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31 May, 2017
The China Insurance Regulatory Commission (CIRC) issued the Notice on Furtherly Tightening the Management of Life Insurers' Sales Operations (the Notice) on 19th May 2017 in respect of CIRC-regulated life insurance companies (Life Insurers). Key elements of the Notice are:
1. Internal Compliance Reviews
The Notice requires that, effective from the date of the Notice’s issue, all Life Insurers shall conduct internal compliance reviews in respect of their sales activities since and including 2016, focussing on product management; information disclosure; and marketing activities.
The Notice highlights, with concern, the dissemination of fake news such as "Recurrent health insurance to be banned" or "Certain serious illnesses to lose cover" etc.
By 30th June 2017, all Life Insurers must submit to CIRC reports detailing the results of their internal compliance reviews, together with the status of any remedial and investigative measures.
2. Punitive Measures
The Notice specifies nine types of illegal sales activities (the Nine No-Nos). Three of these are (i) the dissemination of fake news in respect of any laws, regulations or policies governing insurance business; (ii) the undertaking of marketing activities on the basis that a particular product ‘will soon cease selling!’; and (iii) in the absence of the insured’s consent, the unauthorised entering into or amendment of a contract of insurance. The Notice stipulates that any breach of the Nine No-Nos by a Life Insurer may result in CIRC prohibiting the infringing Life Insurer from writing or accepting any new business for anywhere from three to twelve months.
3. Accountability Systems
The Notice demands all Life Insurers establish accountability systems to prevent illegal mis-selling.
For further information, please contact:
Michael Cripps, Partner, Clyde & Co
michael.cripps@clydeco.com
