Alert

Who does this affect?

Non-life insurers operating in China.

What do you need to do?

Non-life insurers will need to comply with the requirements relating to approval of telemarketing products, direct sales methods, internal control mechanisms, telephony and computer systems and other operational matters.

Authors
Stuart Valentine  (萬思陶)
Partner

Rong Fan  (范荣)
Associate

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Stuart Valentine
(萬思陶)
Partner
T +852 3443 1080

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Hong Kong
Stuart Valentine  (萬思陶)

Beijing
John Shi  (史衛)

Shanghai
 (范荣)

Sydney
 (貝思嫚)

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China’s insurance industry regulator, the China Insurance Regulatory Commission issued a notice on 24 April 2007 regulating the telemarketing of non-life insurance products. The Notice is significant as it sends a clear message that the CIRC not only recognises but also encourages telemarketing as an innovative method for distributing non-life insurance products in China.

Although it does not apply to the sale of life insurance products, it does provide an indication of how the CIRC is likely to approach the regulation of the telemarketing of life insurance products in the future.

Impact of Notice

The Notice confirms that telemarketing as an innovative mode of non-life insurance sales is permitted in China. This creates opportunities for non-life insurers to expand their business by providing services such as consultation, quotation and acceptance of insurance applications or claims, to the public via the telephone. However, such insurers have to ensure they implement the relevant control mechanisms and comply with the operational requirements.

What does the Notice do?

Restrictions

The Notice lays down certain restrictions on telemarketing of non-life insurance products:

• Only specially designed and approved products may be distributed by way of telemarketing (Telemarketing Products)
• Telemarketing Products may not be offered by agents or other intermediaries, they can only be offered by telemarketing employees of insurers
• Telemarketing Products may only be sold to retail customers, and may not be distributed to non-retail customers or via sales channels other than telemarketing
• Insurers conducting telemarketing activities can only offer insurance services for the people within the region they are licensed to operate.

Control Mechanisms and Operational Requirements

Whilst the Notice encourages telemarketing activities by non-life insurance companies, its stated purpose is to protect customers and to promote the healthy development of the insurance industry. Hence, the Notice stipulates certain requirements in order to standardise the development, sales and management of Telemarketing Products:

• Insurance companies must submit to the CIRC for examination and approval, prescribed particulars relating to Telemarketing Products
• Insurance companies are subject to confidentiality obligations and are required to protect customers’ personal data and respect their privacy
• The Notice also requires insurance companies to provide customers with an information statement setting out their rights and obligations under the policies when delivering the policies to customers
• The Notice prohibits telemarketers from engaging in conduct which is considered to be misleading, deceptive, and harassing to customers and they must not denigrate business competitors, or engage in other types of unfair competition.

Insurance companies must also meet certain operational requirements such as:

• having a suitable business venue
• setting up a telemarketing infrastructure and purpose-specific computer and telephony system, including designated telephone numbers
• setting up internal control and management procedures, including an internal audit system for the Telemarketing Products
• establishing a management regime for telemarketers through standardising staff employment contracts and training of telemarketers in telephone manners, customer services, etc.
• establishing quality control, supervision and monitoring system, including recording of all calls
• establishing customer information protection and management procedures
• after sales services
• using the terms and conditions and fee schedules applicable to a particular area as approved by the CIRC (for insurance companies who operate regionally).

The Notice makes it clear that the CIRC will step up its efforts to conduct inspection, supervision and examination of telemarketing insurance business. Breach of its provisions will attract the appropriate penalties.

View the Chinese text of the Notice

Disclaimer

The views set out in this publication are based on our experience as international counsel representing clients in their business activities in China. As is the case for all international law firms licensed in China, we are authorised to provide information concerning the effect of the Chinese legal environment. However we are not admitted to practise Chinese law and so are unable to issue opinions on matters of Chinese law.

This publication is only a general outline. It is not legal advice. You should seek professional advice before taking any action based on its contents.