In late July 2019, China's Banking & Insurance Regulatory Commission ("CBIRC") issued a slew of administrative rectification orders ("Rectification Orders") against twenty 'named & shamed' general insurance companies ("Breaching Insurers"). The Breaching Insurers had been found, upon investigation by CBIRC, to have been engaged in non-compliant activity with respect to the way in which premium rates had been represented in certain of their policies of insurance ("Defective Policies"), the wording of which Defective Policies had been filed (routinely) with CBIRC. CBIRC's Rectification Orders demand the Breaching Insurers undertake a range of remedial action.
The Rectification Orders highlight Defective Policy failings in three broad respects – policy wording, policy premiums and policy filing (with CBIRC). More specifically, identified Defective Policy failings include:
- misleading policy naming (titling);
- haphazard and imprecise layout of policy wording;
- non-compliant incorporation of long-term health cover concepts into short-term health policy wording;
- (deliberately) obfuscated description of premium adjustment wording within policies;
- improper categorisation of policy types;
- separate and additional risks being 'snuck into' the CBIRC filing of other, separate, main-risk policy wording; and
- material errors within policy wording, particularly relating to premiums, and within the materials lodged in support of the CBIRC filing of such Defective Policies.
Via its Rectification Orders, CBIRC have demanded that all Breaching Insurers (i) immediately cease selling any new Defective Policies; (ii) within specified timeframes, rectify the Defective Policies; and (iii) within specified timeframes, re-organise, and improve the function of, the product development and underwriting departments of the Breaching Insurers. Further, of the twenty Breaching Insurers, eleven have been singled out and banned from any new policy wording or premium filings with CBIRC for periods ranging from 3-6 months.
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