The Chinese Damage Insurance Industry: Norihiro Takeuchi’s Views on the Market
According to the Chinese Insurance Supervision and Management (Regulatory) Committee’s data, the revenues of the property (damage) insurance industry from insurance premiums was 1054.1 billion yuan – up 13.8% since last year. This was the first breakthrough beyond the 1 trillion yuan mark.
It was 402.7 billion yuan in 2010, and having grown to 2.6 times that in 8 years, its growth continues to soar. Accompanying this is an increase in consumer complaints, and the Insurance Regulatory Committee has been extremely busy. Economic sites “AskCI” and “Jiemian” picked up the issue of damage insurance. What is the world of the insurance industry in China like? (1 yuan = 16.73 yen)
Claims are of life insurance and damage insurance, almost half-and-half
In 2017, there were 93,111 cases of consumer complaints received by the Insurance Regulatory Committee as well as various local Insurance Authorities against insurance companies. Among them there were 2019 strong complaints stating that the company is illegal, with 366 (17.35%) cases against damage insurance companies and 1743 (82.65%) cases against life insurance companies. Complaints stating complications with the insurance companies numbered 91,002 cases, with 48,663 (53.47%) cases involving damage insurance claims and 42,339 (46.53%) cases involving life insurance claims.
According to the Chinese, life insurance is regarded as a savings product rather than a death benefit, and disputes such as those over the payout are easy to develop into lawsuits. On the other hand, for damage insurance, there seem to be many disputes regarding the circumstances of incident. Out of the complaints involving damage insurance claims, 42,068 (86.47%) cases are automobile-related.
The main causes were judgments in terms of responsibility, the waiting period till compensation, disputes over the payout, etc. Other than automobile insurance, there were 802 cases involving agricultural insurance claims – up 40.70%, and 272 cases involving credit guarantee insurance claims – a jump of 183.33%.
Sanctions against damage insurance companies
The Insurance Regulatory Committee announced the results of a survey involving each insurance company in mid-February. Having surveyed 84 damage insurance companies with products reaching 161,928 items, it prohibited the sale of 10,667 products and identified 8,495 products as problematic. It also ran a strict check on the daily management systems of each insurance company. As a result, 19 companies and 1672 products were terminated.
Among the 19 companies, the names of CCB Insurance, Fude Insurance, Sompo Japan Insurance, Xinda Insurance, Anhua Insurance, Ping An Insurance and Cheng Tai Insurance came up. The Japanese company 3rd on the list is the Chinese subsidiary of Sompo (Sonkai Hoken) Japan Nipponkoa – Sompo Japan Insurance (China) Co., Ltd.
The Insurance Regulatory Committee ordered the prohibition on the sale of problematic products by these 19 companies. Within them, 10 offending companies were prohibited from releasing new insurance products and collecting insurance premiums for 3 months.
The “irregular” naming of products, details of the contract being unclear, violation of the principles of insurance or insurance laws, not specifying the provisions for exemption and mitigation, deliberate distortion of clause citations, and so on are becoming issues.
The Insurance Regulatory Committee cites the lack of responsibility as a management body, a weak legal spirit during development and design, unsound application management systems, the inadequacy of new product development processes, and the dearth in comprehension of the security efficacy of insurance products, etc. as causes.
The Insurance Regulatory Committee, identifying even factional infighting
The Insurance Regulatory Committee further pointed out the problem of internal governance within insurance companies. It said that the unaddressed power struggle between mutual stakeholders was fierce, which was affecting the normal functioning of the companies. As a result, some companies seem to have ignored legal procedures. Anyhow, if they did not develop profitable products, they would end up making losses.
Moreover, in the data obtained by a reporter of “Jiemian”, regarding the inspection of the circumstances regarding agricultural insurance claims, problems were found in 43,000 compensation plans of the 56,000 cases investigated. It was as high as 77%. Even if the profits are taken as the priority here, it’s still no surprise.
There is intense energy swirling around in China’s insurance industry. That supported the soaring increase in insurance premium revenues.
Finally, the Insurance Regulatory Committee emphasised on 4 “adherences”. They were the following : 1 – to strengthen product management and risk management; 2 – to quell chaos and maintain public order; 3 – to carry the will of reform; 4 – emphasising on poorer regions, to join the fight to eradicate poverty. The insurance industry was pushed by the development of mobile payment, and unlike the dull banking industry, it was an industry truly brimming with China-like vitality. It seems that quelling chaos and completing the “preservation of peace” will take a little more time.