China insurance regulator punishes three firms for selling ‘problematic’ policies
Analysts say the policies offer short-term cash returns and do not meet the regulator’s efforts to refocus the industry on long-term security for policyholders
China’s insurance regulator said on Monday it had banned three life insurance firms from applying for permission to sell new products for six months, after it found they had been offering “problematic” policies.
The China Insurance Regulatory Commission (CIRC) has also required ABC Life Insurance, the insurance arm of state-owned Agricultural Bank of China, Bocom Life Insurance, the insurance unit of Bank of Communications, and Greatwall Life Insurance to halt sales of the products and to “rectify their wrongdoings”.
In a statement, the CIRC did not specify what the problems were, but analysts said the policies were short-term ones that offered quick cash returns similar to wealth management products, and did not meet the regulator’s efforts to refocus the industry on offering long-term protection to policyholders.
Market watchers said the signal from the regulatory step is quite clear to warn life insurers off trying to seek regulatory loopholes, as attempts to play close to the edge are not allowed and those who cross red lines will be punished.
The products showed the three life insurance companies failed to shoulder their responsibilities and were not as vigilant as required in product development, the CIRC said, calling the problems “serious and severe”.
The regulator has since last year been ratcheting up scrutiny to try and steer the industry back to its core mission of providing long-term security and away from what it sees as misuse of policies as a path to short-term profits.
It has already clamped down on rampant sales of so-called universal life insurance policies, which are short-term wealth management products. It said in its statement that it would maintain its tough stance, requiring insurers to conduct a complete check on existing products.