Regulation emphasizes that individual sales of group insurance are not allowed, and group life insurance will comply with new regulations in 8 years

The group life insurance business will face new regulations in 8 years. The reporter from First Financial News learned that the State Administration for Financial Supervision and Administration recently issued a notice to the industry on regulating the development of group life insurance business. This is a heavyweight new regulation for group insurance business following the relevant regulations in 2015.

Compared to the Notice on Promoting the Healthy Development of Group Insurance, which only had 6 articles in 2015, this draft of soliciting opinions, which has expanded to 23 articles, can be described as a comprehensive upgrade, comprehensively regulating group insurance business from basic operating conditions, actuarial pricing, underwriting, claims settlement, prevention of commercial bribery, and other aspects.

It is worth noting that the draft for soliciting opinions has for the first time established eight negative lists for group life insurance business, with the first one being "individual sales of group insurance".

"This new regulation is a comprehensive improvement in the supervision of group insurance business, which is also based on some prominent issues such as' individual sales of group insurance 'in recent years. This is necessary for the long-term healthy development of group insurance business," a person in charge of group insurance business for an insurance company told a reporter from First Financial News.

Group insurance faces a comprehensive upgrade with new regulations

The so-called group life insurance business, as the name suggests, refers to the life insurance business that is insured on a group basis. Group travel accident insurance, which is uniformly insured by travel agencies, and group health and medical insurance, which is uniformly insured by companies, are all group insurance businesses.

From the current life insurance market, group insurance business accounts for a relatively small proportion. According to statistics from the First Financial News, among the top five listed insurance companies in the A-share market, the premium income of group insurance business in life insurance and health insurance business does not exceed 10%. The lowest proportion is only 1.72% for Xinhua Insurance, and the highest proportion is 6.78% for China Taiping Insurance. However, in some insurance companies that excel in group insurance business, the proportion of group insurance is usually relatively high, such as some pension insurance companies and mutual insurance companies that undertake group insurance business, and their main on balance sheet insurance products are mainly group insurance products.

In the eyes of industry insiders, although the protection content of group insurance looks similar to that of personal insurance products, compared to personal insurance, group insurance business is not just a discount on premiums, but also needs to be priced actuarially based on the common risk characteristics corresponding to the group, so separate regulatory regulations are also needed to regulate it.

It is understood that the regulatory rules currently followed by group life insurance business are the Notice on Promoting the Healthy Development of Group Insurance issued by the former China Insurance Regulatory Commission in 2015. However, in the past 8 years, the market and policy environment of group insurance have undergone changes, and some problems have gradually been exposed in the development process, which urgently need to be further regulated.

From the content of this solicitation draft, it can be seen that it has expanded from 6 articles in 2015 to 23 articles, covering the entire process of group insurance business such as product definition, basic operating conditions, actuarial pricing, underwriting, claims, and prevention of commercial bribery.

For example, in terms of basic operating conditions, the draft for soliciting opinions clearly states that insurance companies conducting group life insurance business should obtain business operation licenses in accordance with the law, have professional business personnel, sound management systems, standardized operating procedures, and information systems that are suitable for business development.

In terms of product actuarial analysis, the draft for soliciting opinions requires insurance companies to determine insurance premiums, cash values, and provisions for liability reserves in accordance with the requirements of life insurance actuarial regulations. Product pricing should be based on risk situations, follow general actuarial principles, adopt fair and reasonable pricing assumptions, and prudently determine the terms and rates of group life insurance products.

In terms of preventing commercial bribery, insurance companies are required to strengthen internal control management, prevent the risk of commercial bribery, and not pay commissions or other forms of benefits beyond the cooperation agreement to intermediary agencies, policyholder staff, etc.

It is worth mentioning that in order to protect consumer rights and ensure the sustainable development of group insurance business, this draft for soliciting opinions has added a business retrospective clause for the payout rate of group life insurance products. Specifically, insurance companies are required to backtrack the payout rates for group life insurance business that did not exceed one year of the previous year's insurance period. If it is found in the retrospective analysis that the comprehensive payout rate of group accident insurance after the previous policy year's reinsurance is less than 50%; Group health insurance and group life insurance with a comprehensive payout rate higher than 150% after the previous policy year's reinsurance; If the comprehensive payout rates of group health insurance and group life insurance have continuously exceeded 100% after reinsurance in the past three policy years, it is necessary to explain the reasons for significant deviations between actual operating results and expectations, and adjust the rates of relevant products to a reasonable level in a timely manner.

Set up eight negative lists and prohibit individual sales of group insurance

In response to some of the problems that have arisen in the group insurance market in recent years, the draft for soliciting opinions has for the first time established eight negative lists for the group life insurance business. The first one is "individual sales of group insurance", which means "group life insurance cannot be underwritten for groups organized for the purpose of purchasing insurance".

The person in charge of the group insurance business mentioned above told a reporter from First Financial News that in order to attract customers with business commissions and discounted prices of group insurance, some channels have turned group insurance into "group buying", gathering individuals without social connections to fabricate a group insurance business. "Strangers can group shop online, but it is not possible to 'group purchase' group insurance under the name of a group. The fundamental reason is that they do not have common risk characteristics."

"Group life insurance refers to a personal insurance policy in which a specific group acts as the policyholder for its members and is covered by an insurance company through a single insurance contract. A specific group refers to a legal or non legal entity organization that has common risk characteristics and does not have the purpose of purchasing insurance." From the definition of group life insurance in this draft for soliciting opinions, it can be seen that having common risk characteristics is the foundation of group life insurance.

The above person in charge analyzed that, for example, in corporate group accident insurance, employees of the same company usually have similar job nature, work location, and face similar accident risks. Therefore, pricing and underwriting will also be based on the common risk environment in which the group operates. But if strangers group together to purchase group accident insurance, their work nature and working environment may be completely different, such as office white-collar workers and high-altitude workers, who do not have common risk characteristics, the actuarial pricing basis of group insurance will be invalid.

At the same time, the draft for soliciting opinions clearly states that at the time of issuing the insurance contract, the number of group members shall not be less than three. However, spouses, children, and parents of group members can be insured under group life insurance. "Direct family members in the same family usually have similar living environments and scenarios, so they can be considered as a group with common risk characteristics," said the person in charge.

In addition to the prohibition of individual sales of group insurance, the "negative list" in the draft for soliciting opinions also includes the prohibition of infringing on the legitimate rights and interests of policyholders, insured persons, and beneficiaries; It is not allowed to illegally extract fees through fictitious economic matters, affiliated intermediary business, or other means; It is not allowed to give or promise benefits other than those stipulated in the insurance contract to the policyholder, insured or beneficiary.