Originally published 23 March 2011
Keywords: PRC Insurance, Chinese insurance, insurance, benefit,
The PRC Insurance Law was substantially amended in February 2009, and such amendments became effective in October 2009. Noting that this law has been implemented and enforced for over a year, insurers have become increasingly concerned in particular with respect to restrictions imposed by the amendments and implications on the handling of claims. This update addresses Article 23 of the amended PRC Insurance Law, which concerns the requirement for insurers to a) confirm a coverage position for a validly notified claim within 30 days from receipt and b) be restricted to make a single request for documentation and information before rendering the coverage confirmation. In response to the amendments, insurers may consider adopting some of our suggestions as set out in this update.
Considering the range and depth of the amendments, it appears to us that this statutory regime is a reflection of the PRC Government's stance and its concerns in the Chinese insurance sector after its years of rapid development. The statutory regime has also been frequently used in Court after its amendment.
The effect of Article 23 is as follows:
- After receiving a claim by the insured or beneficiaries for indemnity or insurance benefit, the insurer must render its determination in a timely manner, or for a "complex" claim, render its determination within 30 days unless otherwise provided in the insurance policy.
- The insurer must notify the insured or beneficiaries of the result of the determination.
- Any indemnity payments must then be made within 10 days upon reaching agreements with the insured or beneficiaries on the indemnity or payment of the insurance money after the confirmation of coverage or within the timeframe specified in the policy.
- If the insurer fails to meet these deadlines, it may be liable to compensate the insured for any loss that it has suffered as a result of the delay.
Article 23 was acknowledged as one of the major improvements made in the amendments. As to its implications, there was one case in which an insurance company lost a lawsuit for failing to comply with the requirement to render a coverage confirmation in a timely manner. Please note that the law specifically provides for the time limit for "complex" situations to be within 30 days or otherwise agreed in the insurance policy. The law does not provide for a definition of "complex" situation, and this would be a matter to be decided on a case by case basis. As no guidance has been provided as to the interpretation of the meaning of "complex" situations, it is subject to different interpretations by insurers, the insured and the courts. Accordingly, in an attempt to limit the parameters of the interpretation, we suggest that insurers may consider setting out a) a longer time limit in the insurance policy and b) a broader definition of the term "complex". However, please bear in mind that whether such practice or definition is ultimately upheld by the courts remains to be seen.
In addition to providing a timely response by insurers to
confirm a coverage position, please also note Article 24 of the
amended PRC Insurance Law, which provides that if a claim does not
fall within the insurer's liability, the insurer must give an
informed written notice declining cover to the insured or
beneficiaries within three days from the date of rendering a
coverage confirmation.
Article 22 of the amended PRC Insurance Law provides that insurers
have only a single chance to request for documentation and
information before rendering its coverage position. In response to
this, some insurers have been making a "catch-all"
request for documents and information at the outset. To our
knowledge, such practice has not yet been tested in Court.
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