On 8th June 2013, The Insurance Association of China (中国保险行业协会), in coordination with the Chinese Forensic Medical Association (中国法医学会), announced new personal accident compensation criteria called the ‘Evaluation Standards for Personal Accident Injury and Disability’ (人身保险伤残评定标准), which will take effect on 1st January 2014. These replace the old criteria and represent a significant expansion in the scope of personal accident injury insurance. The new standards include injuries such as mental and intellectual incapacitation for the first time, as well as cover for burn injuries and speech problems amongst many others.
The current guidelines
The current guidelines relied on by insurers were issued by the People’s Bank of China in 1998. They consist of seven categories. These categories are then split into 34 types of injuries or disabilities. This provides limited scope for cover of injury resulting from accidents. A court in Beijing went as far to rule that these guidelines were in fact being used by insurers to deny payouts to injured or disabled policyholders. This gives a reasonable indication of the state of the current guidelines and the need for renewal.
Approach to the new guidelines
At the end of October 2012, the Insurance Association of China set up the ‘Medical Specialist Consultation Committee’ (医学专家咨询委员会). The committee comprised experts from the Chinese Forensic Association, the Categorisation Research Committee of the Disabled Recovery Association and various academics and specialist lecturers in the field of disability. This group worked together to draw up the new evaluation criteria, drawing on the experience and knowledge of World Health Organisation (WHO) and the international community more generally. This is an attempt by the Insurance Association of China to bring evaluation standards for the assessment of payouts in the event of injury or disability as a result of accident closer in line with international norms.
What will the new guidelines cover?
Some of the changes from the old criteria to the new are merely cosmetic. There has been an updating of the name of the guidelines themselves as well as terminology of certain injuries and disabilities. However, the majority of the changes are more profound. There has been an expansion from seven categories covering 34 types of injury and disease to ten categories covering 281 types. This means the new guidelines now include mental and intellectual incapacitation, burn injuries and various other new criteria. They also greatly
expand cover for a whole host of other injuries and disabilities, including those related to the respiratory system, heart, limbs, joints and skin. In addition to expanding the scope of injuries and disabilities covered, the individual injuries and disabilities have been detailed with greater clarity and precision as well as a system for grading the severity of the injury or disability being introduced. By providing more detailed descriptions, the aim is that it will be easier for both consumer and insurer to know their rights and obligations and that it will become more apparent what is covered by insurance and what not. In turn this will avoid costly litigation and insurers hiding behind vague descriptions of injuries and disabilities to avoid paying out, as the new standards will make it clear when payment is due.
Impact on consumers and insurance premiums
The impact of these new guidelines on consumers will not truly be known until they have taken proper and full effect, but there are some indications of their potential influence. In the short term it is likely that premiums will rise as insurers try to cover their losses while getting accustomed to the new guidelines. It is also possible that insurers will start to limit or withdraw cover, particularly for those working in high-risk professions. However, the prognosis for medium to long term is less predictable. Insurers will need to get used to the new guidelines first before adjusting their premiums up or down accordingly. Despite this potential rise in insurance premiums, there are benefits to consumers. The greater scope and clarity of the new guidelines means that there is more chance that any injury or disability sustained from an accident will be covered by their insurance. The greater focus on the degree of severity of injury or disability in the new guidelines may mean that consumers will also receive larger payouts than previously for more serious accidents.
In short, the new ‘Evaluation Standards for Personal Accident Injury and Disability’ represent a significant step forward for guidelines in this area in China. It brings China closer in line with international standards and indicates a more sophisticated approach to accident insurance. However, it has been designed as an evolution rather than a revolution, an enlargement of the current system as opposed to a sweeping away of the old and heralding in the new. Some insurers will feel comfortable simply adopting these new guidelines and others may take more time. As a result, the impact will not be known immediately and in the short term premiums for consumers may rise. But in the long term consumers should have more access to insurance payouts as more injuries and disabilities will be covered.