Order of the President of the People’s Republic of China
No. 11
The Insurance Law of the People’s Republic of China, revised and adopted at the 7th Meeting of the Standing Committee of the Eleventh National People’s Congress of the People’s Republic of China on February 28, 2009, is hereby promulgated and shall go into effect as of October 1, 2009.
Hu Jintao
President of the People’s Republic of China
February 28, 2009
Insurance Law of the People’s Republic of China
(Adopted at the 14th Meeting of the Standing Committee of the Eighth National People’s Congress on June 30, 1995, revised in accordance with the Decision on Amending the Insurance Law of the People’s Republic of China adopted at the 30th Meeting of the Standing Committee of the Ninth National People’s Congress on October 28, 2002, and revised at the 7th Meeting of the Standing Committee of the Eleventh National People’s Congress on February 28, 2009)
Contents
Chapter 1 General Provisions
Chapter 2 Insurance Contracts
Section 1 General Provisions
Section 2 Insurance of Person Contracts
Section 3 Property Insurance Contracts
Chapter 3 Insurance Companies
Chapter 4 Rules Governing Insurance Operations
Chapter 5 Insurance Agents and Brokers
Chapter 6 Supervision and Administration of the Insurance Industry
Chapter 7 Legal Liability
Chapter 8 Supplementary Provisions
Chapter I
General Provisions
Article 1 This Law is formulated for the purposes of regulating insurance activities, protecting the legal rights and interests of the parties involved, strengthening supervision and administration over the insurance industry, safeguarding social and economic order and public interests, and promoting sound development of insurance operations.
Article 2 For the purposes of this Law, “insurance” refers to commercial insurance whereby a policy holder, in accordance with the contract, pays insurance premiums to the insurer, and the insurer bears an obligation to pay the policy holder indemnities against property loss caused by the occurrence of a contingent event as agreed upon in the contract, or pay insurance benefits when the insured dies, is injured or disabled, suffers illness or reaches the age limit, time limit or any other condition agreed upon in the contract.
Article 3 Insurance activities conducted within the territory of the People’s Republic of China shall be governed by this Law.
Article 4 Insurance activities shall be conducted in compliance with laws and administrative regulations, with respect for public morality and without jeopardizing public interests.
Article 5 In exercising their rights and performing their obligations, the parties to insurance activities shall follow the principle of good faith.
Article 6 Insurance business shall be conducted by insurance companies established in accordance with this Law or by other insurance organizations as prescribed by laws and administrative regulations. No other entities or individuals may operate an insurance business.
Article 7 Any legal persons or other organizations within the territory of the People’s Republic of China that need insurance coverage within the People’s Republic of China shall, for the purpose thereof, apply to insurance companies established within the territory of the People’s Republic of China.
Article 8 The insurance industry shall be operated and administered separately from the banking, securities and trust industries, and insurance companies shall be established separately from banking, securities and trust institutions, unless otherwise stipulated by the State.
Article 9 The insurance regulatory authority under the State Council shall be responsible for the supervision and administration of the insurance industry in accordance with the law. The insurance regulatory authority under the State Council shall set up dispatch offices in accordance with its needs for performing duties. The dispatch offices shall perform the duties of supervision and administration as authorized by the insurance regulatory authority under the State Council.
Chapter II
Insurance Contracts
Section 1
General Provisions
Article 10 An insurance contract is an agreement whereby the rights and obligations pertaining to insurance are specified and agreed by the policy holder and the insurer.
A policy holder is a party who enters into an insurance contract with an insurer and is obligated to pay premiums under the insurance contract. An insurer means an insurance company which enters into an insurance contract with a policy holder and is obligated to pay indemnity or insurance benefits under the insurance contract.
Article 11 An insurance contract shall be concluded by agreement upon negotiation, and the rights and obligations of both parties shall be determined according to the principle of fairness. An insurance contract shall be concluded out of free will, unless the insurance is mandated by laws or administrative regulations.
Article 12 An insurance of person policy holder shall have an insurable interest in the insured at the time the insurance contract is formed.
The insured in property insurance shall have an insurable interest in the object insured at the time an incident covered by the insurance occurs.
Insurance of person is a type of insurance which takes the life and body of human beings as the object of insurance.
Property insurance is a type of insurance which takes property and interests related thereto as the object of insurance.
“The insured” means a person whose property, life or body is covered by an insurance contract and who is entitled to claim insurance benefits. A policy holder may be the insured.
Insurable interest refers to a legally recognized interest of the policy holder or the insured in the object insured.
Article 13 An insurance contract is formed when a policy holder applies for insurance and the insurer accepts the application. The insurer shall issue to the policy holder an insurance policy or any other insurance certificate in a timely manner.
An insurance policy or any other insurance certificate shall indicate the contractual content as agreed upon by both parties. Both parties may agree to adopt any other written form specifying the contractual content. A legally formed insurance contract shall become effective upon its formation. The policy holder and insurer may attach conditions or a time limit on the effectiveness of the contract.
Article 14 Once an insurance contract is formed, the policy holder shall pay the premiums in accordance with the terms of the contract, and the insurer shall begin to undertake the insurance liability from the time agreed upon.
Article 15 Unless otherwise stipulated in this Law or agreed upon in the insurance contract, the policy holder may, but the insurer shall not, rescind the contract after it is formed.
Article 16 In concluding an insurance contract, the policy holder shall make an honest disclosure when the insurer inquires about the object insured or relevant circumstances concerning the insured.
The insurer shall have the right to rescind the insurance contract if the policy holder fails to perform his or her obligation of making an honest disclosure intentionally or out of gross negligence, thereby materially affecting the insurer making a decision whether or not to provide the insurance or whether or not to increase the premium rate.
The right to rescind an insurance contract as prescribed in the preceding paragraph shall be annulled after 30 days or more from the day when the insurer gains knowledge of the cause of rescission. After two years or more from the day when an insurance contract is entered into, the insurer shall not rescind the contract. Where an incident covered by insurance occurs, the insurer shall bear the obligation for paying indemnities or insurance benefits.
If a policy holder intentionally fails to perform his or her obligation of making an honest disclosure, the insurer shall bear no obligation for paying indemnities or insurance benefits as regards the incident covered by insurance occurring prior to the rescission of the contract, or for returning the premiums paid.
If a policy holder fails to perform his or her obligation of making an honest disclosure out of gross negligence, which has a material effect on the occurrence of an incident covered by insurance, the insurer shall, with respect to the incidents occurring prior to the rescission of the contract, bear no obligation for indemnification or payment of insurance benefits but shall return the premiums paid.
Where an insurer, knowing the truth that the policy holder fails to tell, enters into an insurance contract with the policy holder, the insurer shall not rescind the contract. If an incident covered by insurance occurs, the insurer shall bear the obligation for indemnification or payment of insurance benefits.
An incident covered by insurance means an event falling within the scope of the insurance liability under an insurance contract.
Article 17 Where an insurance contract is concluded by using the standard clauses provided by the insurer, the insurer shall provide an insurance policy with the standard clauses attached and explain the contents of the contract to the policy holder.
For those clauses that exempt the insurer from liability in the insurance contract, the insurer shall make sufficient warning to the policy holder of those clauses in the insurance application form, the insurance policy or any other insurance certificate, and expressly explain the contents of those clauses to the policy holder in writing or orally. If the insurer fails to make a warning or explicit explanation thereof, those clauses shall not be effective.
Article 18 An insurance contract shall contain the following items:
(1) Name and address of the insurer;
(2) Names and addresses of the policy holder and the insured, and name and address of the beneficiary in case of insurance of person;
(3) Object insured;
(4) Insurance liability and liability exemption;
(5) Period of insurance and commencement of insurance liability;
(6) Amount insured;
(7) Premium and payment method;
(8) Method for paying indemnities or insurance benefits;
(9) Liabilities for breach of contract and resolution of disputes; and
(10) Day, month and year of the conclusion of the contract.
The policy holder and the insurer may agree upon other items related to insurance in the insurance contract.
A beneficiary refers to a person who, as designated by the insured or the policy holder of insurance of person, is entitled to make an insurance claim. The policy holder or the insured may be a beneficiary.
The amount insured refers to the maximum amount of indemnity or insurance benefits which the insurer is liable to pay.
Article 19 Any of the following clauses in the standard clauses of an insurance contract provided by the insurer shall be void:
(1) Clauses exempting the insurer from any legal obligation or aggravating liability of the policy holder or insured; and
(2) Clauses excluding any legal right of the policy holder, insured or beneficiary.
Article 20 The policy holder and the insurer may amend the contents of the insurance contract subject to mutual agreement.
Where amendments to the insurance contract are made, the insurer shall endorse them in the original policy or other insurance certificates or affix an endorsement slip thereto, or the policy holder and insurer shall conclude a written agreement of amendment.
Article 21 The policy holder, the insured or the beneficiary shall, in a timely manner, notify the insurer after being aware of the occurrence of an incident covered by insurance. Where a policy holder, insured or beneficiary fails to notify the insurer in a timely manner intentionally or out of gross negligence, making it difficult to ascertain the nature, cause, extent of the loss, etc., of the incident covered by insurance, the insurer shall not be liable for indemnification or payment of insurance benefits for the undeterminable part, unless the insurer already knows or should have known about the incident in a timely manner through other channels.
Article 22 Where a claim for indemnity or payment of insurance benefits is lodged with the insurer after the occurrence of the incident covered by insurance, the policy holder, the insured or the beneficiary shall, to the best of his or her ability, provide the insurer with evidence and other materials relevant to ascertaining the nature, cause and extent of the loss.
Based on the provisions of the insurance contract, the insurer, in considering the relevant evidence or other material incomplete, shall notify the policy holder, the insured or the beneficiary once, asking them to provide supplementary evidence or other materials in a timely manner.
Article 23 The insurer shall, after receiving a claim for indemnit or payment of insurance benefits from the insured or the beneficiary, determine the matter without delay. If the circumstances are complex, the insurer shall determine the matter within 30 days, unless the insurance contract provides otherwise. The insurer shall inform the insured or the beneficiary of the outcome. If responsibility lies with the insurer, the insurer shall fulfill its obligation for such indemnity or payment within 10 days after an agreement is reached with the insured or the beneficiary. If there are stipulations in the insurance contract on the period within which indemnification or payment should be made, then the insurer shall fulfill its obligation accordingly.
If the insurer fails to fulfill its obligations as prescribed in the preceding paragraph in a timely manner, then, in addition to paying the insurance benefits, the insurer shall compensate the insured or the beneficiary for any damage incurred thereby.
No entity or individual may illegally interfere with the insurer’s fulfillment of its obligation for indemnification or payment of the insurance benefits, or restrict the right of the insured or the beneficiary to receive such payments.
Article 24 After assessing a claim in accordance with Article 23 of this Law, for events not covered by insurance, the insurer shall, within three days from the date such assessment is made, send to the insured or the beneficiary a notice refusing to pay indemnities or insurance benefits and shall explain the reasons for such a decision.
Article 25 If the amount of indemnity or payment of insurance benefits cannot be determined within 60 days upon receipt of a claim for indemnity or payment of insurance benefits, together with relevant evidence and information in respect thereof, the insurer shall first effect primary payment which can be determined by the evidence and materials in hand. The insurer shall accordingly pay the balance after the amount of indemnity or payment of insurance benefits is finally determined.
Article 26 With respect to insurance other than life insurance, the period of limitation of action for an insured or beneficiary to claim indemnification or payment of the insurance benefits against the insurer shall be two years, which shall be counted from the day when the insured or beneficiary learns of or should have gained knowledge of the occurrence of the incident covered by insurance. With respect to life insurance, the period of limitation of action for an insured or beneficiary to claim for payment of insurance benefits shall be five years, which shall be counted from the day the insured or beneficiary learns of or should have gained knowledge of the occurrence of the incident covered by insurance.
Article 27 The insurer is entitled to terminate the insurance contract and not to refund the premiums where the insured or the beneficiary falsely claims that an incident covered by insurance has occurred, and submits a claim for indemnity or payment of insurance benefits.
If the policy holder or the insured intentionally fabricates an incident covered by insurance, the insurer is entitled to terminate the insurance contract, to refuse to bear obligation for indemnification or payment of insurance benefits and, except as otherwise provided in Article 43 of this Law, to refuse to refund the premiums.
If the policy holder, the insured or the beneficiary, following the occurrence of an incident covered by insurance, fabricates the cause of such incident, or exaggerates the extent of loss with forged or altered relevant evidence, information or other proofs, the insurer shall bear no obligation for indemnity or payment of insurance benefits for the portion which is fabricated or exaggerated.
The policy holder, the insured or the beneficiary shall refund insurance benefits or compensate the insurer for expenses incurred as a result of committing any of the acts stipulated in the foregoing three paragraphs of this Article.
Article 28 Reinsurance is when an insurer insures part of its underwritten policies with another insurer.
At the request of the reinsurer, the cedant shall inform the reinsurer in written form of its own liability and the relevant information on the original insurance.
Article 29 The reinsurer shall not demand payment of premiums by the policy holder of the original insurance.
The insured or the beneficiary of the original insurance shall not lodge claims with the reinsurer for indemnity or payment of insurance benefits. The cedant shall not refuse or delay to fulfill its own original obligations with the excuse that the reinsurer fails to perform the reinsurance liability.
Article 30 Where the insurer and policy holder, insured or beneficiary have a dispute over a clause of an insurance contract concluded by using the standard clauses provided by the insurer, the clause shall be interpreted as commonly understood. If there are two or more different interpretations of the clause, the people’s court or the arbitration institution shall interpret the clause in favor of the insured and beneficiary.
Section 2
Insurance of Person Contracts
Article 31 A policy holder has insurable interest in the following persons:
(1) The policy holder himself or herself;
(2) The policy holder’s spouse, children and parents;
(3) Family members and close relatives other than the aforementioned who foster or support the policy holder; or
(4) Workers who have a labor relationship with the policy holder.
In addition to the stipulations in the preceding paragraph, the policy holder shall be deemed as having an insurable interest in the insured if the insured consents to the policy holder concluding the contract for him or her.
If the policy holder has no insurable interest in the insured when the contract is concluded, the contract shall be void.
Article 32 If the age of the insured is not correctly given by a policy holder, and the actual age of the insured does not fall within the age limit specified by the contract, the insurer may rescind the contract and refund the cash value of the insurance policy as agreed upon in the contract. An insurer’s right to rescind an insurance contract shall be subject to paragraphs 3 and 6 of Article 16 of this Law.
In the event that a policy holder provides the incorrect age of the insured, thus causing him or her to underpay the premiums, the insurer shall have the right to rectify such mistake and demand the policy holder to pay the balance, or when paying insurance benefits, reduce the payment in proportion with the amount of premiums actually paid and the amount that should have been paid.
In the event that a policy holder provides the incorrect age of the insured, thus causing him or her to overpay the premiums, the insurer shall refund the overpaid portion to the policy holder.
Article 33 An applicant shall not apply and the insurer shall not underwrite insurance for a person taking death as a condition for payment of insurance benefits for a person without the capacity for civil conduct. The restriction stipulated in the preceding paragraph does not apply to cases where parents apply for insurance of person for their minor children. However, the total payment for death shall not exceed the limit prescribed by the insurance regulatory authority under the State Council.
Article 34 A contract stipulating death as the term for payment of insurance benefits is not valid unless the insured agrees and approves the amount insured.
An insurance policy signed and issued pursuant to a contract stipulating death as the term for payment of insurance benefits shall not be transferred or pledged without the written consent of the insured.
Where parents apply for insurance of person for their minor children, the restriction stipulated in paragraph one of this Article shall not apply.
Article 35 The policy holder may either pay the whole premium or pay by installments in accordance with the terms of the contract.
Article 36 Where a contract specifies payment of the premium by installments and the policy holder has paid the first installment but fails to pay the current installment despite a lapse of over 30 days from a reminder by the insurer or over 60 days from the scheduled date of payment, the validity of the contract shall be suspended, or the insurer may, in accordance with the terms of the contract, reduce the insured amount, unless stipulated otherwise in the contract.
Where an incident covered by insurance occurs to the insured within the time limit specified in the preceding paragraph, the insurer shall pay insurance benefits according to the contract, but may deduct the underpaid insurance premium from the insurance benefits.
Article 37 The validity of a contract that has been suspended in accordance with Article 36 of this Law can be reinstated upon agreement reached between the insurer and the policy holder through negotiations and after the policy holder makes the outstanding premium payment. However, the insurer is entitled to rescind the contract if no agreement has been reached by both parties within two years after the day when the validity of the contract is suspended.
Where an insurer rescinds the contract in accordance with the preceding paragraph, the insurer shall refund the cash value of the policy in accordance with the contract.
Article 38 The insurer shall not resort to legal proceedings to demand payment by the policy holder of the premium in the case of insurance of person.
Article 39 The beneficiary of the insurance of person shall be designated by the insured or policy holder.
The designation of a beneficiary by a policy holder shall be subject to consent of the insured. Where a policy holder applies for insurance of person for any worker who has a labor relationship with him or her, the policy holder shall not designate any person other than the insured or the insured’s close relative as the beneficiary.
If the insured is a person with no or limited capacity for civil conduct, the beneficiary may be designated by his or her guardian.
Article 40 The insured or policy holder may designate one or more persons as the beneficiary or beneficiaries.
Where there is more than one beneficiary, the insured or the policy holder may specify the beneficial order and beneficiary share. If such proportions have not been defined, all the beneficiaries shall share the insurance benefits equally.
Article 41 The insured or policy holder may change the beneficiary, and shall notify the insurer of the change in writing. The insurer shall endorse the change on the policy or other insurance certificates, or affix an endorsement slip thereto upon receipt of the notice.
The change of a beneficiary by the policy holder shall be subject to the consent of the insured.
Article 42 In the event of the death of the insured, the insurance benefits shall, in any of the following circumstances, be deemed as the estate of the deceased and the insurer shall be obligated to pay insurance benefits in accordance with the Inheritance Law of the People’s Republic of China:
(1) Where there is no designated beneficiary or the beneficiary is not clearly designated and cannot be determined;
(2) Where the beneficiary dies before the insured without another beneficiary being designated; or
(3) Where the beneficiary forfeits or surrenders his or her beneficial interests in accordance with the law without any other beneficiary.
Where both the beneficiary and the insured die in the same incident and it is impossible to determine the sequence of death, the beneficiary shall be presumed to have died first.
Article 43 Where a policy holder has intentionally caused the death, disability or illness of the insured, the insurer shall bear no obligation to make the insurance payment. In the event that a policy holder has paid the premium for two years or more, the insurer shall, in accordance with the contract, return the cash value of the policy to the other entitled beneficiaries.
If a beneficiary has intentionally caused the death, disability or illness of the insured, or attempted to cause the death of the insured, the beneficiary shall be deemed to have forfeited his or her beneficial interests.
Article 44 With respect to a contract regarding the death of the insured as the condition for payment of the insurance benefits, the insurer shall have no obligation to make such payment if the insured commits suicide within two years from the day the contract is concluded or when the validity of the contract resumes, unless the insured is a person without the capacity for civil conduct at the time of suicide.
Where an insurer is exempted from paying insurance benefit in accordance with the preceding paragraph, it shall refund the cash value of the insurance policy as agreed upon in the contract.
Article 45 Where death or disability of the insured results from him or her intentionally committing a crime or resisting compulsory criminal law enforcement measures applied according to the law, the insurer shall have no obligation to pay the insurance benefits. If, however, the policy holder has paid the premium for two years or more, the insurer shall return the cash value of the insurance policy as agreed upon in the contract.
Article 46 Where incidents covered by insurance such as the death, disability or illness of the insured result from the actions of a third party, the insurer shall have no subrogation right against the third party after payment of the insurance benefits to the insured or the beneficiary. However, the insured or the beneficiary shall still have the right to demand compensation from the third party.
Article 47 Where a policy holder rescinds a contract, the insurer shall return the cash value of the policy as agreed upon in the contract within 30 days after receiving the notice of termination.
Section 3
Property Insurance Contracts
Article 48 If the insured does not have an insurable interest in the object insured when an incident covered by insurance occurs, he or she shall not claim insurance benefits against the insurer.
Article 49 Where an object insured is assigned, the assignee shall succeed to the rights and obligations of the insured.
Where the object insured is assigned, the insured or the assignee shall notify the insurer in a timely manner, except in the case of a cargo insurance contract or where the contract specifies otherwise.
If the degree of peril is greatly increased due to the assignment of the object insured, the insurer may, within 30 days upon receipt of the notice mentioned in the preceding paragraph, increase the insurance premium or rescind the contract as agreed upon in the contract. If the insurer rescinds the contract, it shall refund the collected insurance premium to the policy holder after deducting the receivable part from the day of commencement of insurance liability to the day of contract rescission.
If the insured or assignee fails to notify the insurer as stipulated in the second paragraph of this Article, the insurer shall bear no obligation for indemnification where the occurrence of an incident covered by insurance is caused by the greatly increased risk attending the object insured due to the assignment.
Article 50 A cargo insurance contract or an insurance contract for the carrier’s voyage shall not be terminated by the parties thereto subsequent to the commencement of insurance liability.
Article 51 The insured shall observe all provisions of the State pertaining to areas such as fire prevention, safety, production operations and labor protection, to ensure safety of the object insured.
In accordance with the terms of the contract, an insurer may inspect the safety conditions of the object insured and make timely suggestions in writing to the policy holder or the insured so as to eliminate unsafe factors and latent risks.
In the event that a policy holder or the insured fails to fulfill his or her contractual obligations to ensure the safety of the object insured, the insurer has the right to ask for an increase in the premium or rescind the contract.
An insurer may, with the consent of the insured, take preventive measures to ensure the safety of the object insured.
Article 52 If the extent of risk attending the object insured increases during the term of the contract, the insured shall, in accordance with the contract, notify the insurer in a timely manner, and the insurer may ask for an increase in the premium or rescind the contract as agreed in the contract. If the insurer rescinds the contract, it shall refund the collected insurance premium to the policy holder after deducting the receivable part for the period between the date of commencement of cover and the date of rescission of the contract as agreed upon in the contract.
If the insured fails to notify the insurer as stipulated in the preceding paragraph, the insurer shall bear no obligation for indemnification where the occurrence of the incident covered by insurance is caused by the obviously increased risk attending the object insured.
Article 53 Unless otherwise specified in the contract, an insurer shall reduce the premium and refund correspondingly the part thereof calculated on a per diem basis in either of the following cases:
(1) A change occurs in relative circumstances under which the insurance rate was determined, so that the risk attending the object insured is noticeably reduced; or
(2) An obvious reduction occurs in the insurable value of the object insured.
Article 54 Where a policy holder requests rescind of a contract prior to commencement of insurance liability, the policy holder shall pay service charges to the insurer as agreed in the contract and the insurer shall then refund the premiums paid. If a policy holder requests rescission of the contract subsequent to the commencement of insurance liability, the insurer may refund the collected insurance premiums to the policy holder after deducting the receivable part from the day of commencement of insurance liability to the day of contract rescission as agreed upon in the contract.
Article 55 Where a policy holder and an insurer have agreed upon and specified the insurable value of the object insured in the contract, the insurable value as agreed upon in the contract shall be the standard for calculating the indemnity when damage occurs to the object insured.
Where a policy holder and an insurer have not agreed upon the insurable value of the object insured, the actual value of the object insured shall be the standard for calculating the indemnity when damage occurs to the object insured.
The sum insured shall not exceed the insurable value. The part in excess shall be null and void, and the insurer shall refund the corresponding amount of insurance premium to the policy holder.
Where the sum insured is less than the insurable value, the insurer shall bear obligation for indemnity pro rata based on the amount insured and the insurable value, unless otherwise provided for in the contract.
Article 56 In the event of double insurance, a policy holder shall notify all insurers concerned of relevant information with respect to such double insurance.
For double insurance, the total amount of indemnity paid by all insurers concerned shall not exceed the insurable value. Unless specified otherwise in the contract, the insurers concerned shall undertake their respective obligations for indemnity according to the proportion of the sum insured by each of them to the total amount of the sum insured.
A policy holder with double insurance may require the insurers to refund pro rata the insurance premium for the excess of the total insured amount over the insurable value.
Double insurance refers to a policy holder entering into separate insurance contracts with two or more insurers for the same object insured, the same insurable interests and the same incident covered by insurance and where the total insured amount exceeds the insurable value.
Article 57 At the occurrence of an incident covered by insurance, the insured shall take all necessary measures to prevent or mitigate loss or damage.
The insurer shall bear all necessary and reasonable expenses incurred by the insured after the occurrence of the incident covered by insurance in taking measures to prevent or mitigate loss or damage of the object insured. The amount of such expenses borne by the insurer shall be calculated separately from the indemnity for the loss of the object insured and it shall not exceed the sum insured.
Article 58 In the event of the partial damage to an insured object, the policy holder may rescind the contract within 30 days after indemnification by the insurer. Unless otherwise provided for in the insurance contract, the insurer may also rescind the contract, but shall notify the policy holder 15 days in advance of such rescission.
In the event that an insurer rescinds the contract, the insurer shall refund to the policy holder the premium for the portion of the object insured which is not lost or damaged after deducting, as agreed upon in the contract, the receivable premium for the object insured which is not lost or damaged from the date of the commencement of cover to the date of rescission of the contract.
Article 59 After the occurrence of an incident covered by insurance, if the insurer pays the sum insured in full which is equal to the insurable value, the insurer shall retain all rights pertaining to the lost or damaged object insured. If the sum insured is less than the insurable value, the insurer shall obtain partial rights pertaining to the lost or damaged object insured based on the ratio of the sum insured to the insurable value.
Article 60 When the occurrence of an incident covered by insurance results from loss or damage to the object insured by a third party, the insurer shall, from the date indemnity is paid to the insured, exercise the subrogation right of the insured to demand indemnification against the third party up to the amount of indemnity paid.
After the occurrence of an incident covered by insurance referred to in the preceding paragraph, the insurer may, when paying indemnity, deduct a corresponding amount therefrom, which the insured has received as indemnity from the third party.
The subrogation right exercised by the insurer in accordance with the first paragraph shall in no way affect the insured’s right to indemnity against the third party for the portion that is not indemnified.
Article 61 If the insured waives the right to indemnity against the third party after the occurrence of an incident covered by insurance and before the insurer pays the indemnity, the insurer shall bear no obligation for indemnity.
If the insured, without the insurer’s consent, waives the right to indemnity against the third party after indemnity is paid by the insurer, the waiver shall be invalid.
An insurer may deduct or require the refund of a corresponding sum from the indemnity if it is not able to exercise the right to subrogation due to intentional fault or gross negligence of the insured.
Article 62 An insurer has no subrogation right against any family member or staff member of the insured, unless the occurrence of the incident covered by insurance referred to in the first paragraph of Article 60 above has resulted from the willful misbehavior of such a party.
Article 63 When an insurer exercises the right to subrogation against a third party, the insured shall provide the insurer with the necessary documents and relevant information known to him or her.
Article 64 An insurer shall bear all necessary and reasonable expenses incurred by the insurer and the insured for the purpose of investigating and ascertaining the nature and cause of the occurrence of the incident covered by insurance, and the extent of loss or damage to the object insured.
Article 65 An insurer may, in accordance with the provisions of law or the terms of an insurance contract, directly indemnify a third party for loss or damage caused by the insured under liability insurance.
Where the insured under liability insurance causes any damage to a third party and the liability of the insured for indemnity to the third party has been determined, the insurer shall directly pay insurance benefits to the third party according to the request of the insured. Where the insured is negligent in making such a request, the third party shall have the right to directly request the insurer to pay the insurance benefits for the damage to the third party.
Where the insured under liability insurance causes any damage to a third party and the insured has not indemnified the third party for the damage, the insurer shall not pay insurance benefits to the insured.
Liability insurance refers to insurance where the object insured is the insured’s liability to indemnify a third party in accordance with the law.
Article 66 If the insured in a liability insurance contract is brought to arbitration or legal proceedings due to the occurrence of an incident covered by insurance which causes loss or damage to a third party, the insurer shall bear the cost of such arbitration or legal proceedings and other necessary and reasonable expenses paid by the insured, unless otherwise provided for in the insurance contract.
Chapter III
Insurance Companies
Article 67 The establishment of an insurance company shall be subject to the approval of the insurance regulatory authority under the State Council.
When examining an application for the establishment of an insurance company, the insurance regulatory authority under the State Council shall take into consideration the development of the insurance industry and the need for fair competition.
Article 68 To establish an insurance company, the following requirements shall be satisfied:
(1) The principal shareholders of the insurance company having a sustainable capability to make profits, a good credit standing, no record of major violations of laws or regulations in the previous three years and net assets worth not less than RMB 200 million yuan;
(2) Having articles of association in conformity with this Law and the Company Law of the People’s Republic of China;
(3) Having a registered capital conforming to the provisions of this Law;
(4) Having directors, supervisors and senior managers with professional knowledge and experience in business operations;
(5) Having a sound organizational structure and management systems;
(6) Having business premises conforming to requirements and other facilities relative to the insurance business; and
(7) Other requirements as prescribed by laws, administrative regulations and the insurance regulatory authority under the State Council.
Article 69 The minimum registered capital required for the establishment of an insurance company is RMB 200 million yuan.
The insurance regulatory authority under the State Council may adjust the amount of the minimum registered capital in accordance with the proposed scope of business and scale of operations; however, the minimum capital shall not be less than that stipulated in the first paragraph of this Article.
The minimum registered capital for the establishment of an insurance company shall be fully paid-up in monetary form.
Article 70 To establish an insurance company, the applicant shall apply in writing to the insurance regulatory authority under the State Council and submit the following documents and materials:
(1) A written application for establishment specifying the name, registered capital and the scope of business of the proposed insurance company;
(2) A feasibility study report;
(3) An establishment preparation plan;
(4) The investor’s business license or other background information, and the accounting report of the previous year audited by an accounting firm;
(5) A list of the persons in charge of the establishment preparation group and the proposed chairman of the board of directors and managers who are acknowledged by the investors and the acknowledgement certificates of such persons; and
(6) Other materials required by the insurance regulatory authority under the State Council.
Article 71 The insurance regulatory authority under the State Council shall examine the application for the establishment of an insurance company, make a decision on approval or disapproval of establishment preparation within six months upon acceptance of the application, and notify the applicant in writing. If the insurance regulatory authority under the State Council disapproves the application, it shall give reasons in written form.
Article 72 An applicant shall complete the establishment preparation within one year after receiving the notice of approval on establishment preparation, and shall not carry out any insurance business operations during the establishment preparation period.
Article 73 After completing the establishment preparation work, an applicant may apply to open a business with the insurance regulatory authority under the State Council if the applicant satisfies the establishment conditions as prescribed in Article 68 of this Law.
The insurance regulatory authority under the State Council shall make a decision on approval or disapproval of the opening of a business within 60 days upon receipt of such an application. If it approves the application, it shall issue an insurance business permit; if it disapproves the application, it shall notify the applicant in writing and give reasons for such disapproval.
Article 74 An insurance company that intends to establish a branch office within the territory of the People’s Republic of China shall obtain the approval of the insurance regulatory authority under the State Council. The branch offices of an insurance company do not possess the status of a legal person, and their civil liability shall be borne by the insurance company.
Article 75 To establish a branch office, an insurance company shall apply to an insurance regulatory authority in writing and submit the following materials:
(1) A written application;
(2) A three-year business development plan of the branch office to be established and market analysis materials;
(3) The resumes and relevant certificates of the proposed senior managers of the branch office; and
(4) Other materials as specified by the insurance regulatory authority under the State Council.
Article 76 An insurance regulatory authority shall examine the application for the establishment of a branch office of an insurance company and make a decision on approval or disapproval within 60 days upon acceptance of the application. If it approves the application, it shall issue an insurance business permit for the branch office; if it disapproves the application, it shall notify the applicant in writing and give reasons for such disapproval.
Article 77 The insurance company or its branch office approved for establishment shall conduct the registration formalities with the administrative authority for industry and commerce by presenting the insurance business permit, and obtain a business license.
Article 78 Where an insurance company and its branch offices, without justified reasons, fail to conduct the registration formalities at the administrative authority for industry and commerce within six months upon obtaining an insurance business permit, the insurance business permit shall become invalid.
Article 79 The establishment of a subsidiary company, branch office or representative office outside the territory of the People’s Republic of China by an insurance company shall be subject to the approval of the insurance regulatory authority under the State Council.
Article 80 The establishment of a representative office within the territory of the People’s Republic of China by a foreign insurance company shall be subject to the approval of the insurance regulatory authority under the State Council. No representative office may engage in insurance business operations.
Article 81 The directors, supervisors and senior managers of an insurance company shall maintain good conduct, be familiar with laws and administrative regulations on insurance, have the management capabilities required for performing their duties, and have obtained the corresponding position-holding qualifications approved by an insurance regulatory authority before holding their positions.
The scope of senior managers of an insurance company shall be specified by the insurance regulatory authority under the State Council.
Article 82 A person shall not hold the position of director, supervisor or senior manager in an insurance company if that person falls within any of the circumstances prescribed in Article 147 of the Company Law of the People’s Republic of China or if the person:
(1) Has been disqualified as a director, supervisor or senior manager of a financial institution by a financial regulatory authority due to a violation of law or discipline, and five years have not lapsed since the date of such disqualification; or
(2) Was formerly a lawyer, certified public accountant or professional of an institution such as asset assessment institution or verification institution, but his or her practicing qualification has been revoked due to a violation of law or discipline, and five years have not lapsed since the date of such disqualification.
Article 83 Where a director, supervisor or senior manager of an insurance company violates laws, administrative regulations or articles of association of the company in the process of performing duties for the company and causes losses to the company, that person shall be liable for compensation.
Article 84 Approval by an insurance regulatory authority is required for an insurance company under any of the following circumstances:
(1) Change of name;
(2) Change in the amount of registered capital;
(3) Change of business premises of the company or its branch offices;
(4) Closure of a branch office;
(5) Division or merger of the company;
(6) Amendment to its articles of association;
(7) Change of a shareholder whose amount of capital contribution accounts for 5% or more of the total capital of a limited liability company, or change of a shareholder who holds 5% or more of the shares of a joint-stock limited company; or
(8) Any other change as specified by the insurance regulatory authority under the State Council.
Article 85 Insurance companies shall employ actuaries recognized by the insurance regulatory authority under the State Council and set up an actuarial statement system.
Insurance companies shall employ professionals to set up a regulatory compliance reporting system.
Article 86 Insurance companies shall file the relevant reports, statements, documents and materials in accordance with the provisions of the insurance regulatory authorities.
The solvency reports, financial and accounting reports, actuarial statements, regulatory compliance reports and other relevant reports, statements, documents and materials of the insurance companies must truthfully record insurance business matters and contain no false records, misleading presentations or material omissions.
Article 87 Insurance companies shall, in accordance with the provisions of the insurance regulatory authority under the State Council, properly maintain complete account books, original documents and relevant materials about insurance business operations.
The account books, original documents and relevant materials mentioned in the preceding paragraph shall be maintained for at least five years if the duration of insurance is less than one year, or ten years if the duration of insurance is more than one year calculated from the day an insurance contract is terminated.
Article 88 Where an insurance company engages or dismisses an accounting firm, an asset assessment institution, a credit rating agency or any other intermediary service provider from its service, it shall report such development to the insurance regulatory authority. In the case of dismissal of such intermediary service providers, it shall provide reasons for such dismissal.
Article 89 Where an insurance company needs to be dissolved as a result of a division or merger of the company, the decision of the shareholders’ meeting or occurrence of a cause for its dissolution as stipulated by the company’s articles of association, the insurance company shall be dissolved upon the approval of the insurance regulatory authority under the State Council.
An insurance company, which includes life insurance in its business, shall not be dissolved except for any division, merger or cancellation in accordance with the law.
A liquidation group shall be set up to perform liquidation when an insurance company is dissolved.
Article 90 Where an insurance company falls under any of the circumstances prescribed in Article 2 of the Enterprise Bankruptcy Law of the People’s Republic of China, upon the approval of the insurance regulatory authority under the State Council, the insurance company or any creditor thereof may apply to a people’s court for reorganization, reconciliation or bankruptcy liquidation. The insurance regulatory authority under the State Council may also apply to a people’s court for reorganization or bankruptcy liquidation of the company in accordance with the law.
Article 91 The bankrupt’s estate shall, after giving priority to paying off the expenses of bankruptcy proceedings and debts incurred for the common benefit of creditors, be used for the payment of debts in the following order:
(1) Wages and salaries as well as medical fees, disability subsidies and pensions owed to employees, basic endowment insurance premiums and basic medical insurance premiums which should be transferred into the personal accounts of employees, and compensation which should be made to employees as required by laws and administrative regulations;
(2) Indemnity or the payment of insurance benefits;
(3) Social insurance fees other than those prescribed in Subparagraph (1) and taxes owed by the company; and
(4) General creditor’s rights in bankruptcy.
If the bankrupt’s estate is not sufficient for repayment of debts in the same order, it shall be distributed pro rata.
The salaries of the directors, supervisors and senior managers of a bankrupt insurance company shall be calculated as per the average wage of the employees of the company.
Article 92 Where an insurance company which includes life insurance in its business is cancelled or declared bankrupt in accordance with the law, it shall assign its life insurance contracts and liability reserve funds to another insurance company which includes life insurance in its business. Where the insurance company cannot reach an assignment agreement with another insurance company, the insurance regulatory authority under the State Council shall designate an insurance company which includes life insurance in its business to accept the assignment.
In the assignment of the life insurance contracts and liability reserve funds prescribed in the preceding paragraph or the acceptance of assignment of the same as designated by the insurance regulatory authority under the State Council, the legal rights and interests of the insured and the beneficiaries shall be protected.
Article 93 When an insurance company ceases its business operations in accordance with the law, its license to conduct insurance business shall be canceled.
Article 94 Insurance companies shall be regulated by the Company Law of the People’s Republic of China, unless otherwise provided for by this Law.
Chapter IV
Rules Governing Insurance Operations
Article 95 The scope of business of an insurance company shall be as follows:
(1) Insurance of person, which includes life insurance, health insurance, accidental injury insurance, etc.;
(2) Property insurance, which includes property damage insurance, liability insurance, credit insurance, surety insurance, etc.; and
(3) Other relevant insurance businesses approved by the insurance regulatory authority under the State Council.
An insurer is forbidden to concurrently engage in the businesses of both insurance of person and insurance of property. However, upon approval of the insurance regulatory authority under the State Council, an insurance company which operates a property insurance business may operate a short-term health insurance business and accidental injury insurance business.
An insurance company shall operate its insurance business within the scope of business approved by the insurance regulatory authority under the State Council.
Article 96 Subject to approval by the insurance regulatory authority under the State Council, an insurance company may engage in the following reinsurance business with respect to the insurance businesses prescribed in Article 95 of this Law:
(1) Outward reinsurance; and
(2) Inward reinsurance.
Article 97 An insurance company shall draw a guarantee fund at the rate of 20% of its total registered capital, deposit it into a bank designated by the insurance regulatory authority under the State Council, and use it for no purpose other than the repayment of debts at the time of liquidation of the company.
Article 98 Insurance companies shall, in accordance with the principles of safeguarding the interests of the insured and guaranteeing the ability to reimburse, set aside all liability reserve funds.
Specific measures for setting aside and carrying forward the liability reserve funds by insurance companies shall be formulated by the insurance regulatory authority under the State Council.
Article 99 Insurance companies shall collect accumulation funds in accordance with the law.
Article 100 Insurance companies shall contribute to an insurance protection fund.
The insurance protection fund shall be managed in a centralized way and used on the basis of overall planning and arrangement in the following circumstances:
(1) Providing remedies for policy holders, the insured or beneficiaries when an insurance company is closed or declared bankrupt;
(2) Providing remedies for an insurance company which accepts the life insurance contracts of another insurance company, which is closed or declared bankrupt; or
(3) Any other circumstance as prescribed by the State Council.
Specific measures for raising, managing and using the insurance protection fund shall be formulated by the State Council.
Article 101 An insurance company shall maintain a minimum solvency commensurate with its scale of business and degree of risk. The difference between the admissible assets and admissible liability of an insurance company shall not be less than the amount specified by the insurance regulatory authority under the State Council; otherwise, the insurance company shall take corresponding measures to reach the amount stipulated in accordance with the requirements of the insurance regulatory authority under the State Council.
Article 102 For insurance companies engaged in property insurance, the self-retained premiums for the current year shall not exceed four times the combined total of its actual capital and its accumulation fund.
Article 103 The liability borne by an insurance company for each risk unit, that is, the liability of an insurance company that might arise from the maximum loss or damage caused by the occurrence of a single incident covered by insurance, shall not exceed 10% of the combined total of its actual capital and its accumulation fund. Reinsurance shall be arranged for the portion in excess of this sum. An insurance company shall classify risk units in accordance with the provisions of the insurance regulatory authority under the State Council.
Article 104 An insurance company’s method for classifying risk units and its arrangement plan on the risk of major disasters shall be submitted to the insurance regulatory authority under the State Council for the record.
Article 105 An insurance company shall arrange reinsurance in accordance with the relevant provisions specified by the insurance regulatory authority under the State Council, and select a reinsurer in a prudent way.
Article 106 An insurance company shall use its funds in a steady manner and follow the principle of safety.
The use of funds of an insurance company is limited to the following forms:
(1) Bank deposits;
(2) Trading bonds, stocks, shares of securities investment funds and other negotiable securities;
(3) Investment in real estate; and
(4) Other uses of funds prescribed by the State Council.
The specific measures for the administration of the use of funds by an insurance company shall be formulated by the insurance regulatory authority under the State Council in accordance with the preceding two paragraphs.
Article 107 Upon approval of the insurance regulatory authority under the State Council in conjunction with the securities regulatory authority under the State Council, an insurance company may establish an insurance asset management company.
Insurance asset management companies shall conduct securities investment activities in accordance with the Securities Law of the People’s Republic of China and other relevant laws and administrative regulations.
The measures for the administration of insurance asset management companies shall be formulated by the insurance regulatory authority under the State Council in conjunction with other relevant departments under the State Council.
Article 108 An insurance company shall set up a management and information disclosure system of affiliated transactions in accordance with the provisions of the insurance regulatory authority under the State Council.
Article 109 None of the controlling shareholders, actual controllers, directors, supervisors and senior managers of an insurance company may make use of the affiliated transactions to damage the interests of the company.
Article 110 An insurance company shall, in accordance with the provisions of the insurance regulatory authority under the State Council, truthfully, accurately and completely disclose its financial and accounting reports, risk management condition, insurance product trading information and other major matters.
Article 111 Insurance salespersons of an insurance company shall meet the qualification requirements set forth by the insurance regulatory authority under the State Council and obtain the qualification certificates issued by an insurance regulatory authority.
The scope and management measures of the insurance salespersons mentioned in the preceding paragraph shall be specified by the insurance regulatory authority under the State Council.
Article 112 Insurance companies shall set up an insurance agent registration system and strengthen the training and management of insurance agents, and shall not incite or induce insurance agents to act against the obligation of good faith.
Article 113 Insurance companies and their branches shall use their insurance business permits in accordance with the law, and shall not transfer, lease or lend their insurance business permits.
Article 114 Insurance companies shall, in accordance with the provisions of the insurance regulatory authority under the State Council, fairly and reasonably determine the insurance clauses and premium rates, and shall not damage the legitimate rights and interests of policy holders, the insured and beneficiaries.
Insurance companies shall perform their obligation of paying indemnity or insurance benefits in a timely manner in accordance with insurance contracts and this Law.
Article 115 Insurance companies shall follow the principle of fair competition in their business operations, and shall not engage in unfair competition.
Article 116 Insurance companies and their staff shall not engage in any of the following acts in their insurance business operations:
(1) Deceive a policy holder, insured or beneficiary;
(2) Conceal important information related to an insurance contract from a policy holder;
(3) Obstruct a policy holder from performing or induce a policy holder not to perform the obligation of making a full and accurate disclosure as prescribed by this Law;
(4) Give or promise to give premium rebates or other benefits not specified in the insurance contract to a policy holder, insured or beneficiary ;
(5) Refuse to perform the obligation of paying indemnity or insurance benefits as agreed in the insurance contract in accordance with the law;
(6) Intentionally make up an incident covered by insurance which has never occurred or fabricate an insurance contract or intentionally exaggerate the degree of damage caused by an incident covered by insurance which has actually occurred, for the purpose of making a false claim, swindling insurance benefits or seeking other illegitimate interests;
(7) Misappropriate, intercept or encroach on insurance premiums;
(8) Entrust an institution or individual without legal qualification to engage in insurance sales activities;
(9) Carry out insurance business in order to seek illegitimate interests for any other institution or individual;
(10) Take advantage of insurance agents, insurance brokers or insurance assessment agencies to carry out illegal activities such as swindling money by fabricating insurance intermediary business or surrendering of insurance;
(11) Damage the business reputation of competitors by fabrication or spreading of misrepresented facts, or disturbing the order of the insurance market by any other act of unfair competition;
(12) Disclose commercial secrets of a policy holder or the insured learned during an insurance business activity; and
(13) Conduct any other act in violation of the provisions of laws, administrative regulations or the provisions of the insurance regulatory authority under the State Council.
Chapter V
Insurance Agents and Insurance Brokers
Article 117 An insurance agent is an entity or individual that has been authorized by an insurer to transact insurance business on the insurer’s behalf within the scope of authorization and receives commission in return from the insurer.
Insurance agencies include full-time insurance agencies which specialize in the insurance agency business and part-time insurance agencies which operate an insurance agency business concurrently with another business.
Article 118 An insurance broker is an entity that, in the interest of the policy holder, provides intermediary services between the policy holder and the insurer for the conclusion of an insurance contract and receives a commission therefore in accordance with the law.
Article 119 An insurance agent or an insurance broker shall meet the requirements prescribed by the insurance regulatory authority under the State Council and shall obtain an insurance agent’s permit or an insurance broker’s permit issued by an insurance regulatory authority.
A full-time insurance agency or insurance broker shall register with the permit issued by the insurance regulatory authority at the administrative authority for industry and commerce to obtain a business license.
A part-time insurance agency shall conduct the formalities for change of registration at the administrative authority for industry and commerce with the permit issued by the insurance regulatory authority.
Article 120 Where a full-time insurance agency or insurance broker is formed as a company, its minimum amount of registered capital shall be regulated by the Company Law of the People’s Republic of China.
The insurance regulatory authority under the State Council may adjust the minimum amount of registered capital of a full-time insurance agency or insurance broker according to its business scope and scale of operations, but the amount shall not be less than the amount prescribed in the Company Law of the People’s Republic of China.
The registered capital or capital contribution of a full-time insurance agency or an insurance broker must be paid-in monetary capital.
Article 121 The senior managers of a full-time insurance agency or insurance broker shall maintain good conduct, be familiar with laws and administrative regulations on insurance, possess business management capabilities required for performing their duties, and have obtained the corresponding position-holding qualifications approved by an insurance regulatory authority before holding their positions.
Article 122 An individual insurance agent, a practitioner of an insurance agency or a practitioner of an insurance broker shall meet the qualification requirements prescribed by the insurance regulatory authority under the State Council and shall obtain a qualification certificate issued by an insurance regulatory authority.
Article 123 Insurance agencies and insurance brokers shall have their own business premises and set up special account books to record the revenues and expenditures of the insurance agency or brokerage business.
Article 124 An insurance agency or insurance broker shall, in accordance with the provisions of the insurance regulatory authority under the State Council, pay money into a guarantee fund or buy professional liability insurance. Without the approval of an insurance regulatory authority, no insurance agency or insurance broker may use the guarantee fund.
Article 125 When transacting life insurance business, no individual insurance agent may accept authorization from two or more insurers concurrently.
Article 126 Where the insurer authorizes an insurance agent to transact insurance business on its behalf, it shall sign an agreement to this effect with the insurance agent, in which the rights and obligations of both parties are agreed upon in accordance with the law.
Article 127 The insurer shall be liable for the acts of the insurance agents when they transact the insurance businesses which are authorized by the insurer.
Where an insurance agent enters into an insurance contract in the name of an insurer without authorization, beyond authorization or after the termination of authorization and the policy holder has good reasons to believe that it has the authority of agency, the act of agency shall be valid. The insurer may, in accordance with the law, investigate the responsibility of the insurance agent that oversteps the authority delegated to it.
Article 128 An insurance broker shall be liable for losses or damages caused to the policy holder or the insured due to his or her mistakes.
Article 129 Parties to an insurance activity may authorize a public insurance assessment institution or any other legally established independent assessment institution or person with relevant expertise to assess and authenticate an incident covered by insurance.
The institution and person authorized to assess and authenticate an incident covered by insurance shall conduct assessment and authentication in a legal, independent, objective and fair way, no entity or individual shall intervene in such assessment and authentication.
The institution or person mentioned in the preceding paragraph shall assume the compensatory liability when causing any loss to an insurer or insured intentionally or negligently.
Article 130 Insurance commission shall only be paid to legally qualified insurance agents and insurance brokers, not to any other persons.
Article 131 When transacting insurance business, no insurance agent, broker or their practitioners may commit any of the following acts:
(1) Deceive the insurer, policy holder, insured or beneficiary;
(2) Conceal material information with respect to the insurance contract;
(3) Prevent the policy holder from fulfilling his obligation of making a full and accurate disclosure, or induce the policy holder not to fulfill his obligation of making a full and accurate disclosure;
(4) Give or promise to give the policy holder, the insured or beneficiary benefits other than the ones provided for in the insurance contract;
(5) Coerce or induce the policy holder to enter into an insurance contract, or restrict the policy holder from entering into an insurance contract, by taking advantage of administrative powers, their positions or occupational facilities, or by employing other illegitimate means;
(6) Forge an insurance contract, or modify any insurance contract without authorization, or provide false proof materials for a party to an insurance contract;
(7) Misappropriate, intercept or encroach on insurance premiums or insurance benefits;
(8) Seek any illegitimate benefit for any other institution or individual by using business advantages;
(9) Collude with any policy holder, insured or beneficiary to swindle insurance benefits; or
(10) Disclose any commercial secret of an insurer, policy holder or insured learned during business activities.
Article 132 The split, merger, dissolution or change of organizational form of a full-time insurance agency or an insurance broker as well as the formation of a branch office shall be subject to the approval of an insurance regulatory authority.
Article 133 The provisions of the first paragraph of Articles 86 and Article 113 of this Law shall apply to insurance agencies and insurance brokers.
Chapter VI
Supervision and Administration of the Insurance Industry
Article 134 An insurance regulatory authority shall, in accordance with the principles of legality, openness and fairness, supervise and administer the insurance industry according to its duties prescribed by this Law and the State Council, to maintain the order of the insurance market and protect the legitimate rights and interests of policy holders, insured and beneficiaries.
Article 135 The insurance regulatory authority under the State Council shall formulate and issue rules on the supervision and administration of the insurance industry in accordance with laws and administrative regulations.
Article 136 Insurance clauses and premium rates for insurance products related to the public interest, insurance products which are compulsory in accordance with the law, and newly developed life insurance products shall be submitted to the insurance regulatory authority under the State Council for approval. When conducting examination and approval, the insurance regulatory authority under the State Council shall abide by the principles of protecting the interests of the public and preventing unfair competition. Insurance clauses and premium rates for other insurance products shall be submitted to the insurance regulatory authority for the record.
The specific measures for examination and approval and filing of insurance clauses and premium rates shall be formulated by the insurance regulatory authority under the State Council according to the preceding paragraph.
Article 137 Where any insurance clause or premium rate used by an insurance company violates any of the laws, administrative regulations or the relevant provisions of the insurance regulatory authority under the State Council, the insurance regulatory authority shall order the insurance company to stop using such clause or rate and make corrections within a prescribed time limit. If the circumstances are serious, the said authority may prohibit the insurance company from applying for new insurance clauses or insurance premium rates within a prescribed time limit.
Article 138 The insurance regulatory authority under the State Council shall establish a sound system for supervision over and administration of the solvency of insurance companies, in order to exercise supervision and control in this respect.
Article 139 The insurance regulatory authority under the State Council shall regard insolvent insurance companies as its key objects of supervision and administration, and may take the following measures according to the specific circumstances:
(1) Order an increase of capital or reinsurance;
(2) Restrict the business scope;
(3) Restrict the payment of dividends to shareholders;
(4) Restrict the purchase of fixed assets or the scale of operation costs;
(5) Restrict the forms and proportion of use of funds;
(6) Restrict the establishment of additional branch offices;
(7) Order an auction of non-performing assets or the transfer of insurance business;
(8) Restrict the level of salaries of directors, supervisors and senior managers;
(9) Restrict commercial advertisements; and
(10) Order the cessation of accepting new business.
Article 140 Where an insurance company fails to set aside or carry forward various liability reserve funds or to carry out reinsurance in accordance with this Law, or seriously violates the provisions of this Law on the use of funds, the insurance regulatory authority shall order it to make corrections within a prescribed time limit, and may order it to replace the person in charge and the relevant managers.
Article 141 Where an insurance company fails to make corrections within a prescribed time limit after an insurance regulatory authority, in accordance with Article 140 of this Law, makes a decision on correction within a time limit, the insurance regulatory authority under the State Council may decide to select and send insurance professionals and designate relevant personnel from the insurance company to form a rectification group to carry out the rectification work of the said insurance company.
A decision on rectification shall be publicized, giving the name of the insurance company referred to, the reason for rectification, the composition of the rectification group and the period of rectification.
Article 142 The rectification group shall have the authority to supervise the daily business operations of the insurance company being rectified. The person in charge and the relevant managers of the insurance company shall discharge their respective duties and powers under the supervision of the rectification group.
Article 143 In the course of the rectification, the original business of the insurance company in rectification shall be continued. The insurance regulatory authority under the State Council may, however, order the said company to stop some original business or stop accepting new business and make adjustments to the use of its funds.
Article 144 Where an insurance company under rectification has rectified its violations of this Law and resumed its normal business operations, the rectification group shall submit a report thereon and cease rectification after the report is approved by the insurance regulatory authority under the State Council, and the said authority shall make an announcement thereon.
Article 145 Where an insurance company falls under either of the following circumstances, the insurance regulatory authority under the State Council may take control:
(1) The company is insolvent to a serious degree; or
(2) The company, in violation of this Law, impairs the public interests, which may seriously jeopardize or has already seriously jeopardized its solvency.
The creditor-debtor relationship of the insurance company taken over shall not change after it is taken over.
Article 146 The composition of the take-over group and the measures for implementation of the take-over shall be determined and publicized by the insurance regulatory authority under the State Council.
Article 147 Where the term of a take-over expires, the insurance regulatory authority under the State Council may decide to extend it. However, the maximum term of a take-over shall not exceed two years.
Article 148 Where the term of a take-over expires and the insurance company has resumed its normal operational capacity, the decision to terminate the take-over shall be made by the insurance regulatory authority under the State Council and an announcement made thereon.
Article 149 Where an insurance company in rectification or take-over falls under any of the circumstances prescribed in Article 2 of the Enterprise Bankruptcy Law of the People’s Republic of China, the insurance regulatory authority under the State Council may apply to the people’s court for a reorganization or bankruptcy liquidation of the insurance company.
Article 150 Where the insurance business permit of an insurance company is revoked due to illegal business operations, or the solvency of an insurance company is lower than the standard prescribed by the insurance regulatory authority under the State Council, and the order of the insurance market will be seriously endangered or the public interests will be seriously damaged if the insurance company is not closed, the insurance regulatory authority under the State Council shall close it, make an announcement thereon and form a liquidation group to conduct liquidation in accordance with the law in a timely manner.
Article 151 The insurance regulatory authority under the State Council shall have the right to require the shareholders and actual controllers of any insurance company to provide relevant information and materials within a prescribed time limit.
Article 152 Where a shareholder of an insurance company seriously damages the interests of the company through affiliated transactions, which endangers the company’s solvency, the insurance regulatory authority under the State Council shall order the shareholder to make corrections. Before the shareholder makes corrections as ordered, the said authority may restrict his or her shareholder’s rights; and, if the shareholder refuses to make corrections, may order him or her to assign his or her shares of the insurance company.
Article 153 An insurance regulatory authority may, in accordance with the needs for performing its functions of supervision and administration, hold supervisory talks with the directors, supervisors and senior managers of an insurance company and require them to explain important matters concerning business operations and risk management of the insurance company.
Article 154 During the period of rectification, take-over or liquidation as a result of the closure of an insurance company or upon the occurrence of any major risk to an insurance company, the insurance regulatory authority under the State Council may take the following measures against the directly responsible directors, supervisors, senior managers and other directly responsible persons of the company:
(1) Notify the border exit administration organ to prevent them from leaving the country; or
(2) Request the judicial authority to prohibit them from disposing of their property by displacement, transfer or other means, or from placing other rights on their property.
Article 155 An insurance regulatory authority may take the following measures when performing its functions and duties in accordance with the law:
(1) Carry out on-site inspections of insurance companies, insurance agents, insurance brokers, insurance asset management companies and representative offices of foreign insurance institutions;
(2) Enter a place where an illegal act is suspected of having occurred to investigate and take evidence;
(3) Inquire of the parties concerned and other entities and individuals related to the investigated event, and require them to explain the matters related to the investigated event;
(4) Consult and copy materials related to the investigated event, such as materials on the registration of property rights;
(5) Consult and copy financial and accounting materials and other relevant documents and materials of insurance companies, insurance agents, insurance brokers, insurance asset management companies, representative offices of foreign insurance institutions, and other entities and individuals related to the investigated event, and seal up documents and materials which could be displaced, concealed or destroyed;
(6) Conduct an inquiry into the bank accounts of insurance companies, insurance agents, insurance brokers, insurance asset management companies and representative offices of foreign insurance institutions which are suspected of illegal business operations and the bank accounts of the entities and individuals related to the suspected illegal matters; and
(7) Upon approval of the chief person in charge of an insurance regulatory authority, apply to the people’s court to freeze or seal up the assets involved, such as illegal funds which have been proved to be or could be displaced or concealed, or any important evidence which has been proved to be or could be concealed, forged or destroyed.
To take the measures prescribed in Subparagraph (1), (2) or (5) of the preceding paragraph, the insurance regulatory authority shall obtain the approval of the person in charge of the authority. To take the measures prescribed in Subparagraph (6), the insurance regulatory authority shall obtain the approval of the person in charge of the insurance regulatory authority under the State Council.
Where an insurance regulatory authority conducts a supervisory inspection or investigation in accordance with the law, there shall be at least two supervisory inspectors or investigators who shall present their legal certificates and a notice of supervisory inspection or investigation. If there are less than two supervisory inspectors or investigators or they fail to present their legal certificates or a notice of supervisory inspection or investigation, the entity or individual subjected to inspection or investigation shall have the right to refuse the inspection or investigation.
Article 156 The insurance regulatory authority shall carry out its functions and duties in accordance with the law, and the entity or individual subjected to inspection or investigation shall cooperate with the said authority.
Article 157 The staff of an insurance regulatory authority shall be devoted to their duties, handle affairs in accordance with the law and be fair and uncorrupt, and shall neither seek illegitimate benefits by taking advantage of their positions nor disclose commercial secrets of the relevant entities or individuals which they have access to.
Article 158 The insurance regulatory authority under the State Council shall set up an information-sharing mechanism of supervision and administration with the People’s Bank of China and other financial regulatory institutions under the State Council.
When an insurance regulatory authority performs its duties and carries out the supervisory inspection and investigation in accordance with the law, the relevant departments shall cooperate with it.
Chapter VII
Legal Liability
Article 159 Anyone who, in violation of this Law, establishes an insurance company or insurance asset management company without approval or engages in illegal commercial insurance business operation, the insurance regulatory authority shall ban such a company or such business operation, confiscate the illegal gains and impose a fine of not less than one time but not more than five times the amount of the illegal gains. If there are no unlawful gains or the amount of illegal gains is less than RMB 200,000 yuan, the fine shall be not less than RMB 200,000 yuan but not more than RMB one million yuan.
Article 160 Anyone who, in violation of this Law, establishes a full-time insurance company or insurance broker without approval or engages in any insurance agency business operation or insurance brokerage business operation without an insurance agency business permit or an insurance brokerage business license, the insurance regulatory authority shall ban such full-time insurance company or insurance broker, confiscate the illegal gains and impose a fine of not less than one time but not more than five times the amount of the illegal gains. If there are no illegal gains or the amount of the illegal gains is less than RMB 50,000 yuan, the fine shall be not less than RMB 50,000 yuan but not more than RMB 300,000 yuan.
Article 161 Where an insurance company, in violation of this Law, engages in insurance business beyond the approved scope of business, the relevant insurance regulatory authority shall order it to make corrections within a specified time limit, confiscate its illegal gains and impose on it a fine of not less than one time but not more than five times the amount of its illegal gains, or a fine of not less than RMB100,000 yuan but not more than RMB 500,000 yuan if there are no illegal gains or the amount of the illegal gains is less than RMB 100,000 yuan. If the insurance company fails to make corrections within the specified time limit or if the consequences are serious, the said authority shall order it to suspend business operations for rectification or revoke its insurance business permit.
Article 162 Where an insurance company commits any of the acts prescribed in Article 116 of this Law, the insurance regulatory authority shall order it to make corrections and impose on it a fine of not less than RMB 50,000 yuan but not more than RMB 300,000 yuan. If the circumstances are serious, the said authority shall restrict its scope of business, order it to cease accepting new business or revoke its insurance business permit.
Article 163 Where an insurance company violates Article 84 of this Law, the insurance regulatory authority shall order it to make corrections and impose on it a fine of not less than RMB 10,000 yuan but not more than RMB 100,000 yuan.
Article 164 Where an insurance company, in violation of this Law, commits any of the following acts, the insurance regulatory authority shall order it to make corrections and impose on it a fine of not less than RMB 50,000 yuan but not more than RMB 300,000 yuan:
(1) Underwriting excess insurance, where the circumstances are serious; or
(2) Underwriting insurance of person, which takes death as the condition for the payment of the insurance benefits for a person without the capacity for civil conduct.
Article 165 Where an insurance company, in violation of this Law, commits any of the following acts, the insurance regulatory authority shall order it to make corrections and impose a fine of not less than RMB 50,000 yuan but not more than RMB 300,000 yuan. If the circumstances are serious, the said authority may restrict that its scope of business, order it to cease accepting new business or revoke his or her insurance business permit:
(1) Fails to set up a guarantee fund as required or uses the guarantee fund in violation of the provisions;
(2) Fails to set aside or carry forward all the liability reserve funds as required;
(3) Fails to pay into the insurance guarantee fund or contribute to the accumulation fund as required;
(4) Fails to take out reinsurance as required;
(5) Fails to use the funds of the insurance company as required;
(6) Establishes branches or representative offices without approval; or
(7) Fails to submit for approval the insurance clauses or premium rates as required.
Article 166 Where an insurance agency or insurance broker commits any of the acts prescribed in Article 131 of this Law, the insurance regulatory authority shall order it to make corrections and impose on it a fine of not less than RMB 50,000 yuan but not more than RMB 300,000 yuan. If the circumstances are serious, the said authority shall revoke its insurance business permit.
Article 167 Where an insurance agency or insurance broker, in violation of this Law, commits any of the following acts, the insurance regulatory authority shall order it to make corrections and impose on it a fine of not less than RMB 20,000 yuan but not more than RMB 100,000 yuan. If the circumstances are serious, the said authority shall order it to suspend business for rectification or revoke its insurance business permit:
(1) Fails to pay into the guarantee fund or to purchase professional liability insurance as required; or
(2) Fails to maintain a special account book to record revenues and expenditures as required.
Article 168 Where a full-time insurance agency or insurance broker, in violation of this Law, sets up a branch office or changes its organizational form without approval, the insurance regulatory authority shall order it to make corrections and impose on it a fine of not less than RMB 10,000 yuan but not more than RMB 50,000 yuan.
Article 169 Where anyone, in violation of this Law, engages any person without position-holding qualification or practicing qualification, the insurance regulatory authority shall order it to make corrections and impose a fine of not less than RMB 20,000 yuan but not more than RMB 100,000 yuan.
Article 170 Where anyone, in violation of this Law, transfers, leases, or lends its insurance business permit, the insurance regulatory authority shall impose a fine of not less than RMB 10,000 yuan but not more than RMB 100,000 yuan. If the consequences are serious, the insurance regulatory authority shall order it to suspend business for rectification or revoke his or her insurance business permit.
Article 171 Where anyone, in violation of this Law, commits any of the following acts, the insurance regulatory authority shall order it to make corrections within a specified time limit. If the said person fails to make corrections within the specified time limit, the insurance regulatory authority shall impose a fine of not less than RMB 10,000 yuan but not more than RMB 100,000 yuan:
(1) Fails to submit or keep reports, statements, documents or information as required, or fails to provide the relevant information or materials as required;
(2) Fails to file insurance clauses or premium rates as required; or
(3) Fails to disclose information as required.
Article 172 Where anyone, in violation of this Law, commits any of the following acts, the insurance regulatory authority shall order it to make corrections and impose a fine of not less than RMB 100,000 yuan but not more than RMB 500,000 yuan; and if the circumstances are serious, the said authority may restrict its scope of business, order it to cease accepting new insurance business or revoke its insurance business permit:
(1) Compiles or submits false reports, statements, documents and information;
(2) Refuses or hinders supervision and inspection conducted in accordance with the law; or
(3) Fails to use the approved or filed insurance clauses or premium rates as required.
Article 173 Where an insurance company, insurance asset management company, full-time insurance agency or insurance broker violates this Law, the insurance regulatory authority shall, in addition to imposing punishment on the relevant entity in accordance with the provisions of Article 161 through Article 172 respectively, give a warning to the directly responsible persons in charge and other directly responsible persons and impose on them a fine of not less than RMB 10,000 yuan but not more than RMB 100,000 yuan. If the circumstances are serious, the said authority shall cancel their position-holding qualification or practicing qualification.
Article 174 Where an individual insurance agent violates this Law, the insurance regulatory authority shall give him or her a warning and may impose a fine of not more than RMB 20,000 yuan. If the circumstances are serious, the said authority shall impose on him or her a fine of not less than RMB 20,000 yuan but not more than RMB 100,000 yuan and may revoke his or her qualification certificate.
Where a person engages in individual insurance agent business without a legal qualification, the insurance regulatory authority shall give him or her a warning and may impose a fine of not more than RMB 20,000 yuan. If the circumstances are serious, the said authority shall impose a fine of not less than RMB 20,000 yuan but not more than RMB 100,000 yuan.
Article 175 Where a foreign insurance institution sets up a representative office within the territory of the People’s Republic of China without the approval of the insurance regulatory authority under the State Council, the said authority shall ban the representative office and impose a fine of not less than RMB 50,000 yuan but not more than RMB 300,000 yuan on the foreign insurance institution.
Where a representative office set up by a foreign insurance institution within the territory of the People’s Republic of China engages in insurance business operations, the insurance regulatory authority shall order it to make corrections, confiscate its illegal gains and impose on it a fine of not less than one time but not more than five times the amount of its illegal gains; if there are no illegal gains or the amount of the illegal gains is less than RMB 200,000 yuan, the insurance regulatory authority shall impose on it a fine of not less than RMB 200,000 yuan but not more than RMB one million yuan, and may order it to replace its chief representative. If the circumstances are serious, the said authority shall cancel the representative office.
Article 176 A policy holder, insured or beneficiary who commits any of the following acts for the purpose of insurance fraud shall be subject to administrative penalties if it does not constitute a crime:
(1) A policy holder intentionally makes up an insured object to swindle insurance benefits;
(2) Makes up an incident covered by insurance which has never occurred, or makes up the cause of an incident covered by insurance or exaggerates the degree of damage caused by an incident covered by insurance to swindle insurance benefits; or
(3) Intentionally causes an incident covered by insurance to swindle insurance benefits.
An appraiser, assessor or certifier of an incident covered by insurance who intentionally submits any false certificate to provide conditions for a policy holder, insured or beneficiary to commit an insurance fraud shall be punished in accordance with the preceding paragraph.
Article 177 Anyone who, in violation of this Law, causes damage or loss to others, shall bear civil liability in accordance with the law.
Article 178 Anyone who refuses or obstructs supervisory inspection or investigation performed by the insurance regulatory authority and its personnel in accordance with the law shall be subject to administrative penalties for public security if no violence or threat is used.
Article 179 Where any provision of a law or administrative regulation is violated and the circumstances are serious, the insurance regulatory authority under the State Council may forbid the relevant responsible persons from practicing in the insurance sector within a prescribed time limit or even for a lifetime.
Article 180 Where any staff member of an insurance regulatory authority who undertakes supervision and administration work commits any of the following acts, the person shall be subject to disciplinary sanctions in accordance with the law:
(1) Approves the establishment of an institution in violation of provisions;
(2) Examines and approves insurance clauses or premium rates in violation of provisions;
(3) Carries out on-site inspections in violation of provisions;
(4) Makes inquiries about accounts or freezes funds in violation of provisions;
(5) Discloses commercial secrets of a relevant entity or individual which become known to him or her;
(6) Imposes administrative penalties in violation of provisions; or
(7) Any other act of abusing power or neglecting duties.
Article 181 Any violation of this Law shall be investigated for criminal liability if a crime is constituted.
Chapter VIII
Supplementary Provisions
Article 182 An insurance company shall join the insurance association. An insurance agent, insurance broker and public insurance assessment institution may also join the insurance association.
The Insurance Association of China is a self-disciplinary organization for the insurance sector and is a social group legal person.
Article 183 This Law shall apply to commercial insurance businesses operated by legally established insurance organizations other than insurance companies.
Article 184 The Maritime Code of the People’s Republic of China shall be applicable to marine insurance. For matters not covered by the Maritime Code of the People’s Republic of China, this Law shall apply.
Article 185 This Law shall apply to Chinese-foreign joint venture insurance companies, wholly foreign-funded insurance companies and branches of foreign insurance companies. Where other laws and administrative regulations provide otherwise, such provisions shall prevail.
Article 186 The State supports the development of insurance businesses which facilitate agricultural production. Agricultural insurance shall be governed separately by laws and administrative regulations.
For compulsory insurance, if laws and administrative regulations provide otherwise, such provisions shall prevail.
Article 187 This Law shall go into effect as of October 1, 2009.