Regulations on Mandatory Liability Insurance for Motor Vehicle Traffic Accidents (2nd Revision)

Article 2: Owners or managers of motor vehicles driven on roads in the People's Republic of China shall take out mandatory liability insurance for motor vehicle traffic accidents in accordance with the PRC Road Traffic Safety Law.

These Regulations shall govern the taking out of, indemnification from, and regulation of, mandatory liability insurance for motor vehicle traffic accidents.

Article 3: For the purposes of these Regulations, the term “mandatory liability insurance for motor vehicle traffic accidents” (Car Accident Insurance) means mandatory liability insurance under which the insurance company, when the insured motor vehicle is involved in a road traffic accident, pays indemnification within the liability limit for the injury, death and/or property loss caused to victims other than the persons in the vehicle and the insured by the insured motor vehicle.

Article 4: The State Council's insurance regulatory authority (the CIRC) shall regulate the Car Accident Insurance business of insurance companies in accordance with the law.

The traffic administration departments of public security authorities and the departments in charge of agriculture (agricultural machinery) (hereinafter collectively referred to as the Motor Vehicle Administration Authorities) shall conduct, in accordance with the law, monitoring inspections of whether motor vehicles are covered by Car Accident Insurance. Motor Vehicle Administration Authorities may not register and motor vehicle safety technology inspection authorities may not inspect motor vehicles not covered by Car Accident Insurance.

When the traffic administration department of a public security department and its traffic officers are investigating and dealing with a road traffic safety infraction or road traffic accident, they shall check the Car Accident Insurance tag in accordance with the law.

Part Two: Taking out insurance

Article 5: Subject to the approval of the CIRC, an insurance company may engage in the Car Accident Insurance business.

With a view to ensuring the implementation of the Car Accident Insurance system, the CIRC shall have the authority to require an insurance company to engage in the Car Accident Insurance business.

No entity or individual may engage in the Car Accident Insurance business without the approval of the CIRC.

Article 6: Car Accident Insurance shall be subject to uniform insurance terms and basic premium rates. The CIRC shall examine and approve premium rates for the Car Accident Insurance business based on the overall principle of no profit and no loss.

When examining and approving premium rates, the CIRC may engage a relevant professional firm to conduct an appraisal or conduct hearings to receive the opinions of the public.

Article 7: The Car Accident Insurance business of an insurance company shall be managed and accounted for separately from its other insurance business.

The CIRC shall conduct reviews of the Car Accident Insurance business of insurance companies annually and publicly announce the same. Based on the overall profitability or loss situation of the Car Accident Insurance business of an insurance company, the CIRC may require or permit it to revise its premium rates accordingly.

If the extent of the revision of an insurance premium rate would be relatively large, the CIRC may conduct a hearing.

Article 8: If an insured motor vehicle is not involved in a road traffic safety infraction or road traffic accident, the insurance company shall reduce its premium rate the following year. If in subsequent years the insured motor vehicle remains free of road traffic safety infractions and road traffic accidents, the insurance company shall continue to reduce its premium rate until it reaches the lowest rate. If an insured motor vehicle is involved in a road traffic safety infraction or road traffic accident, the insurance company shall increase its premium rate the following year. If it is involved in multiple road traffic safety infractions and/or road traffic accidents, or a major road traffic accident, the insurance company shall increase the range by which it increases its insurance premium rate. If the insured is not at fault in a road traffic accident, the insurance company shall not increase his/her/its premium rate. The rates for reducing and increasing premium rates shall be formulated by the CIRC in concert with the State Council's public security department.

Article 9: The CIRC, the State Council's public security department, the State Council's department in charge of agriculture and other relevant authorities shall gradually establish a mechanism for sharing information on Car Accident Insurance, road traffic safety infractions and road traffic accidents.

Article 10: When applying for insurance, a proposer shall select an insurance company that has the qualifications to engage in the Car Accident Insurance business and the insurance company selected may not refuse or delay the underwriting of the insurance.

The CIRC shall publicly announce the insurance companies that are qualified to engage in the Car Accident Insurance business.

Article 11: When applying for insurance, a proposer shall truthfully inform the insurance company of important particulars.

Important particulars include the type, brand, model, vehicle identification number, licence plate number and nature of use of the motor vehicle, the name, sex, age, domicile, ID card or driver's licence number (organisation code) of the owner or manager, details of accidents in which the motor vehicle was involved prior to renewal and other particulars as specified by the CIRC.

Article 12: When executing a Car Accident Insurance contract, the proposer shall pay all of the premium in one lump sum. The insurance company shall issue the proposer an insurance policy and insurance tag. The insurance policy and insurance tag shall indicate the policy number, licence plate number, policy period, and the name, address and claim telephone number of the insurance company.

The insured shall affix the insurance tag to the insured motor vehicle.

The format of the insurance tag shall be uniform nationwide. Insurance policies and insurance tags shall be printed under the supervision of the CIRC. No entity or individual may forge, alter or use forged or altered insurance policies or insurance tags.

Article 13: When executing a Car Accident Insurance contract, the proposer may not request that the insurance company add other conditions beyond the insurance terms and premium rate.

When executing a Car Accident Insurance contract, an insurance company may not compel the proposer to enter into a commercial insurance contract or demand that other conditions be added.

Article 14: An insurance company may not terminate a Car Accident Insurance contract unless the proposer failed to perform his/her/its obligation of truthfully informing the insurance company of important particulars.

Before an insurance company terminates a contract for the proposer's failure to perform his/her/its obligation of truthfully informing the insurance company of important particulars, it shall notify the proposer thereof in writing and the proposer shall perform his/her/its obligation of truthfully informing the insurance company within five days from the date of receipt of the notice. If the proposer performs his/her/its obligation within the aforementioned period of time, the insurance company may not terminate the contract.

Article 15: When an insurance company terminates a Car Accident Insurance contract, it shall recover the insurance policy and insurance tag, and notify the Motor Vehicle Administration Authorities thereof in writing.

Article 16: A proposer may not terminate a Car Accident Insurance contract, except in the following circumstances:

(1) the insured motor vehicle is deregistered in accordance with the law;

(2) procedures for termination of driving are carried out for the insured motor vehicle; or

(3) the insured motor vehicle is certified as lost by the public security department.

Article 17: Until a Car Accident Insurance contract is terminated, the insurance company shall bear the insurance liability in accordance with the contract.

When a contract is terminated, the insurance company may charge the premiums for the period from the date of commencement of the insurance liability to the date of termination of the contract and shall refund the remainder to the proposer.

Article 18: If ownership of an insured motor vehicle is transferred, the procedures for amendment of the Car Accident Insurance contract shall be carried out.

Article 19: When a Car Accident Insurance contract expires, the proposer shall carry out renewal procedures in a timely manner and provide the insurance policy for the preceding year.

Article 20: Car Accident Insurance shall be valid for one year. However, the proposer may take out short-term Car Accident Insurance if:

(1) the motor vehicle is a foreign motor vehicle that is entering China temporarily;

(2) the motor vehicle will be used on the road temporarily;

(3) the motor vehicle is less than one year away from the prescribed decommissioning date; or

(4) another circumstance as specified by the CIRC applies.

Part Three: Indemnification

Article 21: When an insured motor vehicle is involved in a road traffic accident causing injury, death and/or property loss to a victim other than the persons in the vehicle and the insured, the insurance company shall pay indemnification within the scope of the liability limit of the Car Accident Insurance in accordance with the law.

If the loss in a road traffic accident was deliberately caused by the victim, the insurance company shall not pay indemnification.

Article 22: An insurance company shall advance emergency treatment expenses within the scope of the liability limit of the Car Accident Insurance and shall have the right of recovery against the person that caused the injury if:

(1) the driver did not have driving qualifications or was intoxicated;

(2) the insured motor vehicle caused the accident while in the possession of a thief; or

(3) the insured deliberately caused the road traffic accident.

If a road traffic accident occurs in any of the circumstances set forth in the preceding paragraph, causing the victim to incur a property loss, the insurance company shall not be liable for indemnification.

Article 23: Car Accident Insurance shall be subject to a uniform liability limit nationwide. The liability limit is divided into the death, injury and disability indemnification limit, medical expense indemnification limit, property loss indemnification limit and indemnification limit for road traffic accidents in which the insured is not liable.

The liability limit for Car Accident Insurance shall be specified by the CIRC in concert with the State Council's public security department, the State Council's department in charge of health and the State Council's department in charge of agriculture.

Article 24: The state shall establish social relief funds for road traffic accidents (the Relief Funds). In any of the following circumstances, the funeral expenses and part or all of the emergency treatment expenses of victims killed or injured in a road traffic accident shall be advanced from the Relief Fund, and the Relief Fund management organisation shall have the right to seek recovery against persons liable for road traffic accidents:

(1) the emergency treatment expenses exceed the liability limit of the Car Accident Insurance;

(2) the motor vehicle that caused the accident is not covered by Car Accident Insurance; or

(3) after causing the accident, the motor vehicle fled the scene.

Article 25: The sources of the Relief Fund include the following:

(1) funds allocated at a certain percentage from Car Accident Insurance premiums;

(2) fines imposed on owners and managers of motor vehicles for which Car Accident Insurance has not been taken out in accordance with provisions;

(3) funds recovered in accordance with the law by the Relief Fund management organisation from persons liable for road traffic accidents;

(4) fruits of the Relief Fund; and

(5) other funds.

Article 26: The specific measures for the administration of the Relief Fund shall be formulated and implemented on a trial basis by the State Council's finance department in concert with the CIRC, the State Council's public security department, State Council's department in charge of health and the State Council's department in charge of agriculture.

Article 27: When an insured motor vehicle is involved in a road traffic accident and the insured or the victim notifies the insurance company, the insurance company shall respond promptly and inform him/her/it of relevant matters, such as the specific indemnification procedure.

Article 28: When an insured motor vehicle is involved in a road traffic accident, the insured shall apply to the insurance company for payment of the insurance proceeds. The insurance company shall, within one day from the date of receipt of the indemnification application, inform the insured in writing of the supporting documentation and information relating to the indemnification that he/she/it is required to provide to the insurance company.

Article 29: Within five days from the date of receipt of the supporting documentation and information provided by the insured, the insurance company shall render its determination as to whether the accident falls within the insurance liability and notify the insured of the results thereof. If it does not fall within the insurance liability, it shall give the reasons therefor in writing. If it does fall within the insurance liability, the insurance company shall pay the insured the insurance proceeds within 10 days after reaching an indemnification agreement with him/her/it.

Article 30: In the event of a disagreement between the insured and the insurance company over the indemnification, either may apply for arbitration or institute a legal action in a people's court in accordance with the law.

Article 31: The insurance company may pay the insurance proceeds either to the insured or directly to the victim. However, if the insurance company is required to pay or advance emergency treatment expenses for the emergency treatment of an injured person, after receipt of the notice from the traffic administration department of the public security department, it shall, following verification, pay or advance the emergency treatment expenses to the medical institution in a timely manner.

If the Relief Fund management organisation is required to advance emergency treatment expenses for the emergency treatment of an injured person, after receipt of the notice from the traffic administration department of the public security department, it shall, following verification, advance the emergency treatment expenses to the medical institution in a timely manner.

Article 32: Medical institutions shall give emergency treatment to and treat persons injured in road traffic accidents by referring to the relevant clinical diagnosis and treatment guidelines organised and formulated by the State Council's department in charge of health.

Article 33: When an insurance company is to pay insurance proceeds or advance emergency treatment expenses or when the Relief Fund management organisation is to advance emergency treatment expenses, and is required to verify relevant matters with the relevant department or medical institution, the relevant department or medical institution shall offer its cooperation.

Article 34: The working personnel of insurance companies and the Relief Fund management organisation shall maintain the privacy of concerned parties.

Article 35: The items and rates of damages for road traffic accidents shall be handled in accordance with the provisions of relevant laws.

Part Four: Penalties

Article 36: If a party illegally engages in the Car Accident Insurance business without the approval of the CIRC, the CIRC shall shut it down. If a criminal offence is constituted, criminal liability shall be pursued in accordance with the law. If a criminal offence is not constituted, the CIRC shall confiscate the illegal income, and if the illegal income is not less than Rmb200,000, it shall additionally impose a fine of not less than the equivalent of and not more than five times the illegal income. If there is no illegal income or the illegal income is less than Rmb200,000, the CIRC shall impose a fine of not less than Rmb200,000 and not more than Rmb1 million.

Article 37: If an insurance company engages in the Car Accident Insurance business without the approval of the CIRC, the CIRC shall order it to rectify the matter, order it to refund the premiums that it collected, confiscate its illegal income and, if the illegal income is not less than Rmb100,000, additionally impose a fine of not less than the equivalent of and not more than five times the illegal income. If there is no illegal income or the illegal income is less than Rmb100,000, the CIRC shall impose a fine of not less than Rmb100,000 and not more than Rmb500,000. If the insurance company fails to rectify the matter by the specified deadline or causes serious consequences, it shall be ordered to suspend operations and undergo rectification or have its permit to engage in the insurance business revoked.

Article 38: If an insurance company violates these Regulations by committing any of the acts set forth below, the CIRC shall order it to rectify the matter and fine it not less than Rmb50,000 and not more than Rmb300,000; if the circumstances are serious, the CIRC may restrict its scope of business, order it to suspend its acceptance of new business or revoke its permit to engage in the insurance business:

(1) it refuses or delays underwriting Car Accident Insurance;

(2) it fails to engage in the Car Accident Insurance business based on the uniform insurance terms and basic premium rates;

(3) it fails to manage and account for its Car Accident Insurance business separately from its other insurance businesses;

(4) it compels a proposer to enter into a commercial insurance contract;

(5) it terminates a Car Accident Insurance contract in violation of provisions;

(6) it refuses to perform its specified obligation of paying insurance proceeds; or

(7) it fails to pay or advance emergency treatment expenses in accordance with provisions in a timely manner.

Article 39: If the owner or manager of a motor vehicle fails to take out Car Accident Insurance in accordance with provisions, the traffic administration department of the public security department shall impound the motor vehicle, notify the owner or manager of the motor vehicle to take out insurance in accordance with provisions and fine him/her/it the equivalent of twice the premiums payable for the minimum liability limit when taking out insurance in accordance with provisions.

If the owner or manager of the motor vehicle later carries out the procedures for Car Accident Insurance in accordance with provisions, his/her/its motor vehicle shall be returned in a timely manner.

Article 40: If a motor vehicle on the road does not have an insurance tag, the traffic administration department of the public security department shall impound it, notify the party concerned to provide the insurance tag or carry out the relevant procedures that were not carried out and may give him/her a warning or fine him/her not less than Rmb20 and not more than Rmb200.

If the party concerned provides the insurance tag or carries out the relevant procedures that were not carried out, the motor vehicle shall be returned to him/her in a timely manner.

Article 41: If a party forges, alters or uses a forged or altered insurance tag, or uses the insurance tag of another motor vehicle, the traffic administration department of the public security department shall confiscate the same, impound the motor vehicle and impose a fine of not less than Rmb200 and not more than Rmb2,000. If a criminal offence is constituted, criminal liability shall be pursued in accordance with the law.

If the concerned party provides the relevant lawful proof or carries out the relevant procedures that were not carried out, the motor vehicle shall be returned to him/her in a timely manner.

Part Five: Supplementary provisions

Article 42: The following terms as used herein shall have the meanings set forth below:

(1) the term “proposer” means the owner or manager of a motor vehicle who enters into a Car Accident Insurance contract with an insurance company and bears the obligation of paying the insurance premiums in accordance with the contract;

(2) the term “the insured” means the proposer and the lawful drivers whom he/she/it permits;

(3) the term “emergency treatment expenses” means, when a person is injured in a motor vehicle road traffic accident, the medical expenses incurred by a medical institution taking the necessary measures, with reference to the relevant clinical diagnosis and treatment guidelines organised and formulated by the State Council's department in charge of health, to treat the injured person whose vital signs are irregular or, although stable, his/her life would be in danger if handling measures are not taken, or where disability, failure of organ function or a marked prolongation of the duration of the injury would result.

Article 43: Car Accident Insurance is not taken out for trailers. In the event a traffic accident occurs, causing injury, death or property loss, indemnities shall be paid by the insurer of the tractor within the liability limit of the Car Accident Insurance. For any amount above such indemnities, the tractor party and trailer party shall be liable for damages in accordance with the law.

Article 44: These Regulations shall apply mutatis mutandis to indemnification for injury, death or property loss arising in an accident that occurs when a motor vehicle is operating somewhere other than on a road.

Article 45: The measures for the participation in Car Accident Insurance for enlisted motor vehicles of the People's Liberation Army and the People's Armed Police shall be specified separately by the People's Liberation Army and the People's Armed Police.

Article 46: Owners and managers of motor vehicles shall take out Car Accident Insurance within three months from the date of implementation hereof. If commercial third party liability insurance for motor vehicles was taken out before the implementation hereof, Car Accident Insurance shall be taken out upon expiration of the term of the commercial insurance.

Article 47: These Regulations shall be effective as of July 1 2006.