Yu Dan Miao Qian March 14 2023 Rules on information disclosure of life insurance products: investment-linked insurance products AnJie Broad Law Firm | Insurance - China Yu Dan, Miao Qian Insurance IntroductionAmendments to investment-linked insurance productsInvestment-linked insurance products PenaltiesIntroductionFollowing 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) recently promulgated the Rules for Information Disclosure of Life Insurance Products of More than One Year.(2)According to the China Insurance Regulatory Commission (CBRC), 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 third of a three-part series(3) on the main changes made by the rules to the Measures for the Administration of Information Disclosure of New Type of Life Insurance Products(4) (the original measures). This article focuses specifically on investment-linked insurance products, among other things.Amendments to investment-linked insurance productsThe Notice on Matters Relating to the Implementation of the Measures for the Administration of Information Disclosure of New Type of Life Insurance Products (Notice No. 104 of 2009, repealed on the effective date of the New Measures) stipulates that:The assumed investment return rate of the high, medium and low levels of investment-linked insurance for benefit presentation shall not be higher than 7%, 4.5% and 1% respectively.The rules amend the benefit presentation of investment-linked insurance products to read:When presenting the policy benefits of investment-linked insurance products, insurance companies should use optimistic, neutral and unfavourable scenarios to demonstrate the future benefits of the products, and the assumed investment return rate for benefit presentation should not be higher than 6%, 3.5% and 1% respectively. In addition, the presentation rate level is lowered by eliminating the high, medium and low presentation rates.Investment-linked insurance productsThe rules simplify the requirements relating to return visits, which is consistent with the simplification of the requirements relating to return visits for participating insurance products. The rules retain the requirement to confirm whether the policyholder is aware:that the return in excess of the minimum guaranteed interest rate is uncertain;that the amount of return depends on the actual operation of the company; andof the expense deduction items and the percentage or amount of the deduction.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; andwas aware of the possible loss arising from surrender.Special insurance product exclusionThe rules clarify that the following are carried out in accordance with the relevant regulations of the CBRC, and have corresponding special regulatory rules:product information disclosure of individual tax-deferred commercial pension insurance;individual tax-favoured health insurance;rate-adjustable long-term medical insurance; andexclusive commercial pension insurance.Special channel sales rules to followIf there are special requirements for product information disclosure in bank agency channels, Internet channels and telephone sales channels, they must be implemented in accordance with the relevant regulations of the CBIRC. If there are no special requirements, the rules must apply, consistent with article 29 of the New Measures, which states that:These Measures shall apply to the information disclosure requirements of individual life insurance products. Group life insurance product information disclosure shall not be subject to these Measures and shall be regulated separately.Penalties A violation of the provisions related to return visits in the original measures will incur;the maximum fine of 30,000 yuan (approximately £3,600) for institutions; andthe maximum fine of 10,000 yuan (approximately £1,200) for individuals.Any violation of other provisions related to information disclosure will incur:the maximum fine of 100,000 yuan (approximately £12,000) for institutions; andmaximum fine of 30,000 yuan for individuals.The new measures provide for the classification of violations into categories such as:failure to disclose product information in accordance with the measures;failure to rectify the situation by the deadline;preparation or provision of false information;refusal or obstruction of supervision and inspection in accordance with the law; andother circumstances as prescribed by the CBIRC, which will be punished by the CBIRC and its dispatching agencies in accordance with the Insurance Law and other laws and administrative regulations (eg, special provisions regarding the "failure to design, modify or use product information disclosure materials in accordance with the provisions of these Measures").The maximum fine of 100,000 yuan applies to both institutions and individuals.The rules require that:if the relevant provisions of these rules are violated, the CBIRC and its dispatching agencies will pursue the responsibility of the insurance company and the relevant responsible person in accordance with the law.In general, the penalties tend to be more severe, and insurance companies face higher requirements and challenges.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) For part one and two in this series, please see, "Rules on information disclosure of life insurance products: general and participating insurance products" and "Rules on information disclosure of life insurance products: universal life insurance products and investment account description."(4) CIRC Order No. 3 2009.