On September 28th, China’s National Financial Regulatory Administration (NFRA) published a new, comprehensive framework that regulates the country’s insurance sales.
The rules are effective from March 2024 and the NFRA said they have been established to impose stricter regulation on the insurance sales process, with the ultimate aim to provide greater protection to policyholders.
The framework consists of six chapters and fifty articles and clearly divides the sales process into three distinct stages: pre-sales, sale, and post-sale, in order to regulate the different behaviours and characteristics of each stage.
In addition, the new rules introduce the idea of an insurance product description system, which will aim to simplify terms and conditions and make contracts easier to understand.
The rules also propose enhancements to product suitability, to ensure insurance products are categorised and marketed in line with the specific requirements of individual policyholders.
Three sales stages
The approach of defining the insurance sales process into three, distinct stages provides a comprehensive and clear roadmap for each stage of the process.
During the pre-sale phase, the regulations specify the roles and duties of insurers, brokers, and agents. They clearly outline responsibilities related to matters such as terms and conditions, information disclosure, and pre-sale behaviour.
In the sales stage, the measures emphasise the importance of understanding and tailoring solutions to customer’s individual needs. These emphasise the need for their industry to know their clients while selling insurance products and prohibit actions such as the pre-selection of options.
In the post-sales stage, the news measures cover rules which include the delivery of policies, renewals, and general post-agreement behaviour.
The NFRA moving quickly
The NFRA was established in May this year to unify the roles played by the China Banking and Insurance Regulatory Commission, People’s Bank of China, and China Securities Regulatory Commission.
Experts told (Re)in Asia, the regulator has two clear tasks it aims to complete this year: central-level reforms and the identifying risks at financial institutions. Local-level reforms are due to following in 2024.
Dr Zhan Han, Managing Partner of Anjie Broad Law Firm in Beijing, said that consumer protection was also a clear and important remit of the NFRA. The announcement of these new sales regulations reflects the regulator’s commitment to standardising practices within the industry, in order to protect policyholders.
Since its inception, the NFRA has wasted no time in stamping its authority as a regulatory body. In addition to the new sales rules, the regulator has made changes including the establishment of new cyber guidelines in May and revised bancassurance rules in August.
It has also made swift progress with its ambitious goal of establishing an international reinsurance trading centre in Shanghai, which is slated to commence operations in October.
