In China’s insurance market, insurance brokers play a very important role. On the one hand, insurance brokers can formulate insurance plans for policyholders, select insurance companies, go through insurance procedures, and assist insureds or beneficiaries to claim claims from insurance companies; Loss or risk assessment, risk management and other consulting services. Especially in the process of insurance application and claim settlement involving complex insurance such as directors’ liability insurance and reinsurance, the role of insurance brokers has become increasingly prominent. According to statistics released by the former China Banking and Insurance Regulatory Commission (now the State Administration of Financial Supervision, hereinafter referred to as the “CBIRC”), as of September 2022, there are 2,609 professional insurance intermediaries in China. Among them, there are 5 insurance intermediary groups, 1,733 professional insurance agency companies, 494 insurance brokerage companies, and 377 insurance assessment companies. As the number of insurance brokers has gradually increased and their role in the Chinese insurance market has become increasingly important, controversies related to insurance brokers have gradually emerged. The purpose of this article is to conduct a preliminary analysis and sort out of related hot and controversial issues.
1. The definition of insurance brokerage in Chinese laws and regulations
China’s “Insurance Law” and the regulatory regulations formulated by the former China Banking and Insurance Regulatory Commission both define insurance brokers. Article 118 of the “Insurance Law” stipulates that an insurance broker is an institution that provides intermediary services for the policyholder and the insurer to conclude an insurance contract based on the interests of the policyholder, and collects commissions according to law. Article 2 of the “Regulations on the Supervision of Insurance Brokers” also stipulates that insurance brokers refer to institutions that provide intermediary services for policyholders and insurance companies to conclude insurance contracts based on the interests of policyholders, and collect commissions according to law, including insurance brokers and their branches.
To operate insurance brokerage business in China, it is necessary to obtain an insurance brokerage business license issued by the former China Banking and Insurance Regulatory Commission. When the former China Banking and Insurance Regulatory Commission determines whether to grant an insurance brokerage business license, it will comprehensively examine various conditions and factors such as the insurance broker’s shareholders, registered capital, senior management qualifications, governance structure and internal control system, and business model.
Foreign-funded insurance brokerage institutions have also experienced a process of gradually liberalizing their insurance brokerage business in China. When China just joined the WTO, according to the “Notice on Issuing my country’s WTO Accession Legal Documents Concerning the Insurance Industry” (Bao Jian Ban Fa [2002] No. 14), the entry conditions for foreign-funded insurance brokerage institutions five years after China’s accession to the WTO organization are: investors should be foreign insurance brokers with a history of more than 30 years in the territory of a WTO member, must have established a representative office in China for two consecutive years, and have total assets of no less than 200 million US dollars at the end of the year before the application is submitted.
In April 2018, the China Banking and Insurance Regulatory Commission announced that “the requirement to open a representative office for two years before the establishment of a foreign-funded insurance institution will be canceled nationwide.” In May 2019, in an interview with reporters from People’s Daily, Xinhua News Agency, and Economic Daily, Chairman Guo Shuqing announced 12 new measures to expand the opening up of the banking and insurance industries. People operating insurance brokerage business in China need to meet the requirements of 30 years of operation and total assets of not less than 200 million US dollars.” “Allow foreign insurance group companies to invest in the establishment of insurance institutions” and “Allow domestic foreign-funded insurance group companies to refer to Chinese-funded insurance companies Group company qualification requirements to initiate the establishment of insurance institutions.” In order to effectively implement the above opening-up policies, the China Banking and Insurance Regulatory Commission researched and formulated the “Notice of the General Office of the China Banking and Insurance Regulatory Commission on Clarifying the Relevant Measures for the Opening-up of the Insurance Intermediary Market.”
At present, there are many insurance brokerage companies fully owned by foreign capital in the Chinese insurance market.
2. The legal relationship between policyholders and insurance brokers
According to the definition of insurance brokers in the “Insurance Law” and other laws and regulations, an insurance broker is an institution that provides intermediary services for the policyholder and the insurer to conclude an insurance contract based on the interests of the policyholder, and collects commissions according to law. In practice, insurance brokers often receive commissions from insurance companies. Therefore, the policyholder and the insured often have questions about which party the insurance broker serves, what is the relationship between the insurance broker and the policyholder, and whether the actions of the insurance broker can legally bind the policyholder?
In order to clarify the above issues, it is first necessary to clarify the nature of the legal relationship between the policyholder and the insurance broker. Regarding the legal relationship between policyholders and insurance brokers, there are currently two main views, one is that it belongs to the entrusted contract relationship; the other is that it belongs to the intermediary contract relationship. Those who claim to be an intermediary contract relationship are mainly based on the provisions of Article 118 of the “Insurance Law” and Article 2 of the “Regulations on the Supervision of Insurance Brokers”. The so-called intermediary contract emphasizes that the intermediary reports to the client the opportunity to conclude the contract or provides intermediary services for the conclusion of the contract, and the client pays remuneration. If it is claimed to be an entrusted contract relationship, it is mainly based on Article 48 of the “Regulations on the Supervision of Insurance Brokers”. This article stipulates that when an insurance broker engages in insurance brokerage business, it shall sign an entrustment contract with the client, and agree on the rights and obligations of both parties and other matters in accordance with the law. An entrustment contract is a contract in which the principal and the trustee agree that the trustee shall handle the affairs of the trustor.
The difference between the intermediary contract relationship and the commission contract relationship is mainly reflected in the following aspects:
(1) The status of the parties, the service provided and the attribution of the legal consequences of the behavior are different.
The intermediary of an intermediary contract is limited to reporting contracting opportunities or intermediary contracting. The scope of its services is limited. It only introduces or assists the client to conclude a contract with a third party. The client directly concludes a contract with a third party. The intermediary himself does not Do not participate in the contract between the principal and the third party, and cannot make a declaration of intention by himself or on behalf of the principal in intermediary activities. The role of the intermediary is only a middleman, and it only serves as an introduction and assistance between the parties to the transaction.
When handling entrusted affairs, the trustee of the entrustment contract conducts activities in the name of the principal or in his own name. Determine the content of the relationship between the client and the third party, and the consequences of handling the affairs are directly attributed to the client.
(2) The scope of the transaction content is different.
The intermediary of the intermediary contract is to provide the principal with the opportunity to conclude a contract with the third party, or provide the principal with intermediary services, and mediate between the principal and the third party to facilitate their transactions. The contract concluded with the third party does not have direct legal significance; the trustee of the entrustment contract handles the entrusted affairs according to the requirements of the client, and the affairs handled can be legal or non-legal. affairs.
(3) Whether it is paid or not, the source of remuneration and payment conditions are different.
The intermediary contract is a paid contract, but the intermediary can only ask for remuneration when there is an intermediary result, and can obtain remuneration from both the client and its counterpart when acting as an intermediary for the contract; the entrustment contract can be paid or gratuitous, and the entrusted agent who is paid entrusts gets remuneration from the principal.
(4) The burden of expenses is different
In an intermediary contract, if the intermediary facilitates the establishment of the contract, the intermediary activities shall be borne by the intermediary. The two parties can agree that the intermediary or the principal shall bear the expenses if the contract is not established, or the two parties shall share the expenses. In the entrustment contract, the principal shall bear the expenses incurred by the agent in handling the entrusted affairs, and shall pay the expenses in advance.
The Interpretation of the Insurance Law released by the National People’s Congress also partially explained and explained the positioning of insurance brokers and the relationship between insurance brokers and policyholders.
(1) Insurance brokers represent the interests of policyholders. Different from insurance agents, insurance brokers accept the entrustment of policyholders and represent the interests of policyholders. They should act in accordance with the instructions and requirements of policyholders, and reflect and adhere to the interests and requirements of policyholders in the process of providing intermediary services for policyholders and insurers to conclude insurance contracts.
(2) An insurance broker is a person who provides intermediary services for the policyholder and the insurer to conclude an insurance contract. Although an insurance broker is entrusted by the policyholder to represent the interests of the policyholder, he only reports to the policyholder the opportunity and information to conclude an insurance contract, or facilitates the policyholder to conclude an insurance contract with the insurer, and acts as an introduction and assistance. He does not conclude an insurance contract with the insurer in his own name or in the name of the policyholder.
(3) Insurance brokers may collect commissions according to law. Commission is the remuneration for insurance brokers to provide intermediary services for policyholders and insurers to conclude insurance contracts. Generally speaking, the client of a brokerage contract should pay the broker as compensation for the broker’s intermediary services. However, according to the general practice of China’s insurance industry, although insurance brokers accept the entrustment of policyholders and represent the interests of policyholders, and provide intermediary services for them to conclude insurance contracts with insurers, their commissions are generally paid by insurers. If the insurance broker and the policyholder agree that the policyholder shall pay the commission for the intermediary services of the insurance broker, and the policyholder shall pay according to the contract.
The above interpretation of NPC is more inclined to define the relationship between insurance brokers and policyholders as an intermediary insurance contract relationship, and emphasizes that insurance brokers reflect and adhere to the interests and requirements of policyholders in the process of providing intermediary services for policyholders and insurers to conclude insurance contracts.
However, defining the legal relationship between policyholders and insurance brokerage institutions as an intermediary contractual relationship may face the following problems in practice in China’s insurance market:
(1) Insurance brokers have a wider range of services, including drawing up insurance plans for policyholders, insureds, or beneficiaries, handling insurance procedures, assisting in claims, or providing disaster prevention and loss prevention, risk assessment, and risk management consulting services for policyholders, insureds, and beneficiaries. They are not limited to reporting opportunities for contract conclusion or providing intermediary services for contract conclusion as limited by the intermediary contract, and run through multiple links such as insurance policy, claim settlement, and risk management.
(2) According to the provisions of the “Civil Code”, if an intermediary provides intermediary services for the conclusion of a contract to facilitate the establishment of a contract, the parties to the contract shall bear the remuneration of the intermediary on an equal basis. The insured and the insurance company bear the burden equally. However, the relevant insurance industry practice is generally that insurance companies pay commissions to insurance brokers as remuneration, but the commissions ultimately come from the insurance premiums paid by policyholders.
(3) The legal relationship between the policyholder and the insurance broker also depends on whether there is a special agreement between the policyholder and the insurance broker.
Since there are different regulations on the relationship between insurance brokers and policyholders in laws, regulations and regulatory provisions, different courts also have different perceptions in judicial practice. Nantong Shengyang Company, Minya Insurance Broker Jiangsu Branch, Minya Insurance Broker, and the third party PICC Nanjing Chengnan Branch Insurance Broker Contract Dispute Case [Case No.: (2018) Su] 0116 Minchu No. 1152], the People’s Court of Liuhe District, Nanjing held that Minya Insurance Broker Jiangsu Branch was an insurance intermediary between Nantong Shengyang Company and PICC Nanjing Chengnan Branch, and its intermediary identity was specified in the insurance policy. Note that there is an insurance brokerage relationship between the policyholder Nantong Shengyang Company and Minya Insurance Brokerage Jiangsu Branch. In the absence of a written intermediary contract between Nantong Sunrise Company and Minya Insurance Broker Jiangsu Branch, their respective rights and obligations can be determined in accordance with the law on intermediary contracts. However, in the case of Jiang Haiping v. Shanghai Xinqiao Insurance Brokers Co., Ltd. over an insurance brokerage contract dispute heard by the Supreme People’s Court, the Supreme Court applied the provisions of the Contract Law on entrustment contracts to determine the rights and obligations of insurance brokers.
Based on the above cognitions, the interests of policyholders, insurers, insureds, and beneficiaries will be affected to varying degrees. In some cases, the characterization of the legal relationship between policyholders and insurance brokers will directly affect the insurance fulfillment of contractual obligations. On the whole, in China’s current insurance practice, there are still some disputes about how to define the legal relationship between the policyholder and the insurance brokerage institution. It is expected that the understanding will be unified through legislation, judicial interpretation, and judicial practice in the future.
3. In the case of the participation of an insurance broker, the insurer prompts whether the performance of the obligation is reduced or exempted
The “Insurance Law” and relevant judicial interpretations stipulate that the insurer has the obligation to explain the standard clauses provided by it. For the clauses in the insurance contract that exempt the insurer from liability, the insurer should remind and explain when signing the contract. The setting of this obligation is mainly based on two considerations: on the one hand, the insurance clauses are drawn up by the insurer in advance and used repeatedly, and there is no sufficient negotiation process with the policyholder. Therefore, the terms involving the core interests of the policyholder need to be raised On the other hand, the insurance clauses have a certain degree of professionalism. Compared with insurance companies, policyholders (especially natural person insureds) may lack sufficient knowledge of insurance clauses, which is It leads to the imbalance of contracting interests between policyholders and insurers.
However, in the case of an insurance broker assisting the policyholder in applying for insurance, given that the insurance broker is a professional insurance intermediary organization and has sufficient knowledge of the insurance terms, etc., in this case, can the insurer be exempted or mitigated? The fulfillment of the obligation to explain has become a more frequent problem in practice.
Regarding this issue, there are different understandings in current judicial practice. Take the second-instance civil case of property insurance contract dispute between Wuhan General Aviation Co., Ltd. and Tianan Property Insurance Co., Ltd. Wuhan Central Branch [(2018) E 01 Min Zhong No. 4184] heard by Wuhan Intermediate People’s Court as an example. In this case, the people’s court held that the insurance contract in this case was signed by insurance brokers. Due to the participation of such professionals, the strengths of both parties to the insurance contract were relatively balanced. The meaning of signing an insurance contract is complete, accurate and free, can realize the autonomy of the will, and can fully negotiate the exemption clause in the contract. Therefore, due to the participation of professional insurance brokers, it should be presumed that they can understand the content of the contract terms and fully understand the meaning of the exemption clause, and the insurer’s obligation of explanation can be reduced or exempted. However, in the second-instance case [(2021) Lu 01 Min Zhong No. 2600] of the Guangdong Branch of China Ping An Property Insurance Co., Ltd. and Gao Zongjian, etc., which was heard by the Jinan Intermediate People’s Court, the Jinan Intermediate People’s Court held that Chongqing Jincheng Hunuo Company was only the insurance broker of Jinan Youwai Delivery Company, and the actual policyholder was Jinan Youwai Delivery Company. Therefore, the exemption clause involved in this case has no legal effect.
4. Conclusion
The disputed issues analyzed above are only some of the issues that often arise in Chinese judicial practice. There are still many controversial issues related to insurance brokers in Chinese insurance practice, including: whether the insurer’s obligation to remind the insurance broker can be fulfilled; These disputes often arise when the policyholder and the insurance broker have not clearly agreed on their rights and obligations, and have not clearly determined the nature of the legal relationship between them. However, these issues are very important and often affect the fulfillment of the obligation of truthful disclosure, the reminder and clear explanation of the exemption clause, the payment of insurance premiums, the termination of the insurance contract, and the insurance liability of the insurance company. It is expected that the judicial practice and cognition will be unified in the future, so that the role and positioning of insurance brokers will be clearer, so that the Chinese insurance market can develop more standardized and efficient.
