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22 June 2009
China’s new insurance law will take effect on October 1 2009. The revised law strengthens protection for policyholders, the insured, and beneficiaries. However, it adds operational requirements for insurance companies. For example, the revised law adds a two-year incontestable rule to protect the insured party. It is a very common clause in Western countries, but not in China. The revised law also requires insurance companies to pay or decline a claim within 30 days; if more documentation from the claimant is needed, the insurance company has to inform the claimant about all the documents needed at one time. All these requirements aim to settle the problem of the “easy to apply, hard to claim” environment. I see end customers’ preferences are changing from investment type products to protection type products. A simpler claim environment is crucial for the development of China’s insurance industry. That’s why regulators emphasized claims when revising the insurance law. For insurance companies, I think this is a double-edged sword. Will “easy to claim” lead to “easy to defraud?” It reminds me of my conversation with a local insurance solution vendor. He said that China has a non-trust environment: people do not trust each other, so the risk management function in his company’s solution is very strong. Some of my thoughts are: insurance companies might need to upgrade claim solutions to make filing a claim easier; second, they might need to upgrade underwriting solutions and antifraud tools to strengthen their risk management function. Are these real requirements for insurance companies? I’ll continue to follow the market.