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6 Aug 2015

China Insurance Regulatory Commission Regulates Internet Insurance Business

On 22 July 2015, China Insurance Regulatory Commission (“CIRC”) promulgated the Interim Provisions for the Supervision of Internet Insurance Business (Bao Jian Fa [2015] No.69, effective from 1 October 2015, the “Provisions”), addressing specific issues relating to the Internet insurance business, such as operating entities, operating conditions and regions, information disclosure, operating rules, supervision and administration. DaHui Lawyers, as an external expert advisor to CIRC, was deeply involved in the whole legislative process, including the drafting and modifications of the Provisions. DaHui closely followed the conception and publication process, by drawing upon the firm’s experience in Internet and finance and by providing a comparative analysis of legislation in mature Internet insurance jurisdictions, such as the United States, Germany, Japan, Taiwan and Hong Kong.

Currently, the PRC government is directing its attention towards legislating Internet finance. On 17 July, 10 ministries and commissions including CIRC promulgatedtheGuiding Opinions on Promoting the Healthy Development of Internet Finance (the “Guiding Opinions”), clarifying the principle of "lawful, moderate, classified, coordinated and innovative supervision and administration" for Internet finance business. The Provisions are the first regulatory rules made after the Guiding Opinions were issued and will certainly have a great influence on the development of the Internet insurance industry in China. The main contents of the Provisions are set out below.

Suitable Objects

The Provisions are applicable to insurance institutions and third-party network platforms. “Insurance institutions” refers to insurance companies and professional insurance intermediaries. “Third-party network platforms” refers to the network platforms (excluding network platforms self-managed by insurance institutions) that provide auxiliary services of network technical support for insurance consumers and insurance institutions during Internet insurance business activities. In accordance with the Provisions, none of the subsidiaries under categories of insurance companies and insurance group (holding) companies, insurance asset management companies, regional professional insurance intermediaries and insurance part-time agencies may operate Internet insurance businesses. In addition, the Provisions apply mutatis mutandis to the management of the sales of insurance products by insurance institutions through channels such as, inter alia, instant messaging tools, application software and social networking platforms.

Third-Party Network Platforms

The Provisions set specific instructions on third-party network platforms, including:

  • Business Scope: third-party network platforms are allowed to provide auxiliary services of network technical support for an insurance institution to initiate its Internet insurance business activities. However, if the Internet insurance business would conduct sales, underwriting, settlement of claims and other insurance operations of the Internet insurance business, such third-party network platforms must obtain the corresponding qualifications of insurance institution.
  • Threshold: third-party network platforms must obtain a license for its website issued by a competent department of the Internet industry or complete the website filing with a competent department of the Internet industry, and the access locations of their websites must be within the PRC. In addition such third-party network platforms must not have suffered any punishment by any department of the Internet industry, an administration for industry and commerce or any other government authorities in the previous two year period and, further, must not have been listed by CIRC in a list that forbids cooperation with any third-party network platforms so listed.
  • Compliance: notwithstanding administration by insurance institutions which cooperate with third-party network platforms, third-party network platforms are obligated to provide access to insurance administration department (i.e., CIRC and its local subsidiaries) for its daily supervision and on-site inspection of the Internet operations of third-party network platforms. If third-party network platforms violate these provisions, the insurance administration department may order the relevant insurance institutions to terminate immediately their cooperation with the platform.

Lifting Restrictions on Operating Regions

The Provisions conditionally lift restrictions on operating regions of certain types of insurance, such as: (1) personal accident insurance, term life insurance and ordinary whole life insurance; (2) household property insurance, liability insurance, credit insurance and guarantee insurance with an individual as the policyholder or the insured; and (3) property insurance businesses with whole-process services including sales, underwriting and settlement of claims provided independently and completely via the Internet. Cross-region operation is prohibited as to other types of insurance except as stipulated in the Provisions. Meanwhile, insurance companies are required to guarantee the consumer’s right to know of the regions where there are no branches by notifying them directly. Regulatory authorities may, following multiple complaints, terminate the operation of relevant types of insurance institutions in the event that they cannot ensure after-sales claims services in different locations.

Information Disclosure

From the perspective of protecting consumers’ rights, the Provisions stipulate many obligations of operating entities, specifically, what and how to disclose and report if there are problems of incomplete or inadequate information, which may occur in the process of self-service transaction of internet insurance.

  • Information about products and services: set out the necessary information pertaining to products and services in a “prominent position” the on relevant network platforms; e.g., channels for customer complaints about underwriting insurance.
  • Information about sales web pages: set out full notification or warning information on the sales web pages of insurance products to prevent misleading sales, such as requirements for the settlement of claims, cooling-off periods under insurance contracts, surrender losses, cash value of insurance policies and other key contents.
  • Preparation and issue of information: insurance institutions (and not any third-party networks) are responsible for the preparation and issue of all relevant information and are responsible for all matters relating to such information.
  • Website information: the official websites of insurance institutions must include the name and URLs of websites operating an Internet insurance business, information on the Internet insurance products, methods of delivering customer services, consumer complaints and other specific information.

Conclusion

Overall, the Provisions stick to the principles determined by the Guiding Opinions and provide for development and regulation equally. The Provisions support and encourage Internet insurance innovation, while at the same time conducting appropriate supervision, thus promoting the healthy development of the Internet insurance business. Protecting consumers’ rights effectively is another basic principle supported by the Provisions. The Provisions strengthen regulation on information disclosure and customer service and lay a solid foundation for the further development of the Internet insurance business, protecting consumers’ rights to know and choose, in particular.

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