Regulators tighten rules on accident insurance

Tracy Li
The changes aim to give customers more protection and a better deal.
Tracy Li
Regulators tighten rules on accident insurance

Chinese regulators on Wednesday unveiled new rules for accident insurance to address problems such as low payouts and abnormally high commissions.

Contracts, sales management and information disclosure will be improved, the China Banking and Insurance Regulatory Commission said in a statement.

China will establish an accident insurance product backtracking and rate adjustment mechanism to link prices to payouts and other business performance indicators, while gradually eliminate products with low payout ratio and obviously unreasonable pricing.

Drawing on relevant lessons and experience in developed insurance markets, a minimum payout rate will be set, according to the watchdog.

For short-term accident insurance products, accident insurance products with premiums exceeding 5 million yuan (US$773,862) annually for three consecutive years and with an average payout ratio below 50 percent, the underwriters will be required to cut their rates.

The industry will also be urged to reduce commissions. And a negative list will be made to help correct irregularities.

Nine types of banned behavior are listed, including bundled sales and forced sales, the statement said.

"The air-travel accident death rate is very low, so the premiums are basically only for sales and marketing expenses," an actuary in Shanghai said.

The measures will be implemented from January 1.

Last month, the China Association of Actuaries, the Insurance Association of China and the China Banking and Insurance Information Technology Management Co issued details on the incidence of accidental injury, which provided a basic model for accident insurance pricing.

An insurance product manager surnamed Liu applauded the reforms, adding they will help the healthy and sustainable development of the sector and will benefit policy-holders.

In 2020, premiums from personal accident insurance in China were about 117 billion yuan, similar to the previous year.

In the past two years, China has tightened the supervision of operating risks in the insurance industry.

In March 2020, the China Banking and Insurance Regulatory Commission issued new guidelines on accelerating the reform of accident insurance.

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