Rules tightened for insurance product sales

China's banking and insurance regulators co-released a new set of rules Thursday urging commercial banks to better protect insurance buyers' rights by selling the products based on buyers' needs instead of the drive to earn commissions.

The rules are intended to regulate China's bancassurance business, in which commercial banks sell insurance companies' products using bank sales channels.

The rules require banks to optimize the structure of the insurance packages being sold and to put more effort into protecting certain groups of customers such as the elderly.

The regulators - China Banking Regulatory Commission (CBRC) and China Insurance Regulatory Commission (CIRC) - said that they want insurance companies and commercial banks to make protecting consumers' rights a priority, according to a notice posted on the CBRC's website Thursday.

"Commercial banks should analyze the insurance applicants' needs and their capabilities to deal with risks, and suggest insurance products based on the results of their assessments," the rules said.

Dong Dengxin, director of the Financial Securities Institute at Wuhan University of Science and Technology, told the Global Times Thursday that China's bancassurance market urgently needs tighter regulations.

"Many commercial banks try to convince insurance applicants to buy highly risky or unnecessary products in order to earn commissions. And that hurts the consumers' rights and interests," Dong said.

The banks should fully educate buyers about each product's pros and cons before they sell them, Dong said, adding that banks' senior executives should also encourage lower-level staff to warn buyers of possible risks.

The rules require banks to suggest low-risk insurance products with stable returns for low-income households and customers aged over 65, and the banks should have insurance applicants sign related risk tolerance statements before selling more risky products.

Commercial banks have to improve the management standards of their bancassurance business, and put more focus on risk-prevention and long-term saving types of insurance products, the notice said.

"The authorities are steering China's insurance industry in the right direction," Dong said, noting that more people should buy pension and medical insurance products.

Commercial banks should allow buyers 15 days to consider whether to buy a product, the rules said, which would give customers more time to decide if they need it.

The rules will be implemented from April 1, 2014.