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On August 9, the State Financial Supervision and Administration Bureau issued the "Notice on Strengthening and Improving the Supervision of Internet Property Insurance Business" (hereinafter referred to as the "Notice"), which puts forward regulatory requirements for property insurance companies (including mutual insurance organizations and Internet insurance companies) and insurance intermediary institutions to conduct Internet property insurance business.

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Specifically, insurance companies must meet the following conditions to carry out Internet property insurance business: the comprehensive solvency ratio is not less than 120% and the core solvency ratio is not less than 75% for the last four consecutive quarters; the comprehensive risk rating is B or above for the last four consecutive quarters; and other conditions stipulated by the State Administration of Financial Supervision.

The Notice requires that a transition period be granted to property insurance companies that have already carried out Internet property insurance business. Property insurance companies should promote rectification on the basis of effectively protecting the legitimate rights and interests of financial consumers and fully comply with the requirements of this Notice before December 31, 2024.

Higher requirements for solvency

The Internet property insurance business referred to in the "Notice" refers to the insurance business activities of property insurance companies selling property insurance products, concluding property insurance contracts, and providing property insurance services by establishing their own online platforms or entrusting insurance intermediary institutions to their own online platforms.

The "Internet Insurance Business Supervision Measures" issued in December 2020 stipulate that insurance companies should comply with relevant regulations on solvency, consumer rights protection and regulatory evaluation when conducting Internet insurance sales. According to the "Insurance Company Solvency Management Regulations", insurance companies must meet the core solvency adequacy ratio of not less than 50%, the comprehensive solvency adequacy ratio of not less than 100%, and the comprehensive risk rating of B or above.

This "Notice" puts forward higher requirements for insurance companies to carry out Internet property insurance business: the comprehensive solvency adequacy ratio shall not be less than 120% for the last four consecutive quarters, and the core solvency adequacy ratio shall not be less than 75%; the comprehensive risk rating shall be B or above for the last four consecutive quarters; and other conditions stipulated by the State Administration of Financial Supervision.

The reporter of "Daily Economic News" noticed that many companies failed to meet the new regulatory requirements. For example, as of the end of the second quarter of 2024, the core and comprehensive solvency ratios of Qianhai Property & Casualty Insurance were both 106.1%, failing to meet the requirement of "comprehensive solvency ratio not less than 120%". Qianhai Property & Casualty Insurance's official website shows that the company currently has 19 Internet insurance products on sale, including return freight insurance, food safety liability insurance (rest assured to eat), takeaway delay insurance (on-time insurance), aviation accident insurance, and employer liability insurance.

According to the requirements of the Notice, if a property insurance company does not meet the operating conditions stipulated in the above-mentioned Notice, it shall immediately stop conducting new Internet property insurance business. Within 10 working days from the date of stopping conducting new business, it shall report to the Financial Regulatory Bureau or its dispatched agency responsible for daily supervision, and disclose relevant information on the official website, self-operated online platform, and the self-operated online platform of the entrusted insurance intermediary institution. For insurance contracts that have come into effect, the insurance liability agreed in the contract shall continue to be fulfilled, and follow-up services such as claims settlement shall be provided.

In addition, Internet insurance companies that carry out Internet property insurance business must comply with the relevant conditions of the "Internet Insurance Business Supervision Measures", and their solvency and comprehensive risk rating at the end of the previous quarter must meet the indicators required by the preceding paragraph. Specifically, Anxin Property & Casualty Insurance's solvency is not up to standard, and its business development is currently stagnant.

Establish a mechanism for partners to enter and exit

A reporter from the "Daily Economic News" noticed that in September 2021, regulators issued a "Notice on Strengthening and Improving the Supervision of Internet Property Insurance Business (Draft for Comments)" to the industry, which stipulated that "qualified insurance companies may conduct Internet property insurance business other than motor vehicle insurance and agricultural insurance nationwide without setting up branches."

The "Notice" issued this time requires that property insurance companies that meet the conditions of this notice can, in principle, 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. Property insurance companies operating agricultural insurance, ship insurance, special risk insurance and other types of insurance shall not, in principle, expand their operating areas through the Internet.

In addition, the "Notice" also requires that property insurance companies are strictly prohibited from expanding their operating areas through the Internet for offline businesses to evade local supervision.

For insurance intermediaries conducting related businesses, in addition to requiring that "insurance professional intermediary institutions should be national institutions", the "Notice" must also meet the following conditions: "have more than three years of experience in property insurance business operation", "sales management, policy management, customer service and other information systems are complete, business process management meets business needs, and the institution itself complies with the relevant requirements for traceable management of Internet property insurance business" and so on.

The Notice also requires that property insurance companies and Internet platforms should carefully select partners when cooperating in Internet property insurance business. They should 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.

According to the requirements of the Notice, if an insurance institution conducts Internet property insurance business and violates the relevant provisions of this Notice, the Financial Regulatory Bureau and its dispatched agencies may make rectification requirements in accordance with laws and regulations, take relevant regulatory measures or impose administrative penalties. A transition period will be given to property insurance companies that have already conducted Internet property insurance business. Property insurance companies should promote rectification on the basis of effectively protecting the legitimate rights and interests of financial consumers and fully comply with the requirements of this Notice before December 31, 2024.

Daily Economic News