Communist Party, the government reinforced its aim to enhance social safety nets. The government is encouraging insurance companies to provide more pension plans, protection products, and medical insurance. The proposed inclusion of private hospitals in medical insurance plans is consistent with international trends.

The latest initiatives could provide new business opportunities for insurers. Existing customers have limited demand for products that are largely focused on protection, medical, and long-term savings, given low product awareness.

Further, increased underwriting of protection, medical, and long-term savings products could increase the profitability of life insurance companies in China because profit margins are higher.

The government also emphasized the decisive role that market forces should play in allocating resources in the economy while maintaining a major role for State-owned enterprises.

Achieving both objectives would require significant changes to ensure that the central government deals at arm's length with the State-owned enterprises. This would be a departure from the situation today.

"We do not expect the central government to significantly change its support for the government-related enterprises in the insurance industry that we currently rate, at least for the next two to three years. That's because of the insurers' unique role in financial services, their linkage to economic development, and the importance of financial and social stability," said Chen.