Regulators to intensify crackdown on risks in booming insurance intermediary market
China’s top banking and insurance regulator aimed to intensify the crackdown on risks and irregularities in the burgeoning insurance intermediary market, which contributed to a majority of the overall premium growth in 2018.
Underwriters are required to establish a strong management system with clear rights and responsibilities for their intermediary partners and strengthen supervisions over the compliance of their cooperation businesses, a notice from the China Banking and Insurance Regulatory Commission (CBIRC) said earlier this week.
Insurance companies are not allowed to use those organizations or platforms to carry out illegal activities, the regulator added.
For example, insurers and their staff are forbidden from giving intermediaries benefits other than those stipulated in the entrustment contract.
To ensure the industry’s healthy development, the watchdog will focus on prominent violations of laws and regulations in the insurance intermediary sector in 2019, organize on-site inspections and enforce severe punishments on wrongdoers, a senior official from the Insurance Intermediary Supervision Department at the CBIRC told China Insurance News.
Key areas of supervision will include the bancassurance channel and third-party sales platforms, especially Internet insurance agencies and brokerages.
Banks, for instance, function as an important channel for selling insurance plans and have played a vital role in the development of China’s insurance sector.
But this channel has long been plagued with rampant irregularities like misleading sales. Banking staff tend to induce customers to buy insurance policies by exaggerating their yields or confusing the difference between insurance products and bank deposits or other wealth management products.
To better cope with those irregularities, CBIRC aims to set up a comprehensive and unified regulation system in terms of the market access threshold, personnel management, market behavior, evaluation criteria and business withdrawal of commercial lenders which conduct insurance agency operations, the official said.
Meanwhile, the regulator also plans to intensify scrutiny over online insurance platforms, which have seen robust growth during the past few years.
Data indicated that 155 domestic insurance firms and 445 insurance agencies are currently operating Internet insurance business, with about 15,000 products on sale.
CBIRC has tightened its regulations over the sector since the very beginning of 2019. During the first two months, the watchdog was reported to have issued a total of 136 penalty tickets, with around half received by insurance agencies.
Insurance intermediaries, including agencies, brokerages and loss adjusting firms, are an integral part of the private insurance market, as they provide a useful link between insurers and the insured.
They are usually contracted with multiple insurance companies so as to match their clients’ needs with the most suitable protection plans.
As of the end of 2018, China boasted a large army of insurance intermediaries, with five leading players, 240 national and 1,550 regional insurance agencies, 499 insurance brokers, 8.71 million insurance salespeople as well as 32,000 financial institutions selling insurance products, according to reports from China Insurance News.
In 2018, intermediary channels earned a combined premium of 3.37 trillion yuan (US$500 billion), accounting for 87.4 percent of the overall income of the whole sector.