On January 29, the life insurance Department of the China Banking and Insurance Regulatory Commission (CIRC) issued the latest issue of the circular on recent problems of life insurance products, informing 28 typical problems of life insurance companies’ products.
In recent years, under the tone of strict supervision of products, the CBRC has repeatedly notified the typical problems of life insurance products and urged life insurance companies to improve their product development and management capabilities. The Chinese reporter of securities companies combed the latest three product problem notifications since July 2020. From the perspective of coverage time, it mainly reflects the problems found in the product supervision process since 2020. Among them, “long-term insurance and short-term operation” and “unfair pricing” are the problems pointed out in many briefings.
The latest circular shows that, in addition to common problems, the supervision also points out the problems existing in the central sub insurance enterprises of the “increased life insurance products” for the first time, and reminds that individual companies have extensive product management and indifferent risk compliance awareness, and some historical products are easy to cause the expected risk hidden danger of “rigid payment”.
sorting out four categories of problems: there are new problems and old problems
According to the notice on recent problems of life insurance products issued by the life insurance Department of China Banking and Insurance Regulatory Commission on January 29 (Life Insurance Department letter [2022] No. 19), the typical problems found in the recent supervision of life insurance products still lie in the aspects of product design, clause expression, rate determination, non-standard submission materials, etc.
1. Product design problems: long-term insurance, short-term operation, increased lifetime life, increased interest rate over 3.5%
Among them, the product design problems in the regulatory notification are: first, the definition of past symptoms is unreasonable. For example, the terms of the four medical insurances submitted by Xinhua life, Shanghai life, happy life and BOC Samsung Life agree that the symptoms that have not been diagnosed and treated by doctors before the effective date of the contract belong to past symptoms, lack of objective judgment basis, and are easy to lead to claims disputes.
Second, the calculation of cash value. For example, the cash value calculation of the eight products submitted by Huahui life, Xintai life, Soochow life, Guolian life, Hongkang life, Tian’an life and Taiping Life is unreasonable and there is a risk of long-term insurance and short-term insurance. The interest rate used for the calculation of cash value of the two life insurance submitted by love life is inconsistent.
The issue of “long-term insurance and short-term insurance” has always been a key issue in the supervision of life insurance products. According to the Chinese reporter of the securities firm, according to the notification on the website of the CBRC, this problem has been notified in 5 of the 6 product notifications since May 2019.
Third, increase the amount of life insurance products. For example, the increased interest rate of 11 increased lifetime life insurance submitted by Haibao life insurance, Hetai life insurance, Hengqin life insurance, Huagui life insurance, Xinmei mutual life insurance and Xiaokang life insurance exceeds 3.5%, which is easy to be confused with the product pricing interest rate, and there is a risk of gimmick marketing.
This is the first time that the regulator pointed out the common problems of increased life insurance products in the circular. Increased life insurance products are a kind of hot selling products in the life insurance market in recent years. They are the key products of some small and medium-sized insurance enterprises and banking insurance enterprises.
2. Terms: serious illness switching and renewal statement
The expression of the terms of life insurance products in the regulatory notice is not rigorous. For example, in a disease insurance of PICC Life Insurance, the relevant expression of extremely severe malignant tumor in the clause is inconsistent with the industry’s code for the use of disease definition of major disease insurance (revised version 2020).
The “definition of serious illness” has been switched from the old to the new at the end of January 2021, and the supervision also said in the notice in July 2021 that the switching between the new and the old definition of serious illness of some companies is still not detailed.
Second, the terms are unreasonable. For example, for a short-term medical insurance submitted by Heng’an standard life, the statement on renewal in the terms does not comply with the regulatory provisions, and there is a serious hidden danger of misleading. The provisions on the application materials for death insurance benefits in the terms of a disease insurance of Yingda life are unreasonable, which is easy to cause claims disputes.
Among them, the problem of “renewal expression” is also the problem notified by regulators for many times, mostly in the short-term health insurance business. For example, in the notification in July 2021, the supervision specifically regarded it as a hidden danger as “the main problem of short-term health insurance”.
3. Rate determination: unfair pricing of medical insurance
The determination of product rate is also the key issue in previous regulatory circulars. From the contents of previous circulars, the problems in determining the product rate are different. Some companies have been pointed out that there are “expression of rate adjustment for short-term health insurance products”, “the proportion of health management service fees in the premium exceeds the regulatory provisions”, “unreasonable surrender assumption” and “unreasonable calculation of cash value”.
from the last two briefings, the typical emerging problem of product rate setting is that the rate setting is unreasonable and unfair pricing.
In the latest Circular on January 29, the typical problems pointed out by the regulator are: first, the rate setting is unreasonable. For example, for the seven medical insurances submitted by CPIC life insurance, Ping An Life Insurance, Centennial life insurance, Tian’an life insurance and Taiping Life Insurance, the age range of rate determination is too large, and there is a risk of unfair pricing. Second, the rate determination lacks a pricing basis. For example, the insurance liability of a disease insurance submitted by Minsheng life insurance is too single and lacks a pricing basis.
In the previous announcement of July 2021, the regulation pointed out that the insurance liability of a certain disease insurance product is to protect the diabetic complications, but the rate is uniform for healthy people and diabetic patients. A medical insurance product uses a flat rate for people aged 0-50.
4. Problems needing attention: it is easy to cause the expected risk hidden danger of “just exchange”
In addition to the above problems, other problems pointed out by the supervision also include: the product submission materials are not standardized, for example, Shanghai Lujiazui Finance & Trade Zone Development Co.Ltd(600663) Cathay Pacific Life Insurance and The Pacific Securities Co.Ltd(601099) health insurance. The fee increase table is submitted as a separate material and is not included in the rate table. The two medical insurances submitted by Ping An health have problems such as incomplete filing materials, upload errors and so on. For a certain endowment insurance submitted by Ping An Life, the assumed rate of return on investment in the actuarial report is filled in incorrectly.
The CBRC also pointed out the “problems needing attention” in this Circular: the product management of individual companies is extensive and the awareness of risk compliance is indifferent. Some historical product terms have relevant statements on the interest bearing account of maturity accumulation. The problems involved in liability management and interest rate determination have serious potential risks, which is easy to cause the expectation of “rigid cashing”.
next step focus: accident insurance, Internet personal insurance, new definition of the use of non serious illness products, etc.
In the latest Circular on January 29, the CBRC required that all life insurance companies should continue to strengthen the audit and control of product development and filing, and the chief actuary should implement the first responsibility of product audit and control, and timely find the problems and deficiencies in product design, pricing, actuarial and other aspects.
In recent years, in view of the problems in the development and management of personal insurance companies, the cbcirc has issued circulars to the industry for many times, and published the “negative list” of personal insurance products (version 2021) at the beginning of 2021. When announcing the new version of the “negative list”, the CBRC said that it would continue to strictly supervise products, give full play to the long-term role of product notification, “negative list” and other mechanisms, regularly carry out product supervision “look back”, and take a series of regulatory measures, including regulatory interview, regulatory accountability and public disclosure of treatment results, for companies with many notifications and repeated problems, Standardize the company’s product development and management behavior without interest.
According to the latest requirements of the CBRC, all companies shall conduct self-examination in strict accordance with the contents of previous circulars and the problems in the “negative list”. For the problems found in the product verification of other companies, they shall take warning, change and stop selling similar products in time. If adverse effects have been caused, they shall report in time and make serious rectification, and there shall be no fluke.
Next, the life insurance Department of the China Banking and Insurance Regulatory Commission will continue to monitor the product development and sales of various companies in terms of accidental injury insurance, internet life insurance and the use of new definitions of serious diseases for non major disease products, resolutely crack down on the illegal development of insurance products, product speculation and misleading publicity, and deal with the problems found in violation of laws and regulations, The company will be subject to regulatory measures or administrative penalties according to law, and the responsibilities of relevant personnel will be seriously investigated.
