China’s insurance regulator has ordered insurance companies to strengthen supervision of their intermediary partners such as agents and brokers, in an effort to impose order on a chaotic and largely unregulated sector of the industry.
Unbalanced regional development and vicious competition have led to a fragmented and unregulated insurance intermediary sector that is rife with violations and shady practices, market participants say. There are around 2,600 insurance intermediaries in China, including five large insurance brokering groups and more than 200 national-level insurance agencies. The rest are mostly regional and smaller local insurance intermediaries.
In March, the CBIRC issued regulations for the management of intermediary channels of insurance companies, as the regulator aims to strengthen supervision, prevent systemic financial risks, and set a bottom line for risk prevention and control.
Among several requirements, the regulations stipulate that:
A. Insurance companies should establish an intermediary management system with clear channels of authority and responsibility
The insurance company shall set up an intermediary channel management department and a special post at its headquarters. The special post is to be filled by a person designated to have responsibility for intermediary channel management.
The insurance company shall establish an auditing system to ensure compliance in intermediary operations.
B. Insurance companies should strengthen management of their cooperation with intermediary partners
The insurance company shall stipulate the relevant obligations of the responsibilities of the intermediaries they cooperate within, including compliance with rules and quick action to correct non-compliance, if any.
The insurance company shall establish an administrative file for each intermediary, accurately recording the agency’s credentials, personnel qualifications, shareholder risk assessment, training, business conditions and compliance evaluation.
Insurance companies shall ensure the authenticity of insurance contracts issued by their intermediaries, and strengthen customer information collection, recording, and management.
Insurance companies shall set up a system for the management of individual insurance agents, and to ensure that the agent registration data are true and accurate. Establish a regular product inspection mechanism for products sales, and resolutely prohibit the sale of non-insurance financial products.
If an insurance company cooperates with a third-party internet platform, the head office shall manage the relationship, including the signing of cooperation agreements.
C. Insurance companies may not use the intermediary channel to carry out illegal activities
The insurance company and its staff members shall not directly or indirectly give the intermediary business entity and its staff members benefits other than those stipulated in the contract.
The insurance company and its staff shall not instigate or induce the intermediary channel to deceive the buyer of the insurance policy, the insured or the beneficiary.
The insurance company and its staff members shall not give or promise to give, to the customer insurance, premium rebates or other benefits other than those stipulated in the insurance contract.
D. Insurance companies should improve supervision over compliance in its intermediary channels
The CBIRC shall strengthen on-site inspections and off-site supervision of intermediary channels of insurance companies, and impose penalties on insurance companies and insurance intermediary agencies which violate regulations. A