Shareholders' behavior anomy is one of the important reasons for the chaos in insurance market in recent years. Some shareholders break through the regulatory defense line through layers of nesting, non-standard equity holding, affiliated transactions and other ways, secretly manipulate insurance companies, and regard insurance companies as low-cost financing channels and cash machines.

Recently, the Financial Times reporter learned from the industry that the property insurance Department of the Banking and Insurance Regulatory Commission recently issued a Notice on Further Strengthening and Improving Compliance Management to the banking and insurance Regulatory Bureau and the property insurance companies (hereinafter referred to as the Notice). The "Notice" puts forward seven specific requirements for property insurance companies, including strictly fulfilling the main responsibility of compliance management, improving the compliance governance structure, improving the compliance system process, strengthening financial accounting management, and focusing on key risk areas.

The "Notice" puts forward the requirements for property insurance companies to strictly fulfill the main responsibility of compliance management and improve the compliance governance structure. The Notice makes it clear that property insurance companies should establish and improve the compliance management system, improve the compliance management organizational structure, clarify compliance management responsibilities step by step, build a compliance management system, effectively identify and actively prevent and resolve compliance risks, and ensure the steady operation of the company. Improve the corporate governance structure, strengthen internal management, establish a strict internal control system. It is necessary to regulate the behavior of major shareholders according to law, urge them to fulfill their obligations according to law, regulate the use of power, and prevent interference with the normal operation and management of the company beyond their power. It is necessary to strictly implement the relevant regulations on the management of connected party transactions, and resolutely prevent major shareholders from manipulating the hollowing out of institutions and illegal transfer of benefits.

"Shareholder misconduct is one of the important reasons for the chaos in the insurance market in recent years. Some shareholders break through the regulatory defense line through layers of nesting, non-standard equity holding, related party transactions and other ways, secretly manipulate insurance companies, and regard insurance companies as low-cost financing channels and cash machines." Senior insiders in the industry said in an interview with the Financial Times that the policy is an upgraded version of regulating shareholder misconduct. Previously, the regulatory authorities have repeatedly put forward the rectification of outstanding problems such as false capital quality, unclear equity relations, and improper behavior of shareholders, requiring the corporate governance of insurance institutions to strengthen the behavior norms of major shareholders, especially controlling shareholders, and make it clear that major shareholders shall not interfere with the performance of duties of the board of directors and senior executives of institutions beyond their authority, so as to effectively prevent major shareholders from manipulating and looting the company.

It is worth noting that the "Notice" requires that property insurance companies should focus on key risk areas, strengthen the control of key links in underwriting claims, shall not refuse insurance in any form, shall not misappropriate, withhold, seize insurance premiums, shall not give or promise to give non-contractual benefits, shall not delay claims, false claims, defraud insurance or seek improper benefits. It shall not take advantage of insurance business to seek improper benefits for other institutions or individuals. Property insurance companies should strengthen the management of key personnel in important positions, strictly prevent the transfer of benefits and moral hazard, control people, watch the money, and build a strong firewall of the system.

"In China's insurance market, corporate governance supervision is very important. In recent years, in response to major shareholder misconduct, related party transactions in the use of funds, illegal sales, false claims and malicious claims refusal, as well as regulatory reporting data fraud and other problems, the CBRC in addition to rectification and takeover of some companies, but also issued a lot of documents to strengthen corporate governance, equity management and related party transactions and other systems, and achieved great results." The above industry experts said that the regulatory authorities issued the "Notice" to strengthen compliance management work, emphasize and reiterate the areas prone to problems, and require the local banking and insurance regulatory bureau to strengthen guidance and supervision, increase investigation and punishment, in order to regulate the development of the industry.

The Notice also stressed that property insurance companies should improve the compliance system process. The company should continue to improve the system to ensure that all business areas and key management links are covered. It is necessary to embed the compliance management requirements of various business systems into business processes, incorporate multi-channel compliance information into each management link, and promote management institutionalization and intelligent risk control. It is necessary to strengthen the division of labor and authorization management, clarify the responsibilities and authority of institutions, departments, posts and personnel at all levels, standardize the cross-employment of personnel, strictly implement the separation of incompatible positions and the system of job avoidance, and ensure the independence of employees in performing their duties. Positions with potential conflicts of interest shall not be held concurrently by one person.

In addition, the "Notice" also requires that the property insurance company to formulate a unified management system for institutions and financial and accounting personnel at all levels, improve the fund management system, and ensure the safety of funds. The business affairs of the company shall be uniformly registered and accounted for in the accounting books set up in accordance with the law, and shall not set up private accounting books in violation of the provisions, and shall not conduct business outside the accounting books. It is necessary to conduct accounting and prepare financial reports according to the actual economic business events, and it is not allowed to conduct accounting with false economic business events or materials, so as to ensure that the financial information is true, accurate and complete.

Strengthen consumer protection and improve the customer complaint mechanism

In terms of strengthening the protection of consumer rights and interests, the Notice requires that property insurance companies should strengthen the evaluation and compliance review of stakeholder insurance products, strengthen the disclosure of key information, and prevent the legitimate rights and interests of consumers from being harmed in the name of financial innovation. It is necessary to strengthen the management of intermediary agencies, service outsourcing agencies and other third parties, regulate the sales behavior of practitioners, and continuously improve insurance claim settlement services.

According to the latest "Notice on Insurance Consumer Complaints in the second Quarter of 2022" issued by the Consumer Rights Protection Bureau of the Banking and Insurance Regulatory Commission, in the second quarter of 2022, the banking and insurance Regulatory Commission and its agencies received and transferred a total of 28,554 insurance consumer complaints, an increase of 7.6%. Among them, claims disputes are the main cause of complaints involving property insurance companies, accounting for 77.68% of the total complaints of property insurance companies.

In addition, the Notice also proposed that property insurance companies should strengthen consumer information security protection, improve customer complaint handling mechanisms, promote dispute resolution, traceability and rectification.

In fact, personal information runs through the whole chain from the creation of insurance products to insurance sales and insurance claims, and is the basic element of insurance business. In recent years, the problem of personal information leakage in the insurance industry has attracted more and more attention from consumers. Since the beginning of this year, the "Personal Information Protection Law" and "Data Security Law" and other relevant laws and regulations have been landed one after another, constantly forcing the insurance industry to face data security issues. "Unlike other financial industries, which mostly involve basic personal information, much of the data that the insurance industry pays attention to and uses touches on the level of personal privacy, such as health care and driving behavior. These data are very sensitive to organizations and individuals, and are the yardrod and criterion for reviewing the compliance of insurance companies." The person said.

Article source: Financial Times