1. The dilemma in the contractual cooperation between banks and insurance companies

Generally speaking, the mode of mixed operation is still under exploration and the driving force mainly originates from the spontaneous market.

The cooperation between banks and the insurance sector remains on the level of contractual agreement between insurance companies and banks. Such cooperation only involves certain activities in which banks conduct the following for insurance companies; charging insurance premiums, disbursing insurance amounts and selling insurance products.

The distribution mode is insurance company-based which means insurance companies are key players and are actively involved. However, most insurance companies regarded this cooperation as an opportunity to extend their own network while paying less attention to the development of their product and the promotion of the service.

Even though banks own the most extensive network in China’s financial market, the decrease of rates in the past few years has reduced the revenue of banks. Under such circumstances, commission charged by an insurance business is quite appealing for banks. However, banks are suspicious whether such cooperation will lead to good outcomes. Due to this consideration, banks are not as active as insurance companies in the entire cooperation.

Furthermore, banks always choose a partner by looking at the amount of the commission provided by insurance companies. China has not adopted any regulation protecting the intellectual property rights of the category of the insurance and insurance services of most insurance companies are almost identical. In order to extend networks, many insurance companies must decrease their own commissions and this is against a banks’ interest. Therefore, banks change their partners frequently, which causes insurance companies to increase their own commission.

2. Problems in the operation of financial groups

Financial holding groups have existed for quite some time. However, there is tremendous room for improvement. Current Chinese financial regulations are enacted on the basis of divided operation, though no clear regulation focuses on mixed operation. In terms of a series of issues, such as entry and exit of the market, corporate governance and retained earnings, there are no special provisions regulating them.

Under the institution of divided operation, crossed-business are often repeatedly regulated or not governed by any regulation. The regulatory framework towards cooperation of banks and insurance companies remains elementary. Regulators are unsure of the entire situation of a financial holding group. Furthermore, due to the differences of regulatory objectives, regulatory institutions and regulatory skills, CBRC, CSRC and the CIRC often conflict with each other in the process of conducting regulatory work.

The risk in the operation of a financial holding group also deserves our attention, for there is a tremendous lack of regulatory measures for financial holding groups.

In this context, mixed operation in China’s insurance market has made great progress. However, due to the lack of experience and the immature nature of current institutions, the future of mixed operation in China’s insurance market remains uncertain.