The revision of the Insurance Law tightens the institutional "iron fence" and increases penalties for illegal acts, which can better safeguard the lawful rights and interests of policyholders, the insured, and beneficiaries.
On September 4, the National Financial Regulatory Administration publicly solicited opinions on the "Draft Amendment to the Insurance Law of the People's Republic of China (Draft for Comment)" (hereinafter referred to as the "Draft Amendment"). This is another comprehensive revision of the Insurance Law of the People's Republic of China (hereinafter referred to as the "Insurance Law") since it took effect in 1995, and it is also the largest adjustment in more than a decade.
In 2025, China's insurance industry original insurance premium income reached 6.12 trillion yuan, exceeding 6 trillion yuan for the first time and ranking second in the world. The larger the market, the more the rules need to keep up. This Draft Amendment focuses on five major directions: shareholder penetration, prudential supervision, risk disposal, consumer protection, and increasing the cost of violations. As the foundation of the insurance industry's legal and regulatory system, the revision of the Insurance Law has far-reaching effects on the protection of insurance consumer rights, the operation and management of insurance companies, and industry supervision.
The Insurance Law is both a guarantee for the smooth conduct of insurance business and an important means of maintaining the stability of the insurance market, regulating its operation, and protecting the lawful rights and interests of the parties involved. The legislative purpose of the Insurance Law, as stated in Article 1, is to regulate insurance activities, protect the lawful rights and interests of the parties to insurance activities, strengthen the supervision and management of the insurance industry, maintain social and economic order and public interests, and promote the healthy development of the insurance sector. This revision is both a summary of the industry's development and regulatory practice over the past decade and a key institutional arrangement for promoting the high-quality development of the insurance industry.
The logic behind revising the law behind 6 trillion yuan in premiums
After China's Insurance Law was adopted in June 1995 and took effect on October 1 of that year, it has been amended four times so far. The first revision in October 2002 was mainly to adapt to the new situation of further opening up the insurance industry after China's accession to the World Trade Organization. In February 2009, the second revision of the Insurance Law improved the legal norms of insurance contracts, the basic systems of the insurance industry, and insurance supervision, and strengthened accountability for illegal acts. Among these, protecting the lawful rights and interests of policyholders, the insured, and beneficiaries was the top priority of this revision, including limiting the insurer's right to rescind the contract, regulating standard-form clauses, and clarifying the procedures and time limits for insurers' claims settlement. After that, the Insurance Law underwent two more revisions in August 2014 and April 2015. These two revisions contained relatively few provisions and mainly reflected the orientation of streamlining administration and delegating power.
In recent years, China's insurance market has developed rapidly and faces more complex and diverse risks, while the lagging nature of the current Insurance Law has become increasingly prominent. It is necessary to comprehensively revise the Insurance Law to solve prominent problems faced by industry development and supervision and to maintain the sustained and steady operation of the insurance industry.
The background of this revision of the Insurance Law differs from previous ones. First, the high-quality development of the insurance industry requires a more solid legal foundation. In recent years, China's insurance market has become increasingly prosperous, and the penetration and importance of insurance in the national economy and people's lives have continued to increase. On this basis, many mature systems and new problems in insurance practice need to be clarified by law, such as the cooling-off period system and policy loan system in insurance contracts, and equity penetration supervision and risk disposal of insurance institutions in insurance regulation. These all require targeted improvement of legal regulation to enhance the adaptability of insurance law to practice.
Second, as an important part of the financial system and the social security system, insurance plays a key role in building a financial powerhouse. In the three "National Ten Articles" issued by the State Council on the reform and development of the insurance industry, modern insurance, in addition to loss compensation and risk management functions, also has "fund circulation and social management functions, and is a basic means of risk management under market economy conditions." "The role of insurance as a social 'stabilizer' and economic 'booster' has been effectively brought into play." At the same time, it is necessary to deeply grasp the connotation of high-quality development of the insurance industry and "help build a solid economic security network, social security network, and disaster prevention and control network." In the process of doing a good job in the "five major articles" of technology finance, green finance, inclusive finance, pension finance, and digital finance, insurance can play an important role. Accelerating the development of the modern insurance service industry is of great significance for improving the modern financial system, driving and expanding social employment, promoting economic quality improvement, efficiency enhancement and upgrading, innovating social governance methods, ensuring stable social operation, enhancing the sense of social security, and improving the quality of life of the people.
Third, strong supervision, risk prevention, and promoting high-quality development are the three central tasks for the reform and development of China's insurance industry in the period ahead. On September 11, 2024, the State Council issued the "Several Opinions on Strengthening Supervision, Preventing Risks, and Promoting the High-Quality Development of the Insurance Industry." This was another comprehensive deployment for the development of the insurance industry at the national level after 2006 and 2014, known in the industry as the new "National Ten Articles" for the insurance industry. The new "National Ten Articles" reflect a clear orientation toward promoting high-quality development. On the basis of strict supervision and risk prevention, better leverage insurance's ability to protect people's livelihoods and serve the real economy. To prevent and defuse risks, it is necessary to adhere to strict supervision, ensure that supervision "has teeth and edges," achieve full coverage and no exceptions, and firmly hold the bottom line of preventing systemic risks. This approach is also reflected in the Draft Amendment.
Five major revisions, from shareholder penetration to consumer protection
Against the above background, the main contents of this revision of the Insurance Law are manifested in five aspects: first, strengthening shareholder penetration supervision; second, improving the prudential supervision system; third, improving the risk disposal mechanism; fourth, strengthening insurance consumer protection; and fifth, increasing the cost of violations of laws and regulations.
China's Insurance Law has eight chapters and adopts a legislative model that combines insurance contract law and insurance industry law. Apart from Chapter 1 on general provisions and Chapter 8 on supplementary provisions, Chapter 2 contains provisions on insurance contracts, while Chapters 3 to 7 cover the operation and management of insurance institutions and the supervision and management of the insurance industry. Compared with the second revision in 2009, the provisions in this revision mainly concern insurance operations and insurance supervision, while the insurance contract part is relatively smaller. The reasons can also be seen from the drafters' explanation. At present, competition among market entities in the insurance industry is more intense, and illegal business practices occur from time to time, reflecting that the current Insurance Law has incomplete coverage, insufficient regulatory authorization, and insufficient punitive measures. The cost of violations for insurance institutions is too low, and the effectiveness of consumer rights protection is relatively weak. Therefore, it is necessary to revise the Insurance Law, tighten the institutional "iron fence," increase penalties for illegal acts, and better safeguard the lawful rights and interests of policyholders, the insured, and beneficiaries.
First, this revision of the Insurance Law emphasizes adherence to the people-centered stance. Firmly establish a people-centered value orientation, strengthen the protection of the lawful rights and interests of policyholders, the insured, and beneficiaries, and build a fair and just insurance market environment. This approach is reflected not only in the revision of regulatory rules but also in the revision of insurance contract provisions. For example, the policyholder has the right to rescind the insurance contract during the cooling-off period, the policyholder may apply to the insurer for a loan using a policy with cash value, the statute of limitations for insurance types other than life insurance and annuity insurance is changed from two years to three years, and the insurer's obligation to explain is further refined. Among these, some incorporate systems that have reached consensus in industry practice into legal provisions, while others are coordinated with the Civil Code and judicial interpretations of the Insurance Law, all reflecting the protection of insurance consumers' interests.
Second, it adheres to taking risk prevention and control as the eternal theme of financial work. Financial transactions involve complex and changeable rights and obligations and are characterized by information asymmetry. The requirements for credit are very high, and a sound regulatory system is necessary. This revision of the Insurance Law also adheres to the reality of industry development and supervision, focuses on prominent problems, improves institutional mechanisms, strives to enhance regulatory effectiveness, and holds the bottom line of preventing systemic financial risks. This approach can be seen from the extensive revisions to insurance operation rules and regulatory systems. For example, strengthen shareholder penetration supervision, include shareholders and actual controllers of insurance institutions within the scope of supervision, strengthen qualification review of major shareholders and actual controllers, and strictly control entry. Another example is improving the prudential supervision system. This includes corporate governance, internal control, related-party transactions, information disclosure, solvency, fund utilization, asset-liability management, product marketing, consumer protection, network and data security, and other content, promoting insurance institutions to strengthen prudent operation and compliant operation. At the same time, improve the risk disposal mechanism. Establish early correction procedures for general risk hazards, improve the insurance guarantee fund system, and further improve risk disposal and market exit rules.
Third, increase the cost of violations of laws and regulations. Implement the requirements of strict supervision and strong supervision, expand the coverage of legal liability in light of the development of the insurance market, and moderately increase the range of fines. Raise the upper limit for institutional fines, and add provisions such as industry entry bans, credit punishment, and lifetime bans. The approach to strengthening insurance supervision is not only connected with the Financial Law (Draft) and the Financial Stability Law (Draft), but also, in the insurance regulatory system supported by solvency supervision, corporate governance supervision, and market conduct supervision, the regulatory rules of the first two have been greatly strengthened. The focus of insurance supervision has risen from micro-level review of whether business conduct is compliant to a systematic assessment of whether the institution as a whole is sound.
Upgraded policy rights, shifting industry logic
"Law is the beginning of governance." A comprehensive revision of the Insurance Law, while solving prominent problems faced by industry development and supervision, must also maintain the sustained and steady operation of the insurance industry. By systematically optimizing the legal institutional framework, it can better give play to the leading, regulating, and safeguarding role of the rule of law in the development of the insurance industry. This is also our expectation for the revision of the Insurance Law.
First, the development of the insurance market requires the insurance legal system to provide guarantees. The Insurance Law has achieved remarkable results in more than thirty years of implementation. With the promulgation and implementation of a large number of administrative regulations, departmental rules, normative documents, and judicial interpretations related to insurance, a systematic insurance legal system has basically taken shape, providing institutional support for the steady development of the insurance industry. The strength of the insurance industry has greatly increased, and insurance regulatory capacity has also been significantly improved. Although China's insurance industry has made great achievements, there is still considerable room for development. From the indicators measuring the development of the insurance industry, in 2024 China's insurance density (that is, per capita premium) was about 3,635 yuan, and insurance depth (that is, the proportion of premiums in GDP) was about 4.2%. In the same period, the world average insurance density was about 928.52 US dollars per person, and the average insurance depth was about 6.81%. At the same time, many illegal acts in the insurance market continue despite repeated prohibitions, and sales misleading and difficult claims settlement seriously affect the healthy development of the insurance market. Insurance legislation must not only protect the lawful rights and interests of insurance consumers, but also promote the sustained and healthy development of insurance institutions while regulating their operations. In response to these problems, on the one hand, the Insurance Law builds a basic framework for the operation of the insurance market, clarifies the rights and obligations of both parties to an insurance contract, establishes basic principles such as utmost good faith, insurable interest, and loss compensation, and provides predictable behavioral norms for insurance transactions. On the other hand, as stated in Article 141 of the Draft Amendment, insurance regulatory authorities, in accordance with the Insurance Law and the duties prescribed by the State Council, follow the principles of legality, openness, and fairness in supervising and managing the insurance industry, strengthen institutional supervision, conduct supervision, functional supervision, penetrating supervision, and continuous supervision, maintain insurance market order, and protect the lawful rights and interests of policyholders, the insured, and beneficiaries. Only in this way can we possibly achieve the goal set in the new "National Ten Articles": by 2035, basically form a new pattern for the insurance industry with a complete market system, rich and diverse products and services, scientific and effective supervision, and strong international competitiveness.
Second, insurance legislation also provides an institutional engine for the sustained and steady development of the insurance market. In the "15th Five-Year Plan for Building a Financial Powerhouse," high expectations are placed on the insurance industry. The insurance industry must fully give play to its functions as an economic shock absorber and social stabilizer in meeting the needs of economic and social development. This is not only a clearer industry positioning for insurance, but has also been written into the implementation level of the plan. During the entire "14th Five-Year Plan" period, the insurance industry paid cumulative claims of 9.7 trillion yuan, an increase of 65% over the "13th Five-Year Plan" period, and its risk protection function continued to be released. At the same time, the insurance industry can also do a great deal of work in supporting the development of the real economy. Taking the use of insurance funds as an example, in recent years, insurance funds have leveraged advantages such as long term, large scale, and stable sources to provide diversified financing services for the real economy. By the end of August 2024, the balance of insurance fund utilization was 31.8 trillion yuan, and the insurance industry provided 28.8 trillion yuan of funding support to the real economy through various methods such as debt and equity. The new "National Ten Articles" also put forward requirements such as "give play to the long-term investment advantages of insurance funds" and "cultivate truly patient capital." At the business level, pension finance is one of the "five major articles," and the insurance industry has great potential in developing third-pillar pension insurance; inclusive insurance has already formed scale in medical security, family property protection, and other areas. In disaster prevention, mitigation, and relief work, the insurance industry gives play to its professional risk management advantages, actively participates in pre-disaster prevention, in-disaster mitigation, and post-disaster relief, coordinates risk reduction and claims services, and catastrophe insurance, agricultural insurance, and work safety liability insurance will all play a role. In the future, the insurance industry must also focus on major national strategies and key areas, serve scientific and technological innovation and the construction of a modern industrial system, and improve the insurance product and service system covering the entire life cycle of technology enterprises. Steady operation is the prerequisite for the insurance industry to perform the above functions. Only by ensuring their own steady operation can insurance institutions better serve the real economy and people's livelihood. Taking the revision of the Insurance Law as an opportunity, during the "15th Five-Year Plan" period, regulatory authorities will guide insurance institutions through legal construction to shift from pursuing speed and scale to focusing on quality and efficiency, continuously enhance core competitiveness, continue to deepen cost reduction, efficiency improvement, and quality enhancement, and continuously broaden service areas and improve service levels.
Conclusion
"To do good work, one must first sharpen one's tools." The insurance undertaking is fundamentally an undertaking that provides protection for the safety of people's lives and property and enhances people's well-being. For the insurance industry to play a role in building a financial powerhouse, highlight its advantages in serving the real economy, and provide services in disaster prevention, mitigation, and relief, it must be premised on the sustained high-quality development of the industry. Regulators have already set out a blueprint for systematic reconstruction of the insurance industry, promoting the industry to shift from scale-driven development to law-based, origin-oriented high-quality development through legal foundation-building and strengthened supervision. While consolidating the long-term institutional foundation of the industry, the revision of the Insurance Law also points out the direction for the future development of the insurance industry. A sound corporate governance structure, strong innovation and product development capabilities, and high-quality livelihood service levels have become new core competitiveness for insurance companies. Next, efforts should be made to improve institutional stability and enforcement effectiveness, so that insurance can better play its role in building a harmonious socialist society.