The first Insurance Law in China came into force in 1995 and was amended in 2002. There have been no other additional changes or modifications to the Insurance Law. Although the Chinese Supreme Court has drafted an Explanation to the Enforcement of the Insurance Law, these rules have yet to be utilized in practice. Thus, it is clear that the rules and regulations governing insurance in China has failed to keep pace with the rapid development in the market.
One of example of this is in Article 12 of the Insurance Law. This provision mandates that a party seeking insurance must have an insurable interest in the insured object. No differentiation is made in Article 12 between life and property insurance. This is problematic .In the real process of life insurance, when signing the insurance contract, insured must have insurable interest in the insured life or health. Meanwhile, in the practical process of property insurance, the insured must have insurable interest in the insured property when the prescribed accident occurs. Professionals often criticize this article which gives distortion to the interpretation of Insurance law.
There has also been an absence of regulation in regard to bonds and a dispute over whether this field should be covered under the Guarantee Law or Insurance Law. This confusion has reached its way to the Supreme People’s Court of China. Conflicting decisions have been made by this body as which law covers bonds.
Many questions also remain on how to best regulate insurance services and effectively account for frequent changes. Many companies are moving quickly in creating business structures for which there is little or no regulation. PICC, China Life, Ping An, Pacific Insurance, and Sunshine Insurance as well as other companies have already established largely unregulated holding companies. Asset management companies, life and property insurance companies, annuity companies, broker companies, agency companies, and loss adjustor companies have already been incorporated within some of these groups. Notable equity purchases by insurance companies include China Life purchasing stock in Guangdong Development Bank and Zhongxin Security Company (a CITIC holding company), and Ping An Group acquiring control of Shenzhen Commercial Bank and naming it Ping An Bank.
The challenge is for different regulatory bodies such as the China Insurance Regulatory Commission (CIRC), China Securities Regulatory Commission (CSRS) and China Banking Regulatory Commission (CBRC) to properly separate their respective responsibilities in the governance of integrated financial institutions.