China - New CIRC Requirements For Internet Insurance Providers.
Legal News & Analysis – Asia Pacific – China - Insurance & Reinsurance
3 October, 2015
On 22 July 2015, the China Insurance Regulatory Commission (CIRC) issued the Circular on the Interim Measures for the Supervision of Internet Insurance Business (the Measures), which will come into force 1 October 2015 and will be valid for three years. The Measures are not applicable to reinsurance business. As a result of the rapid growth of Internet insurance, the Measures introduce new requirements for insurance institutions and their self-operating and third-party Internet platforms conducting online sales of insurance. The aim is to ensure that these platforms are transparent to consumers and enable the development of the Internet insurance industry. The notable changes are set out below.
The Measures provide that if insurance institutions intend to develop Internet insurance services through third-party Internet platforms, these third-party Internet platforms should obtain qualifications for conducting insurance business. Failure to do so means that the Internet platforms will only be allowed to provide technical support for Internet insurance. The location of site access should be within the PRC. There are also certain content and online security requirements that platforms have to comply with. Insurance institutions are not allowed to partner with third-party Internet platforms that do not meet the above requirements. Insurance institutions should enter into cooperative agreements with third-party Internet platforms that clearly set out the respective rights and obligations of the parties, and the website of the third-party Internet platform should indicate that the insurance services are provided by the insurance institution.
Insurance institutions may provide online insurance services in locations where they do not have physical presence, provided that they possess the relevant internal control capabilities and can meet the service needs of consumers. This applies to a limited category of insurance products, including:
- Personal accident insurance, term life insurance and ordinary whole life insurance;
- Household property insurance, liability insurance, credit insurance and guarantee insurance with an individual as the policyholder or the insured;
- Property insurance; and
- Other types of insurance stipulated by the CIRC.
This could be seen as advantageous for the business development of Internet insurance institutions as the removal of geographical operating restrictions mean that they do not have to set up operating offices in locations where they do not have presence. One thing to note is that even though this new rule applies to life insurance, in practice it may be difficult to sell such insurance product online as it is comparatively complex and requires direct contact between insurance agents and clients. Since its establishment in 2013, ZhongAn, the first Internet insurance provider in China, has yet to obtain an operating license for life insurance. Furthermore, the Measures acknowledge that logistical risks may arise in these online cross-province sales, as such they require insurance institutions to disclose potential issues such as inadequate services and low time efficiency at time of sale and require the confirmation of the policyholders.
The Measures also require third-party Internet platforms to provide all relevant information required for underwriting within 24 hours of receiving an insurance application. Unless required by applicable laws, insurance institutions and third-party Internet platforms shall not disclose such information to any organization or persons. In addition, premium payments made by policyholders must be credited directly into insurance institutions' designated bank accounts.
For further information, please contact:
Martin Tam, Partner, Baker & McKenzie