Introduction
New principles
General insurance products
Participating insurance products


Introduction

Following the introduction of the Measures for the Administration of Information Disclosure of Life Insurance Products(1) (the new measures), the China Banking and Insurance Regulatory Commission (CBIRC) has recently promulgated the Rules for Information Disclosure of Life Insurance Products of More than One Year.(2)

According to the China Insurance Regulatory Commission (CIRC), the rules are a companion document to the new measures and specify the corresponding product information disclosure requirements according to different product design types, which will also come into effect from 30 June 2023.

This article is the first of a four-part series on the main changes made by the rules to the Measures for the Administration of Information Disclosure of New Type of Life Insurance Products(3) (the original measures). This article focuses specifically on the new principles to be introduced and their effect, and general and participating insurance products.

New principles

Information disclosure requirements
Information disclosure of life insurance that lasts for more than one year should fully reveal the long-term attributes and various risk characteristics of the product, and express the key content of the product such as the payment method and surrender loss.

The emphasis on this principle is echoed by the new information disclosure adjustments to the product prospectuses of ordinary, participating, universal and participating insurance.

Product specification requirements
Life insurance for more than one year should provide consumers with product specifications.

Product specification requirements in the past applied mainly to participating, universal and investment-linked insurance. Article 12 of the new measures expands these requirements to all one-year life insurance products and rules to make supporting provisions. Before an insurance product is approved by CIRC, the insurer should submit the product specifications to the authority as one of the essential documents.

Complaint provisions
Life insurance that lasts for more than one year should provide the policyholder with information on complaint telephone numbers or other complaint channels in the insurance contract.

Article 17 of the new measures requires the provision of a complaint telephone number or information about other complaint channels in the "product or service contract", though this was not mentioned in the original measures. The rules further refine that the information should be provided in the insurance contract.

Enrolment confirmation
When purchasing the insurance products, the participants should take note of the full contents, acknowledging their full understanding of what the product provides. This can be written online or handwritten.

The content of the transcription statement is the same as the original "approach" provisions.

Access via insurance policies
With-profits, universal life and investment-linked insurance policies should provide access to:

  • policy status reports;
  • dividend notifications;
  • official public service number; and
  • other self-operated platforms.

The original measures required policy status reports or dividend notices to be provided directly to the policyholder at least once a year. In practice, most companies send policy status reports or dividend notices directly to the policyholder.

All insurance companies should include this content in compliance with the rules.

General insurance products

The measures stipulate the minimum standards in terms of the content of general insurance product descriptions, including the basic features of the product, benefit presentation and hesitation period and surrender, which are regular contents and should be implemented by insurance companies in compliance with the rules.

Participating insurance products

Risk alert language
The rules add the requirement that participating insurance products must include the following in their risk warnings:

policyholders may enjoy the right to distribute the surplus of the insurance company's participating insurance products in the form of policy dividends and that future policy dividends are non-guaranteed benefits.

Basic product features
The rules clearly require insurance companies to specify the "scope of insurance, insurance period and premium payment method" in the product specification of participating insurance products, and suggest that insurance companies should amend the same requirements for universal and linked products.

Benefit presentation
The Notice of the CIRC on Matters Relating to the Promotion of the Reform of Participating Life Insurance Rate Policy(4) stipulates that the spread levels of low, medium and high grades used by insurance companies for the presentation of participating insurance benefits shall not be higher than 0, 4.5% minus the product predetermined interest rate, and 6% minus the product predetermined interest rate, respectively.

The rules amend the interest presentation of participating insurance policies to use guaranteed interest presentation and dividend interest presentation to demonstrate the future benefit pay out of the product. The interest presentation the lowest interest spread level should not be higher than 0, the medium should not be higher than 4.5% (minus the scheduled interest rate of the product), and the highest should not be 6% minus the scheduled interest rate of the product. This cancels the expression of high, medium and low presentation interest rate and lowering the level of presentation interest rate.

Dividend realisation rate
The rules stipulate that an insurance company shall disclose the dividend realisation rate of each participating insurance product under the dividend period on the company's official website within 15 working days after the declaration of the annual dividend programme. The dividend realisation rate of each product shall be 4.5% minus the scheduled interest rate of the product as the basis of benefit presentation.

Return visit content
Compared with the original measures, the new measures simplify the requirements relating to return visits. The new measures stipulate that it must be determined whether the policyholder is aware that:

  • the presentation of benefits in the promotional materials is based on the company's actuarial assumptions; and
  • the dividend distribution of the policy is uncertain.

In the original measures, it also had to be confirmed whether the policyholder:

  • had purchased the insurance product;
  • had signed the policy in person;
  • was aware of when the hesitation period started and the rights enjoyed during this period;
  • was aware of insurance liability and the liability exemption; and
  • was aware of the possible loss arising from surrender.

For further information on this topic please contact Dan Yu or Qian Miao at AnJie Broad Law Firm by telephone (+86 10 8567 5988) or email [email protected] or [email protected]. The AnJie Broad Law Firm website can be accessed at www.anjielaw.com.

Endnotes

(1) CBIRC Order No. 8 2022.

(2) CBIRC Regulation No. 24 2022.

(3) CIRC Order No. 3 2009.

(4) No. 93 2015.