On January 16, the China Insurance Regulatory Commission (CIRC) and the China Banking Regulatory Commission (CBRC) jointly issued the Circular to Further Regulate the Bancassurance Activities (the Circular) which took effect on April 1, 2014. This has been the third circular jointly issued by CIRC and CBRC to regulate bancassuance activities in China since 2006 when bancassuance business was introduced. For our previous reports on the relevant bancassurance policies, please refer to Asia Pacific – focus on insurance March 2011.

Key highlights of the Circular can be summarised as follows:

  • Strong focus on the protection of policy purchasers’ rights. For example:
    • insurance products sold to low-income households and clients aged over 65 shall be in principle low-risk products with stable returns;
    • distribution of more risky products requires banks to obtain written risk acknowledgement first from the potential policy purchasers;
    • for insurance products longer than one year term, a cooling-off period of 15 calendar days is provided to allow policyholders time to cancel; and
    • clearly displayed, prominent risk disclosure language shall be set out in policies.
  • Premium for the distribution of risk protected or long term insurance products (such as fixed term life insurance, health insurance, annuity insurance with a term longer than ten years etc.) shall account for at least 20 per cent of the total premium received by a bank for its bancassurance business.
  • To ensure consistency with previous bancassurance regulations issued by CBRC, the Circular reinstates the restriction that each bank outlet (or business office) can only cooperate with a maximum of three different insurers in each accounting year to carry on bancassurance business.

The Circular does not relax the prohibition on sales staff from insurance firms selling insurance products at bank outlets. The split of risks and responsibilities between banks and insurers remains a major concern, though some experts hold an optimistic view and anticipate it will be possible by banks effectively segregating risks internally.