Banks to be more selective of insurance partners

December 14, 2010 | BY

Janice Qu

New rules highlight risk control for insurance sales at banks

Insurance companies selling products through banks may face difficulties as lenders become more cautious when choosing insurance partners.

The China Banking Regulatory Commission (CBRC) has tightened up rules regulating the sale of insurance by banks. The new rules emphasise risk control, now requiring banks to clarify for customers all the risks related to the insurance products and prohibiting the sale of the insurance products together with deposits. Insurance company salespeople are banned from being based at bank branches and each bank branch can only sell the insurance products of no more than three insurance companies.

In addition, the new rules stipulate that bank staff responsible for selling insurance must now have a concurrent business agent licence from the CBRC, record telephone conversations between its staff and customers when selling insurance, and perform a risk profile assessment.

Shanghai-based HHP Attorneys-at-Law partner, Benjamin Zhao said: “Actually, the CBRC is prohibiting banks from misleading its customers by confusing them of the difference between insurance products, bank savings and deposits.”

As banks are able to earn commission from sold insurance products, many disputes had arisen from customer confusion as the banks tried to increase their insurance sales.

“Insurance companies that have a significant part of their revenue relying on bank channels to sell products may face difficulties when cooperating with banks,” said Zhao. With the new restrictions, lenders are likely to become more conservative in selecting its insurance sales business partners, he noted.

In 2006, the CBRC and the China Insurance Regulatory Commission (CIRC) jointly issued a regulation addressing the concern that banks would mislead customers when selling insurance products.

Earlier insurance laws set that companies wanting to sell insurance, but whose primary business was something other than selling insurance, had to obtain a concurrent business insurance agency licence from the CIRC. If the head office of a bank became qualified to sell insurance products, then all its branches were allowed to sell insurance.

This premium content is reserved for
China Law & Practice Subscribers.

  • A database of over 3,000 essential documents including key PRC legislation translated into English
  • A choice of newsletters to alert you to changes affecting your business including sector specific updates
  • Premium access to the mobile optimized site for timely analysis that guides you through China's ever-changing business environment
For enterprise-wide or corporate enquiries, please contact our experienced Sales Professionals at +44 (0)203 868 7546 or [email protected]