China: Runaway critical illness mutual insurance plan by Trust Mutual Life and Alibaba comes to abrupt halt

| 04 Dec 2018

Alibaba's financial arm Ant Financial and Trust Mutual Life have announced that they have stopped sales of their hugely popular critical illness mutual insurance plan, Xianghubao, at the request of the insurance regulator. The brakes on sales were applied on 26 November, six weeks after the product was launched.

Instead, Ant Financial is now selling the scheme as an Internet-based mutual aid programme, eschewing the name “insurance” in the new offering's name and dropping the link to Trust Mutual Life.

Xianghubao attracted more than 10 million subscribers within nine days of its launch on 16 October.

The original product, which had received CBIRC approval, attracted more than 20m subscribers during the six weeks that it was marketed. Those allowed to subscribe to the mutual plan should be in good health and aged between 18 and 59. They could enjoy insurance coverage for 100 major illnesses, including malignant tumours. The cover was CNY100,000 ($14,400) for subscribers aged between 40 and 59; and CNY300,000 for those younger than 40.

Users with at least 650 Sesame Credit points can participate in the programme free of charge. Sesame Credit, a credit scoring system backed by Alibaba, has been widely applied by the e-commerce giant in a broad range of services from renting a car to applying for loans. Subscribers shared equally, irrespective of their age, the costs of insurance payouts and management fees only when claims were lodged. The management fees, amounting to 10% of a payout, were payable only when a claim was filed.

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Trust Mutual Life said in a statement, “The regulatory authorities interviewed our company and conducted an on-the-spot investigation on the business development of this type of critical illness insurance product.”

The authorities told the mutual insurer that the insurance policy contained clauses and set rates that were not in compliance with the terms and conditions registered with the authorities. There was misleading marketing as well as inadequate information disclosure, etc.

Trust Mutual Life said that in line with the requirements of the regulatory authorities, it stopped selling the product that had used terms like “critical illness mutual insurance”.

At the same time, Ant Financial announced that it had changed references to the product. The plan, available for sale on Ant Financial's online platform, is now called an Internet-based mutual aid programme. Although the term “insurance” has been dropped, the features of the renamed scheme remain largely the same as the now defunct plan with Trust Mutual Life.

This first appeared on Asia Insurance Review's premium eWeekly China service. 
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