China Banking and Insurance Regulatory Commission (CBIRC) will be introducing insurance marketing reform including cleaning up the insurance salespersons' registry and establishing a practice evaluation system.
Mr Shi Qiang, deputy inspector of the Insurance Intermediary Supervision Department of the CBIRC, said at the recent China Insurance Marketing Summit organised by the Insurance Association of China, that while the explosive growth in the number of insurance salesmen from 3m in 2014 to 8.06m at the end of 2017 has driven the development of the insurance industry, it has also sparked off mis-selling and fake sales.
To curb malpractices, Mr Shi revealed that the CBIRC will be introducing insurance marketing reform in an orderly manner, including cleaning up the insurance salespersons' registry and establishing a practice evaluation system.
50% premium contribution rate vs 50% dropout rate
CBIRC data show that in 2017, the agency channel raked in premium income of CNY1.6trn ($230bn), accounting for 42.4% of overall premiums, while in the first three quarters of this year, the channel generated premium income of CNY1.5trn, accounting for 48.3% of the overall premium.
However, the "2015-2018 China Insurance Marketer Census Report" shows that the number of insurance marketers who quit the sector, in the same year that they joined it, was on an upward trend. From 2015 to 2017, the dropout rate was around 50%.
Mr Shi made the following observations:
- Most insurers are not strict about who entered the industry, have not invested adequately in personnel training, and failed to develop the growth of their sales team. In addition, the overall educational level of sales personnel is not high, and their professional development needs to be raised.
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- Over the years, insurance companies have been adopting a game of numbers in growing their sales force.
- The industry has violated laws and regulations. Some personnel have poor legal knowledge and lack professional ethics. Mis-selling is committed repeatedly, fake sales are rampant and some personnel even carry out illegal fund-raising.
In a bid to transform the insurance salesperson channel, supervision is carried out continually. In July this year, the CBIRC issued the draft “Regulations for the Supervision of Insurance Agents", which sets out new requirements for the entry of agents into the industry, activities, market exit, industry self-discipline. The draft also spells out rules for supervision and inspection as well as the legal responsibilities of agents.
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Mr Shi said that apart from cleaning up the registry of insurance agents and salespersons, the CBIRC will promote efforts by industry organisations to establish tests for insurance marketing capability and to provide education and training. The regulator will also explore the establishment of benchmarks for sales personnel for parameters like renewal of policies, policy surrender rate, and complaint rate.
In reforming insurance sales practices, the CBIRC will attempt to flatten the organisational structure by trimming the levels of management, adjust the commission system with a focus on quality business and improve the assessment mechanism.
The regulator will also pursue strict accountability by insurance companies since they are the main party responsible for managing sales personnel.
This first appeared on Asia Insurance Review's eWeekly China service. If you are keen to tap one of the world's leading insurance markets, subscribe here.