In recent years, with the increasing adoption of remote working models, insurance companies in China have been exploring more flexible employment and office arrangements, including work from home, cross-regional working, and sharing office space. While these arrangements may improve operational efficiency, they also raise an important compliance issue: whether employees working outside the registered location may be regarded by the insurance regulators as establishing a branch without approval or changing business premises without approval.
In the insurance sector, which is subject to strict regulation, this issue involves not only approval requirements but also potential administrative penalties for violations.
To resolve this dilemma between business innovation and the compliance redline, this article draws upon the Insurance Law of the PRC and relevant regulatory provisions. Adopting a regulatory logic that prioritizes substance over form, we aim to clarify the identification standards for “branches” and “business premises” and help PRC insurance companies build a robust compliance firewall for remote work.
Specifically, this article will address the issue from the following three dimensions to assist clients in accurately identifying risks and implementing compliance solutions:
I. Legal Basis
According to the Insurance Law of the PRC, the relevant risks primarily arise in two scenarios:
The first scenario is the branch establishment without approval. Under Article 74, the establishment of a branch by an insurance company is subject to approval by the insurance regulatory authorities. If an insurance company establishes a branch without obtaining the required approval, Article 164 provides that the insurance regulatory authorities shall order correction and impose a fine ranging from RMB50,000 to RMB300,000. Where the case is serious, the scope of business of the insurance company may be restricted, the insurance company may be ordered to stop accepting new business, or its business permit may be revoked.
The second scenario is changing business premises without approval. Under Article 84, where an insurance company changes the business premises of the company or its branch, it shall obtain the approval of the insurance regulatory authorities. If the company fails to comply with this requirement, Article 162 provides that the insurance regulatory authorities shall order it to make correction and impose a fine ranging from RMB10,000 to RMB100,000.
The two types of non-compliance reflect different regulatory focuses. The former relates to market entry, while the latter concerns the management of changes in business location, which results in different levels of penalties.
However, in practice, the criteria for characterizing the two largely overlap. At the same time, current laws and regulations do not provide a clear or unified definition of either “branch” or “business premises”, leaving room for interpretation.
II. Substantive Criteria for Identifying “Branches” and “Business Premises”
(1) Criteria for Characterizing a “Branch”
Based on the Insurance Company Management Provision, we understand that, for a setup to qualify as a branch, it may be required to fulfill the following criteria: (1) maintaining a permanent and established physical location, a suitable workforce, auxiliary amenities, and IT infrastructure; (2) appointing senior executives or a designated head; (3) possessing a defined organizational and administrative structure; and (4) actively engaging in business operations.
Based on publicly available enforcement cases, “establishing a branch without approval” typically falls into the following scenarios:
(1) establishing an entity without the required approval procedures;
(2) relocating a fully operational department to an unapproved location; and
(3) conducting business on a sustained and stable basis outside the registered address, including leasing office premises, setting up the necessary systems and equipment, and engaging in business activities from that location.
Overall, both the provisions and practice focus on the substantive features of business operations.
(2) Criteria for “Business Premises”
Based on general understanding and relevant cases, the substantive elements of “business premises” largely align with those of a branch. Textually, a business premises implies a stable, independent physical location with an organizational structure used for external business activities. From a regulation perspective, most violations typically involve the relocation of an operation. Since regulators often apply only one characterization to the same conduct, the practical distinction between the two is blurred. In summary, both legal text and regulation practice adopt a substance-based analysis consistent with that for branches.
Based on the above, remote working or changes in office location do not in themselves trigger regulatory risk; what matters is whether the arrangement results in an independently operative business unit.
On this basis, the assessment should be made on a case-by-case basis, with particular attention to the following factors:
First, whether the arrangement has created a fixed and identifiable place from which the insurance business is carried out. This may include, for example, the long-term use of a particular office space, the presence of relatively stable personnel, and the availability of facilities or systems necessary for business operations.
Second, whether the activities at that location are temporary or occasional, or whether they have become regular and continuous. Short-term travel, ad hoc remote work, or temporary work from another location should generally be distinguished from a sustained off-site operating arrangement.
Third, whether the personnel at the location operate merely as individual employees working remotely, or whether they have formed a local management and reporting structure with a degree of operational independence. Relevant considerations may include defined roles, local supervision, and staff training.
Fourth, whether the location is used as a place for external business. This may include meeting clients, conducting marketing or solicitation activities, negotiating business, or using the location as a business contact address.
In practice, where these factors are largely absent, the arrangement is generally less likely to be regarded as establishing a branch or changing business premises without approval. Typical examples include employees travelling for work, working from home, or temporarily working from another location.
By contrast, where an off-site arrangement combines a fixed place of business, stable staffing, continuous business activities, and a local structure capable of operating with relative independence, the risk of being characterized as a “branch” or “business premises” will increase accordingly.
III. Key Considerations for Structuring Remote Work
Under the current regulatory framework, insurance companies may structure remote work arrangements by keeping them clearly within the nature of internal work arrangements, rather than allowing them to develop into off-site operating bases.
In practice, the first point is to avoid creating a fixed and stable off-site place of business. Where employees work outside the registered location, companies may consider managing the duration, frequency and concentration of such arrangements. Long-term or continuous use of the same off-site location should be avoided, and companies should not place independent business operation facilities, systems or other resources at that location.
Insurance companies should also distinguish temporary remote work from a continuous off-site operating arrangement. Short-term travel, working from home, or temporary work from another location will generally present lower risk. However, if an arrangement gradually develops into a fixed pattern with stable personnel and continuous business activities, the company should conduct a compliance assessment and adjust the arrangement as appropriate.
Another important point is to avoid forming a relatively independent management structure at an off-site location. Off-site employees should, in principle, remain under the integrity management of the institution at the registered location. The company should avoid creating separate functions, management layers, reporting lines, or day-to-day coordination mechanisms at the off-site location.
Finally, the off-site location should not be used as a place for external business. It should not be used for meeting clients, conducting marketing or solicitation activities, or business negotiations. Nor should it be used as a business contact address, mailing address, or externally presented place of business. External documents, business cards, promotional materials and public online information should likewise avoid presenting the location as a business premises of the company.
More broadly, remote work should be supported by internal rules and compliance management. These may include clear approval procedures for remote work, rules on when and for how long remote work is allowed, compliance reminders, consistent external communications, and stronger data segregation, information security, and customer data management for off-site work. These measures can help reduce the risk that remote work is regarded as establishing a branch or changing business premises without approval.
For further information, please contact:
Agnes Wang, Partner, AnJie Broad Law Firm
wangshan@anjielaw.com
