Authored by Dr. Zhan Hao (firstname.lastname@example.org), Huang Zaizai (email@example.com), Xu Wei (firstname.lastname@example.org), Chen Xingfa (email@example.com), Han Rubing
At the beginning of 2013, CIRC (China Insurance Regulatory Commission) and PRC Supreme Court jointly issued a notice to establish the collaboration system to link insurance litigation to mediation in some areas.
The Notice stipulates that in the experimental areas, local courts shall publish the panel list of mediation entities and mediators, and ensure the parties of litigations to choose the mediation entities and mediators at their discretion during the course of litigations. To enhance the mediation, the Notice specifically requires the local with capacity could set the special mediation office for the use of insurance dispute mediation.
Insurance Association of China and its local branches (the local association of insurance) are responsible for the setup of the insurance mediation entities, and training for mediators.
To facilitate the settlement for the insurance litigation, the Notice encourages court to dispatch mediator to mediate the insurance dispute after plaintiff files case but before court formally accepts case. After the formal litigation procedure is kicked off, tribunal encourages plaintiff and defendant to appoint mediator to be involved in the settlement.
When the settlement is reached with support of mediator, plaintiff and defendant shall sign the settlement agreement. Either party of settlement can claim court to recognize the validity of settlement agreement. With court’s recognition of such settlement, one party can make application for court to enforce the settlement if the other party does not execute the agreement.
The reasons lying behind the Notice regarding insurance dispute mediation are obvious.
First, with the fantastic development of PRC insurance market, insurance disputes also occur at a frenetic speed. Just nearly 20 years ago, Chinese insurance market was at the infant stage and there was a typical monopolized market with only one insurer, namely, PICC. During the past ten years, PRC insurance market has been leaping faster than any other country in the world. With respect to the increasing speed of premium nationwide, its average speed reached 18.7% per year from 2002. Now there are 162 insurers in PRC fierce competition, and the whole value of insurance asset is over RMB 6900billion, which is ten times of the value in 2002. Facing such quick development for insurance industry, Chinese society is far from well-prepared for such growth.
Second, the utmost good faith does not have root in minds of relevant parties of insurance contract. For some insurance companies, to ensure its profit, the higher level management sometimes makes ridiculous requirement for its subordinates to limit the compensation ratio. From viewpoint of the insured and beneficiary, insurance fraud is a useful means to make money, and it will not bring serious result. If the insured or beneficiary succeeds, they can get rich; if not, they almost need not worry about criminal penalty or reputation damage.
Third, judges with adequate experience to handle insurance disputes are rare, and so does PRC lawyer. Thus, it is hard to solve insurance disputes through litigations, and even after verdict or judgment is issued, parties always ask for the judicial review until they exhaust all resources.
For some municipal areas, a large number of litigation cases are about contractual disputes. With respect to some specific litigations, such as, health insurance or body damage cases, the time-consuming procedure will deprive the insured or beneficiary of the urgent compensation need, and litigation is not a wise choice for parties. According to PRC law framework, tort liability is quite different from contractual liability, thus if an insurer delays to pay the compensation to the insured or beneficiary, the insurer will not assume tort damage or punitive damage. In practice, if reputation loss is not taken into account, an insurer will not pay the proceeds promptly. S(he) tends to find excuses to delay investigation, then refuse to compensate for the loss without justified reason, eventually provide the proceeds with the bank interest if ruled by judgment, and such procedure tricks rack the insured and beneficiary who is in need of money.
Comparing the limited judicial resource with the bunks of disputes, PRC Supreme Court has to encourage ADR, and it chooses insurance litigations as experimental sector this time.