Guidelines for Regulation of the Bancassurance Business of Commercial Banks

(Issued by the China Insurance Regulatory Commission and the China Banking Regulatory Commission on, and effective as of, March 7 2011.)

Bao Jian Fa [2011] No.10

Part One: General provisions

Article 1: These Guidelines have been formulated pursuant to laws, administrative regulations, and rules such as the PRC Insurance Law (the Insurance Law), the PRC Law on Commercial Banks (the Commercial Banks Law), the PRC Law on the Regulation of the Banking Sector (the Banking Sector Law) in order to regulate the operation of the bancassurance business of commercial banks, protect the lawful rights and interests of consumers of insurance and promote the sustained healthy development of the bancassurance business of commercial banks.

Article 2: For the purposes of these Guidelines, the term “bancassurance business of a commercial bank” means the business activity wherein a commercial bank, upon appointment by an insurance company, sells insurance products and provides related services on behalf of the insurance company to the extent authorised by the insurance company and for which it charges the insurance company an agency fee in accordance with the law.

Article 3: When an insurance company and a commercial bank engage in the bancassurance business, they shall comply with laws, administrative regulations and relevant provisions of the China Insurance Regulatory Commission (CIRC) and the China Banking Regulatory Commission (CBRC), abide by the principles of free will, good faith and fair competition, seek to make up the deficiencies of one with the strengths of the other, achieve a win-win situation and create value for consumers of insurance.

Article 4: The CIRC and CBRC shall perform their duty of regulating the bancassurance business of commercial banks in accordance with the Insurance Law, Commercial Banks Law and Banking Sector Law and as authorised by the State Council.

The agencies of the CIRC and the CBRC shall perform regulatory duties within the scope authorised by the CIRC and the CBRC.

Part Two: Agency relationship

Section One: Cooperation counterparties

Article 5: Insurance companies and commercial banks shall prudently select their cooperation counterparties and rationally determine the scope and number of such cooperation counterparties by taking into account its and the opposite party's capital situation, asset size, management and control capabilities and other such factors.

Article 6: When selecting a cooperating commercial bank, an insurance company shall fully consider the commercial bank's capital adequacy ratio, risk management and control capabilities, place of business, soundness of its bancassurance business and financial management systems, penalties imposed by regulatory authorities in the last two years, etc.

Article 7: When selecting a cooperating insurance company, a commercial bank shall fully consider the insurance company's solvency, risk management and control capabilities, business and financial management information systems, penalties imposed by regulatory authorities in the last two years, etc.

Article 8: When an insurance company or commercial bank is selecting and assessing a cooperation counterparty, it shall consult the information disclosed by the regulatory department, external auditor, rating agency and industry association and ensure that the information it obtains is true and reliable.

Article 9: An insurance company or commercial bank shall maintain the stability of its cooperative relationships and customer services. The continuous cooperation term of any single bancassurance handling entity in a commercial bank's network with each insurance company may not be less than one year.

If, during the term of cooperation, either party comes to be characterised by a situation that has a material adverse impact on the cooperative relationship between the parties, the other party may suspend the cooperation early. With respect to the suspension of cooperation between an entity in a commercial bank's network and an insurance company, the commercial bank shall cooperate with the insurance company in duly handling follow-up services for policies, such as settlement at maturity, surrender, complaint handling, etc.

Article 10: A commercial bank may not sub-entrust its bancassurance business to another organisation or individual.

Section Two: Agency qualifications

Article 11: The CIRC exercises control over the bancassurance qualifications of entities in commercial banks' networks in accordance with the law.

(1) When a commercial bank engages in the bancassurance business, each of the entities in its business network shall secure an insurance agency permit issued by the CIRC and authorisation as a top-level establishment (including the branch of a province, autonomous region, municipality directly under the central government or city with independent development plans) before engaging in such business.

(2) An insurance company may not appoint an entity in the network of a commercial bank that has not secured an insurance agency permit to engage in the bancassurance business.

(3) The use and administration of the insurance agency permit of an entity in the network of a commercial bank shall be handled in accordance with relevant provisions of the China Insurance Regulatory Commission, Measures for the Administration of Insurance Permits.

(4) An entity in the network of a commercial bank shall post a uniformly prepared notice on applying for insurance in a prominent location in its place of business.

Article 12: The CIRC exercises control over the qualifications of the bancassurance sales personnel of commercial banks and the personnel in charge of the bancassurance business of insurance companies in accordance with the law.

(1) Commercial banks and insurance companies shall, in accordance with relevant provisions of the regulators, provide bancassurance sales personnel of commercial banks and personnel in charge of the bancassurance business of insurance companies with training in laws and regulations and vocational knowledge and education in professional ethics.

(2) The bancassurance sales personnel of commercial banks shall satisfy the conditions for the qualifications to engage in insurance sales specified by the CIRC and have secured an Insurance Salesperson Qualification Certificate issued by the CIRC. Personnel who sell investment-linked insurance shall additionally have at least one year of insurance sales experience, received at least 40 hours of specialised training and not have a record of improper conduct.

(3) The personnel in charge of the bancassurance business of an insurance company shall have secured an Insurance Salesperson Qualification Certificate issued by the CIRC and shall receive at least 36 hours of training each year.

Section Three: Agency agreement

Article 13: When an insurance company appoints a commercial bank to handle bancassurance business, the agency agreement shall, in principle, be executed exclusively by their respective head offices. If top-level establishments (including branches of a province, autonomous region, municipality directly under the central government or city with independent development plans) of an insurance company and a commercial bank genuinely need to execute an agency agreement, they shall each first secure the written authorisation of their respective head offices and submit the agency agreement to their respective head offices for the record in a timely manner once the same is executed.

Article 14: If an insurance company appoints a regional commercial bank to handle bancassurance business, the agency agreement may be executed by the head office of the regional commercial bank and the head office of the insurance company or the top-level establishment of the insurance company of the place where the business is to be carried on. The top-level establishment of the insurance company shall first secure the written authorisation of the head office and submit the agency agreement to its head office for the record in a timely manner once the same is executed.

Article 15: The agency agreement executed by an insurance company and a commercial bank shall include but not be limited to major provisions addressing the following: the products sold, the agency fee rate and method of payment, management of documents and publicity materials, customer account and identity information verification, anti-money laundering, confidentiality of customer information, division of the rights and responsibilities of the parties, dispute resolution, crisis response and customer complaint-handling mechanisms, term of cooperation, entry into effect, amendment and termination of the agreement, liability for breach of contract, etc.

Part Three: Operating rules

Section One: Insurance products

Article 16: The insurance products that an insurance company appoints a commercial bank to sell shall be insurance products that have been approved by or recorded with the CIRC in accordance with relevant CIRC provisions on the administration of the approval and record filing of insurance products.

Article 17: The title section on the cover of a policy for an insurance product that an insurance company has appointed a commercial bank to sell shall carry the words “Insurance Policy” or “Insurance Contract”, the name of the insurance company, etc. in a distinctive font, and the insurance contract shall contain the insurance terms and other key contract elements.

Article 18: An insurance company shall fully leverage the core technical strengths of long-term asset to liability matching management and risk protection and a commercial bank shall fully leverage the strengths of its sales channels to vigorously develop in their bancassurance business long-term savings type and risk protection type insurance products, adjust and optimise the bancassurance business structure on an ongoing basis and provide comprehensive financial services to customers.

Article 19: In the course of their cooperation, an insurance company and commercial bank shall intensify product innovation and, taking consumer demand as their guide, promote diversification and differentiation in bancassurance products so as to continuously satisfy customers' ever-increasing demand for insurance protection and financial asset management.

Section Two: Agency fees

Article 20: When negotiating agency fees, an insurance company and commercial bank shall jointly promote the sustained healthy development of the bancassurance market of commercial banks by basing themselves on the principles of mutual benefit, win-win, joint development and protection of the interests of consumers.

Article 21: When the insurance company pays the agency fee to the commercial bank, payment shall be effected by account transfer exclusively from the top-level establishment of the insurance company to the top level or, at minimum, to the secondary-level establishment of the agent commercial bank, and where the conditions are satisfied, payment shall be made exclusively by the head office of the insurance company to the head office of the agent commercial bank. Where a local commercial bank has been appointed to handle bancassurance business, payment shall be effected by account transfer exclusively from the top-level establishment of the insurance company to the head office or top-level establishment of the local commercial bank.

Article 22: An insurance company shall truthfully list the agency fees paid to a commercial bank as expenses in accordance with the financial system, and may not account for or operate the same off the books. A commercial bank shall strengthen the centralised management of agency fees and list the costs for the business incentives to its bancassurance sales personnel under the agency fees.

Article 23: An insurance company and its working personnel may not directly or indirectly offer advantages off the books to a cooperating commercial bank or its working personnel not provided for in the cooperation agreement, including the payment of cash or any type of negotiable security, reimbursement of expenses, offering of travel opportunities, etc. A commercial bank and its working personnel may not in any manner accept or solicit from an insurance company or its working personnel any advantages not provided for in the cooperation agreement. The insurance company and commercial bank shall strengthen the education and management of their personnel, and enhance their management systems so as to guard against the risks of commercial bribery.

Article 24: Insurance industry associations and banking industry associations shall, through strengthening industry self-regulation, actively fulfil their roles of maintaining market order and promoting fair competition.

Article 25: The regulatory departments will lawfully and stringently investigate and deal with acts that, through unfair competition means such as offering, accepting or soliciting advantages not provided for in a cooperation agreement, disturb market order and infringe upon the interests of consumers.

Section Three: Sales model

Article 26: A commercial bank and insurance company shall strengthen their cooperation in accordance with their agency agreement. Personnel who sell insurance products directly to customers through an entity in the network of the commercial bank, shall be sales personnel of the commercial bank who have insurance agent qualification certificates. The commercial bank may not permit the insurance company to second personnel to entities in its banking network. The personnel of an insurance company that are in charge of bancassurance business of commercial banks shall be responsible for providing services to the commercial bank such as training and document exchange and assisting the commercial bank in duly providing relevant after-sale customer services such as settlement at maturity and premium collection at renewal.

Article 27: A commercial bank shall define different sales areas based on the degree of complexity of insurance products. Investment-linked insurance products may not be sold from the savings counter of the commercial bank. With respect to insurance products the policy term or premium payment term of which is relatively long, the degree of protection is high, the product design of which is relatively complex or that require a relatively long period of time to explain, a commercial bank shall actively seek to create a wealth management service area, dedicated wealth management counter, wealth centre, private banking, or other such sales area established expressly for that purpose and, through the control of sales areas and sales teams, enhance sales quality by having the appropriate personnel selling the appropriate products to the appropriate customers.

Article 28: A commercial bank and insurance company shall strengthen their strategic cooperation and, provided that the same can be done lawfully and compliantly and that risks are controllable, they shall cooperate in launching telephone sales, online sales and other such innovative sales models.

Article 29: If a commercial bank wishes to sell an insurance product by telephone, it shall first secure the consent of the customers; the sales personnel shall be bank employees that have insurance salesperson qualifications; the act of selling shall be carried out using uniform standardised language, the customer shall be expressly informed that what is being sold is an insurance product, and the entire sales telephone call shall be recorded and duly kept.

Article 30: If a commercial bank sells insurance products through online banking, a prominent risk warning shall be posted, the various risk control measures in the sales process may not be of a standard lower than those for the entities in the commercial bank's network and a complete record of the sales process shall be retained. The insurance company shall cooperate with the commercial bank in providing electronic insurance policies, and continuously improve and upgrade service quality. Steps shall be taken to ensure that high-risk complex insurance products are sold to appropriate customers with the corresponding risk bearing capacity.

Section Four: Sales

Article 31: A commercial bank, as the entity actually selling bancassurance, shall strengthen management of the sale of bancassurance, intensify its internal training of sales personnel, strengthen its internal pursuit of liability for acts such as misleading sale and erroneous sale that violate regulations, and establish and enhance the relevant management system and penalty system.

Article 32: A commercial bank and its working personnel shall use the insurance-product publicity materials centrally prepared by the head office of the insurance company or the top-level establishment of the insurance company authorised to do so by the head office, and may not themselves, without authorisation, print publicity materials for the products they sell or modify the content of the product publicity materials.

Article 33: A salesperson shall, in the course of selling an insurance product, provide to the proposer in writing the application notice and product description required by the insurance regulator and procure the provision by the proposer of true and complete customer information on the application and, in the case of an application for a new personal insurance product, his or her copying of the relevant declaration, and may not copy the relevant declaration for him or her or sign for the proposer or the insured. Additionally, for a proposer of an investment-linked insurance product, the salesperson shall assess his or her risk-bearing capacity, and may not sell such product to a customer for whom such assessment has not been made or who, through an assessment, has been determined not to be suitable for such product.

Article 34: A salesperson is responsible for fully and objectively describing the insurance product during the sales process and shall, based on the insurance terms, expressly inform the customer about key matters such as insurance liability, liability waiver, surrender charge, cash value of the policy, deadline for payment of the premiums and hesitation period.

Article 35: A salesperson may not conduct a misleading sale or erroneous sale. During the sales process, a salesperson may not blur the lines between insurance products and savings deposits, bank wealth management products, etc., may not use inappropriate language such as “jointly launched by the bank and insurance company”, “launched by the bank” or “new bank wealth management service”, may not indiscriminately apply concepts such as “principal”, “interest” or “deposit” to the insurance products, may not draw superficial analogies between the benefits of an insurance product and the returns on bank deposits, returns on sovereign bonds, etc., may not exaggerate or exaggerate in a disguised manner the benefits of an insurance contract and may not promise fixed dividend returns.

Article 36: An entity in the network of a commercial bank and its sales personnel may not conduct misleading sales or induce sales by such means as drawing prizes, conducting raffles, giving things away, giving insurance away, halting the sale of a product, etc. An insurance company may not support or encourage a commercial bank in doing the foregoing.

Article 37: The commercial bank shall provide comprehensive, complete and true insurance application information of customers to the insurance company, so as to ensure that the insurance company's underwriting business and customer visitation work proceed smoothly. The insurance company shall establish an examination mechanism for insurance application information and may not underwrite items of insurance for which the application information is incomplete, or for which the customer information has been fabricated or altered.

Article 38: The commercial bank and insurance company shall progressively unify their systems for assessment of the risk-bearing capacity of proposers so as to provide convenience to customers wishing to take out insurance.

Article 39: With respect to information that insurance companies are required to disclose, the insurance company shall centrally disclose the same on its official website or in the designated media in accordance with the relevant requirements of the measures of the CIRC for the administration of information disclosure.

Article 40: The insurance company shall, during the hesitation period, visit a proposer who was sold a personal insurance product with a term of at least one year through the commercial bank's channels. When a proposer applies to the commercial bank for surrender, settlement upon maturity or payment of premiums at renewal, the commercial bank and insurance company shall cooperate and carry out the pertinent work in a timely manner.

Section Five: Financial accounting

Article 41: An insurance company that engages in the bancassurance business of a commercial bank shall establish an independent financial accounting and assessment mechanism for such bancassurance business and practise independent accounting of the value of, profits from and costs of new business.

Article 42: Insurance companies shall rationally formulate financial budgeting policies and business incentive policies for the bancassurance business of commercial banks based on the principle of prudence so as to prevent the occurrence of business acts that only take into account business size without consideration of costs and guard against premium difference loss risk. Their head offices shall duly bear the responsibility of managing their establishments, and regulators shall stringently investigate and deal with vicious price competition in the bancassurance business in accordance with the law and intensify their pursuit of the management liability of the entities with legal personality and senior officers at every level.

Article 43: A commercial bank shall truthfully enter the agency fees derived from the bancassurance business into its accounts and separately account for the insurance premiums collected for and agency fees derived from each different insurance company.

Section Six: Contingency mechanism

Article 44: An insurance company and commercial bank shall treat incidents of mass petitioning, mass surrender, etc. that occur in their bancassurance business as material events and establish a joint mechanism for responding to and dealing with material events. They shall jointly formulate measures for dealing with material events, designate personnel responsible for the same, establish a contingency handling committee and establish a joint information disclosure mechanism so as to duly respond in a timely manner in the event that a material event arises.

Article 45: An insurance company and commercial bank shall actively deal with events such as a customer complaint or surrender as soon as possible, establish a system whereby the party first approached is responsible for handling the matter and may not each attempt to shift responsibility onto the other, so as to avoid a negative impact causing the situation to escalate. The party dealing with the event shall take measures in a timely manner to duly resolve the issue in accordance with the jointly formulated measures for dealing with material events.

Article 46: When a material event arises, the head offices of the insurance company and commercial bank shall report the same to the CIRC and CBRC in a timely manner; and their establishments in the place where the event occurred shall report the same to the local agencies of the CIRC and CBRC in a timely manner.

Section Seven: Intra-industry exchanges

Article 47: An insurance company and commercial bank shall establish a regular exchange mechanism to regularly exchange information on their bancassurance business.

Article 48: An insurance industry association and bank industry association shall establish a regular exchange mechanism to regularly exchange inter-industry information on the bancassurance business of commercial banks and self-regulation.

Part Four: Monitoring inspections

Article 49: The CIRC, CBRC and their agencies shall conduct onsite inspections of the bancassurance business of commercial banks in accordance with the law.

The CIRC, CBRC and their agencies may conduct joint onsite inspections of the bancassurance business of commercial banks, and take regulatory measures against violations of regulations, pursue the attendant liability and impose appropriate penalties in accordance with the law.

Article 50: If an insurance company, commercial bank, an establishment thereof or a member of their personnel violates these Guidelines, the CIRC, CBRC and/or their agencies shall impose penalties in accordance with laws, administrative regulations, or rules. If a criminal offence is suspected, the case shall be handed over to the judicial authorities for criminal prosecution.

Article 51: The CIRC, CBRC and their agencies shall strengthen communication and exchanges on the oversight of the bancassurance business of commercial banks, regularly communicate and exchange information on the oversight of the bancassurance business of commercial banks and communicate information on onsite inspections of, and imposition of penalties in connection with, the bancassurance business of commercial banks to the opposite party in a timely maner.

Part Five: Supplementary provisions

Article 52: The insurance agency business of other banking financial institutions and postal companies shall be handled with reference to these Guidelines.

Article 53: These Guidelines shall be effective as of the date of issuance.