The amendment focuses on five major areas of insurance law including insurance contracts, insurance companies, insurance intermediaries, the management of insurance companies, and the supervision of the insurance industry.
Under the amended China Insurance Law, once a life insurance policy has been in force for two or more years, the insurance company will cease to be able to terminate the insurance contract on the grounds of misrepresentation or non-disclosure by the insured in obtaining the policy.
With regard to the setting up of an insurance company, the present China Insurance Law requires an authorised insurance company to be in the form of a company limited by shares or a wholly state-owned company. This restraint will be removed by the amended China Insurance Law. The amended China Insurance Law also provides the insurance companies with more flexibility in offering new products and making investments.
Further, the amended China Insurance Law will give the China Insurance Regulatory Commission (“CIRC”) greater power to take various measures against an insurance company failing to meet the solvency requirements or codes of conduct, which will offer more protection to consumers.
Overall, the reforms reflect the rapid development of China’s insurance industry since China joined the World Trade Organisation in 2002.
Consultation on Reform of Regulations on Insurance Intermediaries
In connection with the amended China Insurance Law, the CIRC has invited the public to comment on the proposed reform of the regulations on insurance intermediaries, which it issued on 22 July 2009.
Under the proposed new rules, insurance agencies which are authorised to offer services nationwide will be required to have a minimum registered and paid-up capital of RMB 10 million; whereas those who are authorised to offer only regional services are subject to a lower threshold, i.e. a minimum registered and paid-up capital of RMB 2 million. In addition, more stringent requirements are proposed for shareholders, senior executives and employees of all insurance agencies in the PRC.
This regulatory reform is also scheduled to come into effect on 1 October 2009.
