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After two rounds of soliciting opinions, the Internet property insurance regulatory rules finally ushered in a formal revision. On August 9, the Financial Regulatory Administration issued the "Notice on Strengthening and Improving the Supervision of Internet Property Insurance Business" (hereinafter referred to as the "Notice").

In recent years, regulatory authorities have issued new regulations for Internet insurance business, such as the "Internet Insurance Business Supervision Measures" and the "Notice on Further Regulating Insurance Institutions' Internet Personal Insurance Business". With the implementation of the "Notice", Internet property insurance business has also ushered in more detailed and specific regulatory rules. Which rules does the "Notice" focus on strengthening and improving? How will the implementation of the "Notice" affect the entire property insurance market?

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Lower operating threshold

After the original CBIRC issued the "Notice on Strengthening and Improving the Supervision of Internet Property Insurance Business (Draft for Comments)" (hereinafter referred to as the "Draft") in 2021, the Financial Regulatory Administration issued the "Notice on Strengthening and Improving the Supervision of Internet Property Insurance Business (Revised Draft)" for comments twice at the end of 2023. On August 9, the Financial Regulatory Administration officially issued the "Notice" to strengthen and improve the supervision rules of Internet property insurance business.

The Notice first stipulates the threshold for property insurance companies to conduct Internet property insurance business: Property insurance companies other than Internet insurance companies shall meet four conditions to conduct Internet property insurance business: the comprehensive solvency ratio shall not be less than 120% and the core solvency ratio shall not be less than 75% for the last four consecutive quarters; the comprehensive risk rating shall be Class B or above for the last four consecutive quarters; and other conditions stipulated by the State Administration of Financial Supervision. Internet insurance companies shall comply with the relevant conditions of the Internet Insurance Business Supervision Measures to conduct Internet property insurance business, and the solvency and comprehensive risk ratings at the end of the previous quarter shall meet the indicators required by the preceding paragraph. In principle, insurance institutions that meet the requirements may expand the operating area of ​​Internet property insurance business to provinces (autonomous regions, municipalities directly under the Central Government, and cities with independent planning status) where no branches have been established, and report the expansion of Internet property insurance business to the dispatched agencies in the expansion areas in a timely manner.

A Beijing Business Daily reporter compared and found that compared with the "Draft Opinion" issued by the original China Banking and Insurance Regulatory Commission in 2021, the entry threshold of the "Notice" has been lowered, and the two requirements of "no major administrative penalties for Internet insurance business within one year" and "no circumstances of operating Internet property insurance business that seriously infringes the rights and interests of insurance consumers within one year" have been deleted.

After a brief review by a Beijing Business Daily reporter, eight property and casualty insurance companies were "turned away", namely Anxin Property and Casualty Insurance, Huaan Property and Casualty Insurance, Bohai Property and Casualty Insurance, Qianhai United Property and Casualty Insurance, Everest Property and Casualty Insurance, Dubang Property and Casualty Insurance, Anhua Agricultural Insurance, and Fude Property and Casualty Insurance.

Special risk insurance, etc. shall not be operated across regions

In general, the Notice has both "restrictions" and "relaxations" on Internet property insurance business. It supports property insurance companies to develop small-amount, decentralized, convenient and inclusive property insurance products based on specific Internet scenarios. It strictly controls property insurance companies from expanding their motor vehicle insurance business areas to provinces (autonomous regions, municipalities directly under the Central Government, and cities with independent planning status) through the Internet without setting up branches.

It is worth noting that strict control does not mean "strict prohibition". The "Notice" points out that those with strong risk management, internal control management and comprehensive service capabilities, matching the corresponding regional market environment, market capacity, business demand, degree of competition, etc., and meeting the corresponding regional regulatory requirements can implement it after careful evaluation by the Financial Regulatory Administration.

In addition, the Notice also mentioned that property insurance companies operating agricultural insurance, ship insurance, special risk insurance and other types of insurance are not allowed to expand their operating areas through the Internet in principle. Liu Chunsheng, an associate professor at the Central University of Finance and Economics, told the Beijing Business Daily that these types of insurance often involve higher risk exposure or complex claims processes, requiring more professional risk assessment and on-site investigation capabilities. Online cross-regional sales may increase risks due to information asymmetry, inadequate services and other issues, which is not conducive to the effective management of risks by insurance companies.

"In recent years, the property and casualty insurance market has been highly competitive. Strict online cross-regional sales of special risk insurance and other types of insurance are also aimed at preventing disorderly competition, maintaining market stability and protecting consumer rights." Yang Zeyun, a teacher at the Department of Finance, School of Business, Beijing Union University, further analyzed that these types of insurance businesses not only have more complex risk management themselves, but also face different risk conditions in different regions. At the same time, they also require quick claims settlement services after an accident. Online cross-regional sales not only make it difficult to control risks, but also make it difficult to provide good customer services.

Strengthening the management and control of cooperative institutions

In recent years, some Internet platforms, TPA institutions, OTA platforms, etc. have been exploring the integration of Internet insurance with their own business scenarios. Products such as return freight insurance and aviation accident insurance have entered the lives of consumers intentionally or unintentionally.

However, problems such as malicious bundling and forced tie-in sales are also emerging one after another.

The Notice puts forward targeted requirements: Property and casualty insurance companies and Internet platforms should carefully select partners when cooperating in Internet property insurance business. Establish a mechanism for the entry and exit of partners, clarify the corresponding standards and procedures, conduct full assessment and due diligence on partners, and implement a list management system. Internet platforms that act as insurance agents should obtain a license to operate insurance agency business.

Regarding offline cooperative institutions, the Notice mentioned that when property insurance companies entrust offline cooperative institutions to provide on-site services, they should carefully screen their partners, and offline cooperative institutions should have three years or more of property insurance business service experience. At the same time, it is required that service evaluations should be conducted at a frequency of no less than once a year. For offline cooperative institutions with problems such as poor evaluation results, many complaints and reports from financial consumers, low service quality, and poor internal management, timely measures should be taken, and relevant matters such as information disclosure and follow-up service plans should be prepared for the protection of financial consumer rights.

Liu Chunsheng said that by selecting cooperative institutions with a stable operating history and good reputation, business risks caused by problems with the partners, such as fraud, illegal operations, etc., can be reduced. Standardizing the qualification requirements of cooperative institutions will help maintain fair competition and healthy development of the market and prevent bad cooperative institutions from disrupting the market order.

Before the issuance of the Notice, the only regulatory rules applicable to Internet property insurance business were the Internet Insurance Business Supervision Measures. Yang Zeyun introduced that the Notice is an important regulatory document for insurance regulatory agencies to further regulate and develop Internet property insurance business, and is also a supporting regulatory document for the Internet Insurance Business Supervision Measures. It improves the regulatory rules for Internet property insurance business, refines industry norms and standards, strengthens risk management, and strengthens the protection of consumer rights, which is conducive to promoting the healthy and sustainable development of Internet property insurance business.

Talking about the impact of the implementation of the "Notice" on the property insurance market, Song Zhanjun, deputy secretary-general of the China Insurance Research Institute of Beijing Technology and Business University, believes that the "Notice" generally encourages property insurance companies to actively operate Internet property insurance business without setting high registered capital or solvency requirements. In general, the "Notice" is more open and encourages innovation, creating a good market environment for small and medium-sized insurance companies.

Beijing Business Daily reporter Li Xiumei