The China Insurance Industry Association Releases the "Self-Regulatory Code for Suitability Management of Insurance Products"

To implement the “Measures for the Appropriateness Management of Financial Institution Products” issued by the National Financial Supervision and Administration, the China Insurance Industry Association (hereinafter referred to as “CIAA”) released the “Self-Regulatory Norms for the Appropriateness Management of Insurance Products” (hereinafter referred to as the “Self-Regulatory Norms”) on March 27. As the first self-regulatory document in the insurance industry focusing on product appropriateness management, the “Self-Regulatory Norms” are an important institutional result of the CIAA’s in-depth implementation of the people-centered development philosophy, guided by the construction goal of being a “Three Good Association” — “serving the industry well, assisting regulation well, and contributing to society well.” It provides strong support for solidifying the foundation of consumer rights protection in insurance.

In April 2024, the CIAA established a research group for the “Self-Regulatory Norms,” based on the actual situation of the insurance industry, adhering to the unity of scientific, guiding, and operable principles. Through multiple rounds of industry consultations and cross-industry discussions, it formed the “Self-Regulatory Norms,” which are both practical and industry-adaptive. The norms consist of nine chapters and forty-six articles, along with five operational attachments, creating a comprehensive management system covering product classification, sales qualifications, customer assessment, matching sales, internal control management, and self-regulatory supervision, with clear operational standards for each core link.

The “Self-Regulatory Norms” aim to establish a unified, scientific, and operable standard for appropriateness management, starting from the principle of “seller responsibility.” By building a self-regulatory framework covering the entire chain of products, personnel, customers, sales, and internal control, they are committed to mitigating sales misguidance and product mismatching risks from the source, enhancing the professionalism and standardization of sales behavior. The formulation of the “Self-Regulatory Norms” closely revolves around consumers’ actual needs and prominent industry issues, emphasizing operability and providing clear guidance for insurance institutions to implement regulatory systems through supporting standardized tools. This reflects the trend of advancing industry self-regulation from principle advocacy to refined management. The release of the “Self-Regulatory Norms” is not only an effective response to regulatory requirements but also a practical guarantee for consumers’ rights to information, choice, and fair trading, providing an important basis for clarifying responsibilities in insurance consumption disputes.

The “Self-Regulatory Norms” specify that insurance institutions must comprehensively consider factors such as product design type, coverage responsibilities, insurance period, and whether policy benefits are certain, to implement classified and graded management of insurance products. Life insurance products are classified into five categories from P1 to P5, where P1 represents low complexity and short-term products with certain policy benefits; P2 represents medium complexity and long-term ordinary products with certain policy benefits; P3 includes medium complexity products with guaranteed fluctuating benefits such as participating and universal life products; P4 covers investment-linked and variable annuity products with uncertain or high complexity benefits; and P5 encompasses products with high complexity and uncertain fluctuating benefits. Property insurance products are classified into two categories, P1 and P2, based on complexity.

For P4 and P5 type products with fluctuating benefits, insurance institutions must further classify the risk levels of the products or investment accounts into five levels from low to high, at least from R1 (low risk) to R5 (high risk), with reference names being R1 (low risk), R2 (medium-low risk), R3 (medium risk), R4 (medium-high risk), and R5 (high risk). Among these, R1 has a low overall risk level, small yield or net value fluctuations, and low probability of investment principal loss; R2 has low risk, small fluctuations, and low probability of loss; R3 has medium risk, medium fluctuations, and medium probability of loss; R4 has high risk, large fluctuations, and high probability of loss; and R5 has high risk, large fluctuations, and high probability of loss. Additionally, factors such as investment direction, investment scope, investment ratio, and liquidity of investment assets, maturity time limits, subscription and redemption arrangements, leverage conditions, complexity of structure, credit status of relevant issuers, and past performance and historical volatility of similar products must also be comprehensively considered.

The “Self-Regulatory Norms” require insurance institutions to establish a graded management system for sales personnel qualifications, using criteria such as insurance knowledge, integrity compliance records, and sales history as the main grading standards, and implementing differentiated authorization in connection with product classification. Capability levels range from four to one, progressively advancing, where level four can sell P1 and P2 products, and level one can sell all insurance products. When selling in combination, authorization should be determined according to the principle of selling from high to low. At the same time, insurance institutions must not use sales performance as the sole assessment indicator and must establish a mechanism for reclaiming commission compensation for economic losses caused by sales personnel violations.

The “Self-Regulatory Norms” clearly state that insurance institutions must evaluate clients. For ordinary products, the focus is on assessing the matching degree of coverage goals and financial status; for P4 and P5 type products with fluctuating benefits that may lead to principal loss, a risk tolerance assessment is also required, classifying clients from low to high into five levels from C1 (conservative) to C5 (aggressive), and establishing clear matching rules with product risk levels.

The CIAA stated that in the next steps, it will take the construction of the “Three Good Association” as guidance, ensure the promotion and implementation of the “Self-Regulatory Norms,” urge member units to fully implement the normative requirements, accelerate the construction of a sound appropriateness management system in the industry, continuously enhance the trust and satisfaction of insurance consumers, and better serve the real economy with high-quality industry development, contributing to the building of a strong financial nation with insurance strength.