China Amends Law to Further Open up Insurance Industry

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Last updated at: (Beijing Time) Monday, June 24, 2002

China Amends Law to Further Open up Insurance Industry

China's legislators are making amendments to the 7-year-old Insurance Law to further open up China's insurance industry, since the entry into the World Trade Organization (WTO).

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China's legislators are making amendments to the 7-year-old Insurance Law to further open up China's insurance industry, since the entry into the World Trade Organization (WTO).

The amendment draft to the Insurance Law of China was submitted to the Standing Committee of the National People's Congress (NPC) Monday.

Ma Yongwei, chairman of the China Insurance Regulatory Commission (CIRC), said that the Insurance Law, implemented in 1995, has played an important role in updating the insurance industry and protecting the interests of policy holders. However in recent years the present Insurance Law has not met the current situation and now needs to have some changes.

The draft, in line with China's commitments to the WTO, brings the life insurance business into reinsurance, saying that insurance companies should conduct the reinsurance business according to regulations.

Since Chinese and foreign insurance companies are now allowed to conduct joint ventures in China, the draft law allows insurance businesses to invest in businesses excluding securities companies.

Currently, insurance rates and items were set up by the regulatory administration, which had barriers to the development of business insurance. The draft law states, insurance rates and items in relation to public interest and new forms of business should be approved by the regulatory administration.

In keeping with international rules for short-term health insurance and accident insurance, the draft law states an individual insurer cannot sell property and life insurance at the same time while the real estate insurance business can operate two types of business with the approval of the CIRC.

The current insurance law hinders the development of the professional and pluralistic insurance agent, and leads to a monopoly of the old insurance business, which acts against fair competition in the insurance industry. In the meantime, supervision of the individual insurance agent needs to be strengthened. The draft law says individual insurance agents should not be entrusted with life insurance at the expense of the above two insurers.

To avoid and resolve insurance risks and strengthen the liquidation capability of insurance companies, the draft law rectifies the regulation of reserve drawing, grants regulatory administrations to inquire into insurance companies' deposits in financial institutions, and links the "legal responsibility" in the current law to China's criminal law.

The draft law has also made some changes to the concept of regulatory administration.

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