On 23 July 2015, the China Insurance Regulatory Commission (CIRC) circulated the Interim Supervisory Measures on Internet Insurance Business (the Measures), which are set to come into force on 1 October 2015 and will remain effective for a period of three years. With the implementation of the Measures, the former Supervisory Measures on Internet Insurance Business of Insurance Agencies and Brokers (Trial), which have been effective since 1 January 2012, will now be superseded on 1 October 2015.
Internet insurance business and requirements
The Measures apply to the direct business, whereby insurance institutions conclude insurance contracts and provide insurance services through self-operated or third-party operated online platforms, using internet and mobile communication technologies (Internet Insurance Business). The Measures also apply to sales of insurance products through instant messaging tools, Apps and social network platforms.
The insurance institutions engaging in the Internet Insurance Business must be: -
- insurance companies licensed by the CIRC and duly registered in China; or
- insurance intermediaries (i.e. agency, broker or loss adjuster) whose operational area has already been approved so as to extend to locations outside the province where it is licensed.
Insurance institutions shall manage and take responsibility for internet insurance operational activities; including sales, underwriting, claims handling, policy cancellation, handling of complaints and customer services. Any third-party online platform, which has not obtained an appropriate insurance intermediary licence from the CIRC, may only provide internet technology support and ancillary services, and shall not engage in the above-mentioned insurance operational activities.
Break-through in operational area
As a regulatory requirement under the PRC Insurance Law, an insurance company can only operate in those provinces where it and its branch companies are licensed. However, under the Measures, insurance companies now have the opportunity to break through this limitation. When conducting an Internet Insurance Business for the following lines of business, insurance companies may extend their business to the provinces where they do not have a branch company: -
- personal accidental injury insurance, fixed term life insurance, and ordinary whole life insurance;
- household insurance, liability insurance, credit and surety insurance (if the policyholder or the insured is an individual);
- property and casualty insurance(if the whole process of the sales, underwriting and claims handling can be conducted via internet independently and in its entirety);
- other types of insurance permitted by the CIRC.
In addition to meeting the information disclosure requirements for offline business, an insurance company involved in an Internet Insurance Business shall also disclose information as follows: -
- in the information disclosure section on its official website – disclosing the name and address of the website on which the Internet Insurance Business is operating, information about internet insurance products, a list of branch companies, access to customer services and the complaints procedure;
- on the online platforms – listing and disclosing the information of the relevant insurance products and services in a prominent position;
- on the webpage concerning a specific product – setting out the product name, the product approval or filing number, policy wording and premium rates (or links to such information), the policyholder’s duty of disclosure and consequences of non-disclosure, the sales area of the product etc.
An insurance intermediary who engages in an Internet Insurance Business shall disclose its operational licence issued by the CIRC, information on its business licence, as well as the scope and contents of the authorisation from the principal insurance companies.
A third-party online platform shall also disclose the information of the insurance institutions that it co-operates with in a prominent place and make it clear that the insurance services are provided by insurance institutions.
The Measures also require insurance institutions and third-party online platforms to follow various operational rules.
Obligation to notify
Under the Measures, insurance institutions are obliged to notify their partners in an Internet Insurance Business of the relevant insurance regulatory requirements and shall keep a record of such notifications.
Within 24 hours of receiving an insurance proposal from a customer, a third-party online platform shall provide the information required for underwriting to the insurance institution, including the name of the policyholder, insured and beneficiary, identification documents and number, contact details and account information.
If a third-party online platform provides promotional services for an insurance institution (including an insurance company or an insurance intermediary), the promotional contents shall be reviewed and approved by the relevant insurance company to ensure that they are compliant with regulatory requirements. The insurance company is ultimately responsible for the integrity, accuracy and compliance of any promotional contents.
Premiums shall be paid directly to the bank account of the insurance institution. No third-party online platform shall collect premiums for onward transfer to the insurance institution.
An insurance institution shall suspend the sales of a product if convenient and fast insurance services are not accessible by the customers due to reasons such as the necessity for onsite investigation. If the services cannot be improved, the insurance institution shall cease the sales of the product.
According to the CIRC, up until the end of 2014, 85 insurance companies have started Internet Insurance Business; which has resulted in a total premium income of RMB85.89 billion. The year-on-year increase of business is 195%. Supposedly, the Measures are an attempt by the CIRC to regulate the booming internet insurance business, with a view to helping its healthy development. It is anticipated that the CIRC may modify the Measures or release further detailed rules after the implementation period of the Measures (i.e. up to 30 September 2018) to keep pace with the fast changing internet world.