Chinese consumers shrug off Beijing’s ban on insurance gimmicks

Some consumers said the offbeat insurance products changed their perspective on financial institutions

PUBLISHED : Monday, 06 February, 2017, 3:15pm
UPDATED : Monday, 06 February, 2017, 11:00pm

Tech-savvy consumers have shown mixed response to the ban on smog insurance and similar products after China’s regulator clamped down on unconventional offerings designed mainly for marketing stunts.

Smaller insurers have turned to such products to quickly build up brand awareness and reach more young customers as most of the products are sold online.

However, in a new rule issued in January the China Insurance Regulatory Commission banned non-life insurers from developing eight types of products where the insured event doesn’t lead to real losses for policyholders or if the offbeat products are just a marketing stunt.

The top insurance watchdog argued that such gimmicks disrupt the market order and strayed away from the core mission of insurers to hedge against real risks.

Insurers rolled out these “innovative” products mainly via the internet after young Chinese consumers became accustomed to buying almost everything online. For example, mid-autumn moon insurance compensates a policyholder when foul weather clouds the moon during the Mid-autumn festival. Other offbeat products include World Cup insurance for when a policyholder’s favourite team is knocked out of competition.

Regulators are increasing efforts to discourage such behaviour and nurture insurance back to its tradition
Zhang Hong, market researcher at Kantar TNS

“It’s a pity smog insurance and mid-autumn moon insurance are banned,” said Vicky Lai, a consumer in her 20s. “They changed my perspective on financial institutions as rigid and poker-faced players.”

Robin Zhang, a consumer in his 30s, said he can understand how such products annoy the regulator.

“My guess is that the regulator bans it over fears that such products are more like a lottery in the name of insurance,” he said. “The regulatory ban makes sense, though it’s no fun.”

The tighter scrutiny was among a spate of regulatory measures announced by the CIRC since December to crack down on irregularities such as aggressive sales of universal life insurance, a de facto wealth management product with limited insurance coverage, and suspicious investments in the equities market.

The regulator promised tighter scrutiny this year in an attempt to steer the industry back to its fundamental mission.

Zhang Hong, a senior market researcher at Kantar TNS, said smaller insurers can easily increase their brand awareness by selling such eye-catching products online, though he doubts their real sales performance.

“It’s a typical internet concept – low charges, easy access, low marketing costs targeting consumers who rely heavily on smartphone from shopping to reading,” he said. “Regulators are increasing efforts to discourage such behaviour and nurture insurance back to its tradition.”

A growing number of mainland Chinese consumers embrace internet insurance. For instance, they are willing to pay 0.70 yuan (82 HK cents) to receive compensation of six yuan to cover delivery fees if their online purchases are refunded.