Huaxia Times Reporter Wu Min, Beijing
Product development management at property insurers is undergoing a systemic upgrade. Recently, the National Financial Regulatory Administration issued the "Regulations on Insurance Product Development for Property Insurers," effective as of 2026/11/1. Compared to the 2019 "Guidelines on Insurance Product Development for Property Insurers," this new document shifts from "Guidelines" to "Regulations," sending a clear signal that regulatory oversight has moved from soft to hard enforcement.
The "Regulations" consist of 8 chapters and 41 articles, covering basic requirements for product development, core insurance terms and rates, rider terms and rates, and product development management standards. Li Wenzhong, Deputy Director of the Rural Insurance Research Institute at Capital University of Economics and Business, told reporters from Huaxia Times that after the implementation of the Regulations, market segmentation is expected to intensify, with leading companies likely to strengthen their competitive advantages. Industry leaders with robust risk control, actuarial capabilities, and product innovation will benefit most from these policy shifts. Smaller insurers can no longer rely on the flexibility of riders or fee-based competition to drive business; they must pivot toward differentiated, specialized product innovation.
Supplementary Insurance Chapter: Strictly Prohibit "Using Supplementary Policies to Replace Main Policies"
Add-on insurance issues are a persistent challenge in non-life insurance. In practice, some companies exploit add-ons to meet client requirements and win bids, even breaching regulatory rules.
A senior official from the National Financial Regulatory Administration stated in response to media inquiries that riders, serving as supplements to base policies, aim to maintain the stability of the base policy while appropriately enhancing its flexibility. This approach provides insurance consumers with more comprehensive and targeted coverage. Riders should be closely related to the base policy, extending, reducing, or adjusting relevant aspects of it. In practice, some insurers have designed clauses that are substantively independent or have weak ties to the base policy as riders, or even used riders to correct errors in the base policy.
Li gave reporters several examples: some companies have been underwriting motor third-party liability insurance as an add-on to cargo insurance, while others are selling products that should be purchased as add-ons as main policies. According to industry data, in some companies' existing product portfolios, the ratio of sum insured between main and add-on policies has reached 1:46, with add-ons severely underrepresented. He also noted that the market once saw products like "Mid-Autumn Moon Viewing Insurance" and "Love Insurance," which offered no real coverage and were created solely for hype—straying from insurance's core purpose of risk protection.
The "Provisions" establish a dedicated chapter for riders. Article 3 redefines the terms: a basic policy is a rate and term package that can be sold independently with complete elements, while a rider is a rate and term package that has a clear connection to its underlying basic policy and cannot be sold independently. Article 16 lists five categories of riders that shall not be developed in principle: those where the applicant or insured differs from the basic policy (except when extending or limiting coverage); those intended to correct errors in the basic policy; those whose framework and key elements are sufficiently complete and whose insurance responsibilities are independent enough to warrant development as a basic policy; those with weak linkage to the basic policy; and any other circumstances deemed prohibited by regulators.
Regarding standardization of terms and rates, the Provisions stipulate that companies shall, in principle, adopt industry model clauses or benchmark pure risk loss rates where available. If not used, reasons and differences must be explained in the feasibility report or actuarial report.
Supply at the industry level is advancing. On 9/16, the Insurance Association of China released draft model clauses for public comment, covering general commercial medical insurance (short-term), general commercial medical insurance (long-term), and city-customized commercial medical insurance. Li Wenzhong believes this approach respects companies' differentiated operations while enhancing the effectiveness of model clauses and pure risk loss ratios through detailed requirements.
Product governance shifts from a departmental concern to a top-priority initiative led by senior leadership.
In the past, product development was often treated as the sole responsibility of the Product or Business Division. Initiation and registration lacked comprehensive justification and documentation, resulting in weak risk and compliance controls. The Regulation requires property insurance companies to establish a Product Management Committee led by the senior management head, defining end-to-end management requirements from planning and research to internal review, approval, and filing.
Article 28 stipulates that the following five categories of clauses and rates must be submitted to the Committee for deliberation: (1) those requiring approval; (2) financing credit insurance and financing guarantee insurance; (3) those with high innovation, unique business models, or elevated underwriting risks; (4) those deemed necessary by the Chief Compliance Officer, Chief Actuary, or Product Development Management Department; and (5) other matters the regulatory authority deems require submission.
Responsibilities are assigned to specific roles: the main person in charge bears leadership responsibility; the Chief Compliance Officer is directly responsible for clause review; the Chief Actuary is directly responsible for rate review; and the managing department and business department heads each bear their respective responsibilities. The company must also establish an accountability mechanism to rigorously investigate and hold accountable cases of negligence, administrative penalties, concentrated complaints, or major negative public sentiment.
The "Provisions" also extend the regulatory chain from entry to the full lifecycle. Article 32 requires that for products currently in sale with a current signed premium share exceeding 5%, assess sales, cash flow, capital usage, and profitability at least every six months within the first two years of listing, and at least annually thereafter. Adequacy of premiums must be assessed at least annually.
Article 33 requires annual review of clauses and rates: discontinue and immediately cancel any that violate regulatory requirements or harm consumer rights; for clauses and rates unused for three consecutive years that are not industry standards, verify, revise, or cancel them promptly. Update the status on the industry platform within 10 days after cancellation.
Article 36: Plug a Common Loophole. Companies and their branches must not substantially alter approved or filed rate terms through special agreements, endorsements, contracts, memoranda, or similar means. As Li Wenzhong noted, the long-standing inertia of "prioritizing filing over management" persists. Some companies treat filing as the endpoint, neglecting post-launch tracking and evaluation. Others continue using expired clauses or modify outdated clauses via special agreements for continued sales, effectively rendering filing requirements meaningless.
In addition, Article 5 of the Provisions establishes five principles: insurable interest, indemnity, utmost good faith, aleatory contract, and risk-based pricing. Article 7 lists eight prohibited development scenarios: (1) lack of a legally recognized insurable interest; (2) agreed insured events that do not result in actual loss; (3) insured events that are certain to occur or certain not to occur; (4) coverage of speculative risks involving both potential loss and profit opportunities; (5) no substantive coverage, solely aimed at price manipulation or malicious speculation; (6) promises to return premiums or provide other improper benefits if no claim occurs; (7) assuming risk protection without charging premiums (except where otherwise regulated); and (8) any other scenarios violating laws, regulations, insurance principles, or public order and good morals.
Terms must have clear names that objectively reflect primary responsibilities and avoid ambiguity or misleading language. Personal terms should be easy to understand. Any clauses that exempt or limit the insurer's liability must be highlighted in a manner sufficient to draw the policyholder's attention.
The "Guidelines for Product Development of Property and Casualty Insurance Companies," issued by the former China Banking and Insurance Regulatory Commission, became effective on 2017 month 1, 1. Li Wenzhong told this reporter that the core of this change is a shift from "advocating compliance" to "mandatory compliance." The "Regulations" employ mandatory language such as "shall" and "shall not" multiple times within the framework of higher-level laws. Coupled with administrative penalties prescribed by laws and departmental rules, these provisions create substantive constraints on product development activities of property and casualty insurance companies.
He also pointed out that the Regulations clearly designate property and casualty insurers as the entities responsible for developing policy terms and rates, holding them legally accountable—a mechanism that was previously unclear. Article 7 establishes a clear "negative list" by specifying eight prohibited scenarios for development.
Li Zhongwen believes that after the new regulations take effect, leading companies with strong risk management, actuarial capabilities, and product innovation will benefit more from policy direction. For smaller and mid-sized insurers, the previous model of acquiring business through flexible supplementary coverage and fee-based competition will no longer be sustainable; they must shift toward differentiated and specialized product innovation.
