1. CIRC issues supervisory (administrative) orders to several insurers
During the period from November to December 2017, the China Insurance Regulatory Commission (CIRC) issued administrative orders (Orders) to six CIRC-regulated domestic-invested insurers (DII) and to one CIRC-regulated foreign-invested insurer (FII) - collectively the “Delinquent Insurers”. The Orders require the Delinquent Insurers to take lawful remedial actions in respect of their continuing regulatory breaches (Breaches), which Breaches had been earlier identified by CIRC.
The Orders, as published by CIRC, identify the leading Breach as a failure by the Delinquent Insurers to price their insurance products in accordance with sound and accredited actuarial standards and practice. Further Breaches identified included problems with: the practice of ‘Three Levels [of corporate governance] but only One Controller [of all three levels]’; internal company controls; related-party dealings; information disclosure; internal audit; and reward/incentive programmes.
Specifically, CIRC, via the Orders, demands immediate rectification of the Breaches by the Delinquent Insurers, including a comprehensive internal review of all operating practices, leading to the screening out of irregular practices and shady dealings and hidden risks. Further, the Orders demand that Breaching insurance products cease to be used by the Delinquent Insurers, and that those insureds who have already purchased such products continue to be properly serviced. Finally, the Orders demand that the Delinquent Insurers establish internal special working groups, the duties of which groups are to include framing rectification plans and submitting reports to CIRC on a timely basis as directed by CIRC.
2. CIRC’s administrative sanctions against several CIRC-regulated insurers
During the period from September to December 2017, CIRC announced 24 separate administrative sanctions (Sanctions) in respect of three FIIs and six DIIs (Sanctioned Insurers) and certain of their branches and subsidiaries and their authorised individual representatives (with the Sanctions including fines and formal warnings).
The Sanctions were applied in respect of the Sanctioned Insurers’:
- use of telemarketing fraud, involving over-stating the extent and levels of cover offered by certain insurance products and deliberately using marketing ploys to peddle false and mis-leading information in respect of products, laws, policies and regulation;
- deliberate withholding and failing to disclose to their insureds certain key and fundamental information in respect of products purchased;
- establishing branches without CIRC approval;
- production and circulation of fraudulent and mis-leading materials; and
- refusal to accept on-line applications for stand-alone compulsory bodily injury insurance.