By Yuan Min, Wang Jianzhao , and Kirby Carder, King & Wood Insurance Department, Beijing

On February 18th, 2011 the China Insurance Regulatory Commission ("CIRC") Chairman Wu Dingfu made an announcement that the CIRC will be focusing more attention on regulating bank assurance based insurance policy sales. He noted that insurance purchasers are being given misleading advice about the best insurance policies for for their needs when they are consulting with insurance agents at Chinese banking institutions. The Chairman stated that protecting insurer purchasers interests is one of the CIRC important interests, and is one of the cornerstones to the sustained growth of the Chinese insurance industry.

As part of improving how bank based insurance sales activities are handled, the Chairman is asking local CIRC offices to pay attention to the letters and visits they receive from the public because these letters and visits will let them know how the insurance purchasers feel about the insurance industry’s behavior the area that the local office is in charge of regulating. He believes that by focusing on insurance consumers’ concerns the local CIRC offices will be able to stop activities that violate the insurance law and effectively protect the interests of insurers and insurance policy purchasers.

Moreover, he wants local CIRC offices to study the issues that insurance consumers are informing them are occurring, and he wants the local offices to provide their enforcement staff written instructions on how to effectively remedy the issues that the insurance consumers are concerned with so that illegal activities associated with bank based insurance policy sales will be reduced.

Specifically, the Chairman has asked that these written instructions address many topics, including, the following issues:

1. Local CIRC offices should instruct their staff to increase their observation of public opinion, and increase their enforcement of insurance agents information disclosures to insurance policy purchasers to ensure that insurance consumers interests protected.

2. The local CIRC office instructions must establish a system to improve the public’s knowledge about insurance. The local offices should work with insurers, insurance associations, and insurance agents to develop a system to improve the public’s understanding what buying insurance means, what insurance claims handling entails, what premium and insurance benefit payments mean, and what insurance policy dispute resolution entails. The overall hope for this education drive is to improve the publics understanding of insurance in order to make insurance consumers more savvy so that they can make better choices about their insurance purchases in the future.

3. The local CIRC offices should attempt to improve insurance contract dispute resolutions by increasing the number of mediation channels available through having CIRC staff push insurance companies to improve claims handling services and resolve policy disputes more quickly. The instructions should also tell CIRC staff to work with insurance associations to strengthen how they handle complaints, disputes, and how they promote efficient mediations. Finally, this the instructions should tell the CIRC staff to work with the judiciary to help improve mediation so that litigation in court is less necessary.

4. The local CIRC office should instruct their staff to increase how much credence they give insurance consumers” complaint letters. The Chairman hopes that increasing the attention that the local office’s pay to complaint letters will show that public that their concerns about the insurance industry are being effectively addressed, which will hopefully improve the public’s faith that the CIRC is prioritizing their interests.

5. The local CIRC office should write instructions that tell their staff that they should provide the central CIRC feedback on the complaints they are receiving and the most effective methods they developed for addressing those complaints. Providing the central CIRC this feedback will help it understand more about the activities in the local insurance markets, and it can attempt to implement the most effective systems on a nationwide basis to improve the CIRC’s regulatory activities throughout all China.

The Chairman’s hopes that the local CIRC offices find creative ways to implement these directives for instructions that they should provide their staff. The Chairman hopes that this creativity will help the CIRC solve difficult problems and create best practices that will help the it improve its regulatory enforcement on issues that public has expressed concerns about. Furthermore, the Chairman hopes that the local staff implementing this directive will improve the CIRC’s interaction with the public and its regulatory transparency. Finally, the Chairman states that the local CIRC offices should provide the central CIRC regular reports on how they are implementing this announcement so that the CIRC will know that the local offices are implementing its directives.

If you would like more details on Chairman Wu’s announce, and the requirements that the CIRC has for the local office written instructions, please contact us. Or if you have any questions about developments in the Chinese bank assurance industry and the potential for international insurance institutions to enter it, please contact us.

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