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	CIRCULAR OF CHINA INSURANCE REGULATORY COMMISSION ON REGULATING THE ADMINISTRATION ON PREMIUM RATES IN THE INSURANCE CLAUSES OF COMMERCIAL MOTOR VEHICLES

	(July 4, 2006, No. 75 [2006] of China Insurance Regulatory Commission)


SUBJECT : COMMERCIAL MOTOR VEHICLES INSURANCE; PREMIUM RATES
ISSUING DEPARTMENT : CHINA INSURANCE REGULATORY COMMISSION
ISSUE DATE : 07/04/2006
IMPLEMENT DATE : 07/04/2006
LENGTH : 783 words
TEXT :

The Regulation on Compulsory Traffic Accident Liability Insurance for Motor Vehicles (hereinafter referred to as compulsory traffic insurance) as effective on 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. All insurance companies shall seize this good opportunity, actively promote product innovation and incessantly improve the product system so as to guarantee 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 notify the relevant matters as follows:

1. An insurance company shall develop the commercial motor vehicle insurance products relating to the compulsory traffic insurance in a timely manner. The principles of compensation for commercial motor vehicle insurance shall comply with the relevant provisions of the Law of the People¡¯s Republic of China on Road Traffic Safety. In particular, 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, according to the real situation, choose the present premium rate of the Association in force or develop new ones by itself. Where the premium rate of the Association is selected, no alteration may be made thereon and no random portfolio may be made among different sets of premium rates of the Association, yet supplementary motor vehicle insurance products can be developed on the basis of the premium rates of the Association.

3. Where an insurance company or China Insurance Association applies for any premium rate for the insurance clause of commercial motor vehicles, it shall meet the requirements of the laws and regulations as well as industrial norms. The application materials shall be complete and accurate. The 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 as well as 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 in light of product categories and sales channels. The processing fee rate per policy for a same product category or sales channel shall not go beyond the standards described in the actuarial report.

4. The interval period for an insurance company or China Insurance Association to apply for adjusting the clause premium rates shall be no fewer than 6 months. In particular, to adjust the premium rate of the Association, an application shall be filed by China Insurance Association to China Insurance Regulatory Commission. Upon approval of China Insurance Regulatory Commission, an insurance company may choose the premium rate at its own will. Where an insurance company needs to continue the premium rate of the Association before adjustment, it shall file a new application with China Insurance Regulatory Commission as a self-developed product.

5. All branches and sub-branches of an insurance company shall implement the premium rates of insurance clauses of commercial motor vehicles as approved by China Insurance Regulatory Commission and shall not unlawfully change it. As of July 1, 2006, none of the insurance regulatory bodies may accept the application of any branch or sub-branch of an insurance company for adjusting the premium rate of motor vehicles.

6. An insurance company shall provide the relevant insurance clauses to an insurance purchaser when issuing and distributing any insurance policy. As of October 1, 2006, where an insurance company provides any insurance clause to any insurance purchaser, the relevant clause serial number as approved by China Insurance Regulatory Commission shall be indicated after the clause name.

7. As of July 1, 2006, an insurance company shall use the new commercial motor vehicle insurance products related to the compulsory traffic insurance, which has been approved by China Insurance Regulatory Commission. The sale of the original motor vehicle insurance products shall be ceased.

8. The present Notice shall be implemented as of the day of its distribution. Any matter that has not been indicated herein shall be implemented according to the Measures on the Administration of Insurance Clauses and Premium Rates of Property Insurance Companies and the relevant provisions.