Licences of 175 insurance intermediaries cancelled last year
The mainland's insurance regulator cancelled the business licences of 175 insurance intermediaries last year following calls to crack down on the industry's illegal practices.
The number of cancelled insurance intermediaries, which include agencies, brokerages and 'loss-adjusting' firms that help insurers handle claims, made up about 7.2 per cent of the country's 2,413 intermediaries in the regulator's quarterly report in September.
In 2007, 174 or 7.4 per cent of intermediary institutions were forced out of the market.
The China Insurance Regulatory Commission (CIRC) did not provide reasons for the closures, but analysts said they were probably linked to such irregularities as misleading sales practices and fraudulent invoicing.
'The vicious competition between representatives has led to sharp criticism from consumers, which worries insurance firms,' said an analyst with a mainland brokerage. 'The mainland intermediary sector has a relatively short history of eight years, so it's not surprising to see some illegal practices.'
Insurance intermediaries collected 34.98 billion yuan (HK$39.68 billion) in premiums in the first nine months last year, up 42.46 per cent from the previous year, on escalating demand for more sophisticated financial products. These brokerages and agencies contributed only 2.59 per cent of all insurance premiums during the period.
To ensure the healthy development of the insurance intermediary sector, the CIRC launched a large-scale investigation of the intermediaries in September.
Forty-two of them received warnings from the insurance watchdog, 92 were fined and 24 had their business licences cancelled.
The regulator recently warned that it would punish lower-ranking insurers and intermediary business operators through various means, including mandatory submission of plans to enhance capital, restrictions on business expansion and lower salaries for management.