Risk control is key for insurance players when dealing with brokers

Insurance companies need to keep a tight rein on risks as their selection of available brokers widens, increasing costs and liabilities.

More financial institutions will be allowed to engage in the insurance brokering business by the end of this month. The China Insurance Regulatory Commission (CIRC) announced its planned revision on April 7 2011, which is open for public comment until April 27 2011. The draft regulation says that non-insurance institutions, including securities and trust companies, can participate in the sector, but that stricter regulatory scrutiny is required.

Insurance companies have to take responsibility for the brokering conduct of their partner financial institutions and are faced with the underlying risks. Because of this, they must be selective when deciding on a partner financial institution, advises Yanghui Cao, a Guangzhou-based partner at Wang Jing & Co. “The desirable choice should be the one that has a sound management system and an ample network of offices,” he said.