A draft version of Internet Insurance Business Regulation ("Draft Regulation") was released by China Internet Regulatory Commission ("CIRC") on 15 April 2011 for public comment. The Draft Regulation is the latest endeavor of the CIRC to spur the development of a healthy internet insurance industry in China.
The Draft Regulation, which lists fraud prevention and the protection of the rights of the insurer, the insured and the beneficiary among its aims, applies to insurance companies and professional insurance intermediary institutions ("Intermediary Institution") that sell insurance products or provide insurance intermediary services through a website – whether it is managed by the company / Intermediary Institution or a third party.
Qualifications and Requirements
Insurance companies and Intermediary Institutions ("Operators") wanting to jump on the internet insurance bandwagon are expected to fulfill a number of qualifications: -
- a sound management for internet insurance business, which, amongst others, should cover the internet insurance business security, insurance products management and promotion, insurance certificate management, underwriting, modification and renewal of policy, cancellation of policy, claim management, antimoney laundering, complaint etc;
- the operation is staffed by an adequate number of employees and the employees who are responsible for the sale of insurance products and services should obtain the relevant qualification certificates issued by CIRC;
- an Intermediary Institution must hold registered capital which is not less than RMB10 million.
The Draft Regulation also outlines the requirements for the website through which the internet insurance business would be operated: -
- an ICP ("Internet Content Provider") licence has been obtained, or the ICP filing formality has been completed;
- the website possesses a safe and reliable e-commerce system as well as security features and data backup function;
- the server must be located within mainland China; and
- where the website is operated by a third party, the net assets of such third party (i.e. the website owner) by the end of previous fiscal year shall not be less than RMB10 million and the website has been running a healthy business for the past 3 years without being subjected to any form of administrative sanction from either the competent department of internet industry or the administrative department for industry and commerce.
Employees of insurance companies or Intermediary Institutions are prohibited from selling insurance products in their own names on internet. Furthermore, insurance companies and Intermediary Institutions are in principle not allowed to authorise a part-time insurance agency institution to operate internet insurance business.
The insurance companies and Intermediary Institutions should also report to the CIRC within 10 working days after their business was kick-started online.
Centralised management is envisaged by the Draft Regulation as the way to operate the internet insurance business. Any branch of the insurance companies / Intermediary Institutions purporting to run such business must first obtain the authorisation of the head office. For this reason, only the head office is allowed to sign the contract with a website owner (in the case of a non self-managed website).
Information about the insurance company / Intermediary Institution, insurance products and services – produced and issued by the head office – must be displayed prominently on the website. Information about the insurance products and services should include, amongst others, the entire clauses of insurance contract and insurance rate, payment method of premium / claim payment, delivery of insurance certificate and invoices, the way to seek consultation and make a complaint etc. The insurance product to be sold online must be approved by or filed with CIRC with a mark of "to be sold through internet".
The Draft Regulation also lays down a string of stipulations that aim to make sure that the consent given by the insured is an informed one, on one hand and to protect the right of the operator, on the other hand. For example, insurance companies / Intermediary Institutions are required to seek the confirmation of the insured that he/she has read and fully understood the entire policy, and accepts the exemption of liability, cooling-off period, deduction of fees, cancellation of insurance, cash value and other important matters. The information to be completed by the policyholder (e.g. identification and contact details of policyholder / insured / beneficiary, subject insured, sum insured, coverage, insurance period, premium and payment method etc) needs to be listed in details.
Insurance companies / Intermediary Institutions are also required to notify the policyholder that if the policyholder or the subject insured is located in the province / city where the insurance company has a branch office, he/she would have easy access to insurance services.. Insurance companies / Intermediary Institutions must ensure that the information provided by the policyholder dovetails with that stored in the insurance company's core data system. Where electronic policy is adopted, insurance companies / Intermediary Institutions should ensure that the electronic policy is authentic and cannot be tampered with.
Depending on the nature of the insurance products or the request of policyholder, where a hardcopy of the insurance certificate and premium invoices are required, the same should in principle be received by the policyholder within 5 working days from the date of the insurance contract came into being. The complete clauses of the insurance contract should be attached to the insurance certificate when it is provided to the policyholder.
In the previous draft edition, the CIRC narrowed the qualifications to only allow insurance companies that operate on a nation-wide basis to use the internet to engage in crossprovince business – companies that operate on a local basis are only allowed to do business within their local territory. This restriction however was absent in this edition. The removal was largely welcomed by the insurance industry as being more pragmatic because the main perk of operating business online is that it transcends geographical boundaries.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.