Chinese public warned over online ‘quasi-insurance’ firms

Regulators have warned the mainland public against investing in insurance-style schemes run by unregistered online firms.

The insurance watchdog referred to Shanghai-based Quark Alliance as an example, saying it was not a registered mutual insurer and that its products should not be considered insurance.

Mutual insurance companies – which are encouraged by the regulator – are owned entirely by their policyholders. Generally, to get a licence they must meet a 100-million-yuan (HK$120 million) initial operating capital requirement, though in certain cases the threshold may be as low as 10 million yuan.

Some firms offering products similar to mutual insurance skirt the requirement by describing products as “mutual assistance schemes” rather than “mutual insurance”. Quark Alliance operates six mutual assistance schemes. Members pay a contribution in return for coverage and compensation is paid from the capital pooled by all members.

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“Mutual assistance schemes lack actuary-based pricing systems, provision against risks and strict supervision by government bodies,” the China Insurance Regulatory Commission said yesterday. “Such projects may be exposed to solvency problems and financial instability.”