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October 14, 2021

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Reforms set to make insurance safer, cheaper

Chinese regulators yesterday unveiled new rules for accident insurance to address problems such as low payouts and abnormally high commissions.

Contracts, sales management and information disclosure will be improved, the China Banking and Insurance Regulatory Commission said in a statement.

China will establish an accident insurance product backtracking and rate adjustment mechanism to link prices to payouts and other business performance indicators, while gradually eliminate products with low payout ratio and obviously unreasonable pricing.

Drawing on relevant lessons and experience in developed insurance markets, a minimum payout rate will be set, according to the watchdog.

For short-term accident insurance products, accident insurance products with premiums exceeding 5 million yuan (US$773,862) annually for three consecutive years and with an average payout below 50 percent of the premiums, the underwriters will be required to cut their rates.

The industry will also be urged to reduce commissions. And a negative list will be made to help correct irregularities.

Nine types of banned behavior are listed, including bundled sales and forced sales, the statement said.

“The air-travel accident death rate is very low, so the premiums are basically only for sales and marketing expenses,” an actuary in Shanghai said.




 

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