London, 5 October 2009
While amendments to the People’s Republic of China’s (PRC) Insurance Law will create more protection for policyholders and insureds, companies should still pay close scrutiny to the individual terms and conditions in their insurance policies, today advises Marsh, the world’s leading insurance broker and risk adviser. Changes to the law came into effect on 1 October.

Michelle Zhou, Vice President, Asia Global Client Services at Marsh, explained: “The amended PRC Insurance Law has made extensive changes regarding insurance contracts, focusing on protecting the legitimate rights and interests of insureds. It also provides detailed provisions in areas where disputes are common, with greater clarification on the rights and obligations of the parties involved in an insurance contract.

"The revised law has strengthened the regulation of insurance companies in China to enhance their stable operation and safeguard the interest of policyholders. Stricter criteria now apply regarding company setup, new branch office approval, employment approval for senior management, compliance requirements and solvency issues.”

The revised law has also further standardised the procedure and timeline for insurance claims. New provisions have put a restriction on insurers requesting additional evidence and information on claims and have clearly defined the timeline for claim assessment and notification obligation on insurers. In addition, the insurer is required to notify the insured party or beneficiary on rejection of claim with an explanation for any rejection.

In order to protect the long-term interest of insureds, the revised law has imposed, for the first time, restrictive provisions on an insurer to terminate the contract mid term. Insurers lose the right to terminate a contract after 30 days from the time it has knowledge of a cause for termination. At the same time, adopting international practice, the revised law prohibits an insurer from dissolving a contract after two years from when it is signed.

Marsh is also advising companies to review their policies in relation to the obligation to notify an insurance incident. The revised law emphasises the obligation of policyholders, insureds or beneficiaries to notify the insurer of incidents promptly. In case of failure to do so, the insurer will not be liable to compensate or pay the insured amount or claim under certain circumstances. The existing law does not stipulate clearly about the legal consequences of such behaviour, so policyholders need to be vigilant on this issue.