The China Insurance Regulatory Commission (CIRC) has issued a directive requiring Chinese insurance companies to include reputational risk management in their overall risk management framework. It also stated that an insurer’s board of directors is ultimately responsible for managing reputational risk.
The directive contains 33 clauses, requiring insurers to set up a system to manage reputational risk, including appointing specific personnel to oversee the function, setting out policies, training company employees and sales forces, establishing handling processes, setting up an accountability system and maintaining a database of relevant information. Insurance companies would also have to submit reports to CIRC and be audited, in the event of any significant untoward incident affecting their reputation.
Issuance of the directive follows an increase in complaints against insurance companies. According to CIRC data, more than 21,300 complaints were lodged against insurers last year, representing an increase of one third over 2012. Of the total, around 9,000 complaints were made against non-life insurers and more than 12,200 against life insurers. In 2012, the total number of complaints exceeded 16,000, double the number in 2011.
Many complaints centred on alleged mis-selling and settlement of claims. In recent years, many customers have complained that they were talked into buying wealth management products which turned out to be insurance policies. Customers have also suffered losses from investment instruments bought from individuals believed to be insurance company staff.
Last month, several customers of Ping An, one of China’s biggest insurance groups, claimed that they had bought funds backed by Beijing Roll-in Investment Management which failed to repay investors on maturity. Capital plus interest on the products involved one billion renminbi (RMB). Although sold by staff purportedly representing the insurer, Ping An said that it did not distribute such funds.
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