Laws of the People's Republic of China

Circular of China Insurance Regulatory Commission concerning Regulating the Administration on Premium Rates in the Insurance Clauses of Commercial Motor Vehicles

Bao Jian Fa [2006] No. 75 July 4, 2006

Each property insurance company, each insurance regulatory body and China Insurance Association,

The Regulation on Compulsory Traffic Accident Liability Insurance for Motor Vehicles (hereinafter referred to as compulsory traffic insurance) implemented as of July 1, 2006 is conducive to promoting a faithful and sound business operation of the property insurance sector, is conducive to promoting a healthy development of the insurance industry and is conducive to promoting the social harmony and stability. Each insurance company shall grasp this good chance, actively promote product innovation and unremittingly improve the product system so as to ensure a smooth transition between the commercial motor vehicle insurance and the compulsory traffic insurance as well as a sustainable, quick and sound development of the property insurance sector. We hereby give the notice about related matters as follows:

1.

An insurance company shall develop the commercial motor vehicle insurance products on the compulsory traffic insurance in time. The principles of compensation for commercial motor vehicle insurance shall abide by the related provisions of the Law of the People¡¯s Republic of China on Road Traffic Safety. Particularly, an insurance company shall develop products of the third party liability insurance for commercial motor vehicles beyond the maximum amounts of compensation in sub-items under the compulsory traffic insurance, whose structure of premium rates shall be basically consistent with the compulsory traffic insurance and in which the specific vehicle types can be further sub-divided.

2.

China Insurance Association may develop the basic premium rates in insurance clauses for the sector of commercial motor vehicle insurance (hereinafter referred to as the premium rate of the Association). An insurance company may, in accordance with the real situation, choose the present premium rate of the Association in force or develop new ones by itself. If the premium rate of the Association is selected, any alteration may not be made thereon and any random portfolio may not be made among different sets of premium rates of the Association, but supplementary motor vehicle insurance products can be developed in light of the premium rates of the Association.

3.

If an insurance company or China Insurance Association makes an application for any premium rate for the insurance clause of commercial motor vehicles, it shall satisfy the requirements of the laws and regulations as well as industrial norms. The application materials shall be complete and accurate. Such items as data basis, actuarial method and proceeding shall be indicated in the actuarial report so as to ensure that the premium rates are both scientific and reasonable. The setting of processing fees and any other surcharge rates shall be reasonable and proper, and the specific standards shall be clearly indicated. The rating standards for the processing fees may differ according to product categories and sales channels. The processing fee rate per policy for a same product category or sales channel may not go beyond the standards described in the actuarial report.

4.

The interval period for an insurance company or China Insurance Association to make an application for adjusting the clause premium rates shall be at least 6 months. Particularly, to adjust the premium rate of the Association, an application shall be filed by China Insurance Association with China Insurance Regulatory Commission. An insurance company may, upon approval of China Insurance Regulatory Commission, choose the premium rate at its own will. If an insurance company needs to continue the premium rate of the Association before adjustment, a new application shall be filed with China Insurance Regulatory Commission as a self-developed product.

5.

Each branch and sub-branch of an insurance company shall implement the premium rates of insurance clauses of commercial motor vehicles as approved by China Insurance Regulatory Commission and may not change it unlawfully. Since July 1st, 2006, the insurance regulatory bodies may not accept the application of any branch or sub-branch of an insurance company for adjusting the premium rate of motor vehicles.

6.

When issuing and distributing any insurance policy, the insurance company shall provide the related insurance clauses to the insurance purchaser. Since October 1, 2006, where an insurance company provides any insurance clause to any insurance purchaser, the related clause serial number as approved by China Insurance Regulatory Commission shall be indicated after the clause name.

7.

Since July 1, 2006, an insurance company shall use the new commercial motor vehicle insurance products which are related to the compulsory traffic insurance as approved by China Insurance Regulatory Commission. It shall cease the sale of the original motor vehicle insurance products.

8.

The present Circular shall enter into force as of the distribution date. Any matter that has not been indicated herein shall be implemented in accordance with the Measures concerning the Administration of Insurance Clauses and Premium Rates of Property Insurance Companies and the related provisions.