Summary of Key Points
The China Banking and Insurance Regulatory Commission (CBIRC) recently released the "Comprehensive Governance Action Plan for Non-automobile Insurance," aiming to regulate the entire insurance market outside of automobile insurance, including liability insurance, corporate property insurance, and household property insurance. This initiative builds upon last year's regulatory requirement to align the application fees with the actual payments made by insurance companies. It addresses various issues in the industry, such as the practice of using high fees to compete for business, the creation of insubstantial products (designed solely for bidding purposes), and the arbitrary charging by intermediaries. In the short term, some companies, especially smaller and medium-sized insurers, may face difficulties in adjusting their business operations or experiencing increased costs. However, in the long run, this will optimize industry profitability and encourage insurers to shift from competing on fees to competing on expertise, leading to a more standardized non-automobile insurance market.
Why is comprehensive governance of non-automobile insurance necessary?
Non-automobile insurance is a crucial driver of growth for property insurance companies. It accounted for 54% of total premiums in the first half of this year and 21% after excluding agricultural and health insurance. However, rapid expansion has led to several underlying problems:
- Emphasis on scale over profitability: Some companies offer high fees to intermediaries or customers to secure business, sometimes even reducing their own rates, resulting in long-term losses (with comprehensive cost ratios exceeding 100%—meaning they spend more than they earn on every 100 yuan in premiums).
- Insufficient product quality: Many products are merely repackaged with new labels but lack substantial coverage, often being created to meet bidding requirements and may be of little use to consumers.
- Intermediary misconduct: Some intermediaries leverage their influence in bidding processes to force insurers to develop non-compliant products and earn illicit income through off-the-books transactions (e.g., using promotional or technical fees as disguised fees).
- Data chaos: Different companies use varying data standards, making it difficult for regulators to enforce effective oversight and for insurers to set fair prices.
These issues not only increase industry risks but also undermine the ability of insurance to support the real economy. Therefore, regulatory efforts need to shift from focusing on fees to addressing these broader systemic issues.
What does the plan cover?
The plan aims to address these issues by targeting four key areas:
1. Product development:
- Requiring insurers to re-register existing products (by type and phase) and regularly publish a list of problematic products.
- Revising product development guidelines to ensure products provide genuine coverage and are not created solely for bidding purposes.
In simple terms, consumers will no longer encounter products that appear useful but offer little real protection.
2. Business operations:
- Strengthening the requirement that fees match the actual cost of underwriting (paying before issuing policies).
- Strictly controlling high-risk businesses and encouraging insurers to focus on areas of national priority, such as green and smart manufacturing insurance.
- Promoting differentiated competition among insurers, so they do not all compete on price but instead specialize in their areas of expertise.
3. Intermediary channels:
- Banning fraudulent accounting and off-the-books operations by intermediaries.
- Prohibiting intermediaries from forcing insurers to develop non-compliant products and restricting them from using promotional or technical fees as disguised fees.
4. Data management:
- Standardizing data collection and establishing a system to support more effective regulation and pricing decisions by insurers (e.g., setting premiums based on the actual risk of businesses).
What are the short-term challenges?
- Temporary disruptions in certain businesses: Products that require re-registration may be unavailable during the re-registration period.
- Increased costs for smaller insurers: Updating systems and complying with new regulations will incur expenses, which can be particularly burdensome for smaller companies with limited resources.
- Short-term impact on scale: Some companies may need to discontinue unprofitable businesses or reduce their premium revenue due to the loss of high-profit margin opportunities.
What are the long-term benefits for the industry and consumers?
- Increased industry profitability: Reduced competition and lower fees (for example, the fee rate for corporate property insurance has decreased by 6 percentage points), leading to improved overall profitability (non-automobile insurance turned from loss to profit from January to July 2026).
- Better-quality products: Insufficient products will be eliminated, providing consumers with more meaningful insurance coverage.
- Greater advantages for leading companies: Larger insurers, with their actuarial and data capabilities, can charge higher prices based on professional underwriting. Smaller companies will focus on niche markets and avoid direct price competition with larger firms.
- Enhanced support for the real economy: Insurers will offer more insurance products related to green and smart manufacturing, providing better risk protection for businesses.
In summary, this regulatory initiative is not aimed at suppressing non-automobile insurance but at transforming it from a fee-driven market to one based on professional expertise and service. It will bring long-term benefits to both the industry and consumers.