The Financial Regulatory Administration recently issued the "Regulations on the Management of Insurance Product Development for Property Insurance Companies" (hereinafter referred to as the "Regulations"). A responsible official from the relevant department of the Financial Regulatory Administration recently answered reporters' questions on related issues.
What is the background behind the introduction of the Regulations?
To improve the regulatory system for insurance products and standardize the insurance product development practices of property insurance companies, the former China Insurance Regulatory Commission issued the "Guidelines for the Development of Insurance Products for Property Insurance Companies" (hereinafter referred to as the "Development Guidelines"), which took effect on January 1, 2017. As a core regulatory document for product oversight of property insurance companies, the Development Guidelines detailed specific requirements for product management and served as an effective supplement to the departmental rule "Measures for the Administration of Insurance Clauses and Insurance Premium Rates of Property Insurance Companies." In recent years, with the rapid development of China's property insurance market, the coverage of insurance products has continuously expanded and the content of protection has been continuously enriched. However, problems have also emerged, such as a high proportion of supplementary insurance products without detailed rules, the management and application of industry model clauses and pure risk loss ratios needing strengthening, and the standards for product evaluation, revision, and deregistration requiring further refinement. To further standardize the development and filing practices of insurance products by property insurance companies, refine and improve regulatory requirements, enhance the quality and effectiveness of product regulation, and strengthen the protection of insurance consumers' rights and interests, the Development Guidelines were revised and simultaneously renamed as the "Regulations on the Management of Insurance Product Development for Property Insurance Companies" (hereinafter referred to as the "Regulations"), providing the industry with a clear and well-defined institutional framework for product development. This serves as an important measure for property insurance regulation and comprehensive governance of non-auto insurance, and as a key tool for strengthening and tightening regulation.
What core requirements does the Regulations set forth regarding standardizing product development and protecting consumer rights?
The Regulations consistently emphasize strengthening product regulation, standardizing development management, and protecting consumer rights. First, adhering to the essence of insurance. It is clearly stipulated that the development of insurance products must follow the principles of insurable interest, loss compensation, good faith, aleatory contract, and risk-based pricing. It prohibits the development of insurance products that lack contingency, cover speculative risks, have no actual protection content, or are purely for malicious speculation or contrary to public order and good customs. Second, strengthening standards and norms. It requires that clause wording adhere to standardization and normalization, proposing that individual-type clauses should be easy to understand, clear, and explicit. For content that exempts or reduces the insurer's liability, it should be presented in a manner sufficient to draw the policyholder's attention, thereby effectively safeguarding consumers' right to know. Third, strictly managing responsibilities. It refines and clarifies the product development management responsibilities that should be borne at all levels of the company, and requires property insurance companies to establish internal accountability mechanisms to urge companies to develop products prudently. Fourth, strengthening ongoing regulation. It requires insurance companies to evaluate the compliance and suitability of products, promptly adjust or stop selling products that are no longer suitable for continued sale, and strengthen full-process management of products.
Why does the Regulations include a dedicated chapter to regulate the development and management of supplementary insurance products?
As a supplement to the main insurance, supplementary insurance aims to maintain the stability of the main insurance while appropriately increasing its flexibility, providing insurance consumers with more comprehensive and targeted insurance protection. Supplementary insurance should have a strong correlation with the main insurance, extending, reducing, or adjusting the relevant content of the main insurance. In practice, some companies have designed clauses that are substantively independent or weakly related to the main insurance as supplementary insurance, and have even used supplementary insurance to revise errors in the main insurance. To this end, the Regulations establishes a separate chapter on supplementary insurance, systematically clarifying its definition, development purpose, and necessity assessment requirements, and listing specific circumstances under which development is prohibited. The aim is to guide the industry back to the original intent of supplementary insurance development, ensure clear product structure and well-defined responsibilities, and prevent clause conflicts, claims disputes, or operational compliance risks.
The Regulations sets forth further requirements on the use of industry model clauses and benchmark pure risk loss ratios. Could you explain the relevant considerations?
Formulating and using industry model clauses and benchmark pure risk loss ratios is an important means of enhancing the standardization and normalization of industry clauses and improving the precision and scientific nature of pricing. The Regulations clearly stipulates that where industry model clauses or benchmark pure risk loss ratios exist, companies should in principle use them. At the same time, it proposes that companies that do not use them must explain the reasons and differences in the feasibility report or actuarial report. Thus, while respecting companies' differentiated business approaches, it strengthens the effectiveness of model clauses and pure risk loss ratios through detailed requirements, promoting quality improvement of products across the entire industry.
What key requirements does the Regulations set forth regarding strengthening the primary responsibility of property insurance companies in product development management?
The Regulations systematically consolidates companies' primary responsibility in product development management from multiple aspects, including management hierarchy, standards, processes, and responsibilities. It requires companies to establish a product management committee led by the principal person in charge to deliberate on major matters related to the development and management of clauses and rates. At the same time, products with strong innovation, special business models, or high underwriting risks should be included in the scope of deliberation to more effectively cover risks. By clarifying the standards and requirements for product evaluation, revision, and deregistration, and refining the annual product report requirements, it urges companies to continuously improve their full-process product management systems. It refines the responsibilities of the company's principal person in charge, chief compliance officer, chief actuary, and product development management personnel at all levels, continuously strengthening product development management and consolidating institutional primary responsibility.