In recent years, "online" insurance transactions in China have made great developments. The Insurance Association of China recorded that online personal insurance (life & health) premiums obtained via online means increasing by 13.6% in 2020 (approx. RMB 211 billion). 

In terms of insurer participation, a total of 7,741 enterprises had involved with online insurance registered with Chinese authorities in 2020, representing a rise of 93% compared to the previous year. Moreover, the Covid-19 pandemic outbreak encourages insurers to become increasingly active in deploying new digital technologies to handle sales, underwriting, risk assessment, and claims.

However, the fast development of online insurance also exposed certain problems. Therefore, The China Banking and Insurance Regulatory Commission (“CBIRC”) issued Rules on Internet Insurance Business (“Rules”), which took effect on February 1st, 2021, to effectively defuse the risks and protect the consumers’ interest in the online platform and replaced the current Interim Rules issued in 2015. Noticeable changes include: 

Regulatory requirements
The Rules state that internet insurance business must be carried out by licensed institutions. These institutions shall also meet various compliance rules regarding information security, advertising, customer identification, online process management and standard, cybersecurity, anti-money laundering, etc.
Moreover, the Rules set out “special rules” regarding business commissions, client management and after-sales service, internal systems establishment, and risk control, which are applied to Qualified Operators which mean licensed internet insurance companies and insurance intermediaries including:
•    insurance agency companies (i.e. specialized insurance agency companies), banks engaging in sideline insurance agency business, and approved internet companies holding an insurance agency license);
•    insurance brokerage companies; and
•    insurance loss adjustors.
Individual insurance agents and other types of sideline insurance agents remain prohibited from conducting internet insurance business.

Regulated activities
The Rules also provide a clear description of the internet insurance businesses including:
•    Qualified Operators distribute insurance products or providing insurance brokerage services to customers via the self-owned platform (“SOP”); 
•    Customers obtain insurance product information from the selling pages of SOP; and
•    Customers complete the application of the insurance policy independently on SOP.
The new requirement on SOP also means the termination of using a third-party platform by the Qualified Operators.
It is worth noting that, if insurance distribution and/or brokerage activities involve a mix of online and traditional offline activities, both the Rules and the existing laws regulating traditional offline activities shall apply. If there is a conflict or inconsistency as a result of the application of the New Rules and the existing CBIRC regulations, the regulations that are more favorable to the customer shall prevail and apply.

Types of insurance products to be distributed via the Internet
Previously, only limited types of insurance products that belong to the “positive list” were allowed to be distributed online. However, the Rules provide new criteria, thereby, insurance products with “simple forms, simple terms, clear responsibilities, and effective after-sales services” can be distributed online. 

Geographical limit
Lastly, Qualified Operators will have the ability to directly market, distribute and service Internet Policies (both P&C and Life) on a national basis throughout China, without any other geographic restriction (including that earlier requirement for provincial branch office establishment).
It is expected that the CBIRC may publish further guidance and details concerning this later.

(Summarized)