China Releases Draft Insurance Law Revisions to Tighten Oversight and Protect Policyholders

China's National Financial Regulatory Administration has published a draft revision of the Insurance Law for public consultation through October 3, 2026. First enacted in 1995 and amended several times, the law requires a comprehensive update to address systemic complexities and industry misconduct. Key measures include look-through supervision of shareholders and actual controllers, higher penalties for illegal practices, alignment with China's Civil Code, and statutory codification of consumer protections like cooling-off periods to curb misleading sales and claim-settlement delays.

The Insurance Law establishes the baseline legal framework for market conduct and policyholder rights in China. Subjecting actual controllers to direct regulatory purview and increasing penalties closes legal loopholes around shadow ownership, reducing the risk of capital misallocation and improving systemic stability across institutional insurers.

China's National Financial Regulatory Administration has unveiled a draft revision of the country's Insurance Law for public feedback, according to a report by People's Daily. The draft outlines sweeping updates to reinforce prudential supervision, establish robust risk resolution mechanisms, elevate consumer protections, and curb regulatory evasions by controlling parties. Originally enacted in 1995, China's Insurance Law underwent revisions in 2002, 2009, 2014, and 2015. However, regulatory authorities noted that rapid market growth and increasingly complex risks have outpaced existing statutory provisions. According to official drafting explanations cited by People's Daily, the current law exhibits limited regulatory coverage, inadequate enforcement mandates, and insufficient punitive deterrence, leaving financial penalties too lenient to discourage misconduct. A central focus of the draft is implementing look-through supervision over insurers' capital structures. The proposed rules formally bring major shareholders and actual controlling entities under statutory supervisory scope, requiring rigorous qualification vetting, clear capital contribution verification, and expanded information disclosure obligations. Legal scholars, including Cai Tongjuan of the Chongyang Institute for Financial Studies at Renmin University of China and Wu Yiwen of Wuhan University School of Law, emphasized to People's Daily that these provisions target longstanding enforcement blind spots where nominal shareholders were easy to identify while actual controlling entities operated beyond direct scrutiny. The draft also seeks to tackle persistent industry practices that harm consumers, such as deceptive sales representations, delays in claims processing, and informal claim rejections. To rectify this, the revisions introduce dedicated rules safeguarding personal information and elevate consumer protections—such as mandatory policy cooling-off periods—into explicit statutory requirements, aligning insurance contracts with China's Civil Code. In addition, the draft significantly increases penalties for non-compliant business practices and illegal proxy contract cancellations. Regulators aim to encourage insurers to build stronger internal controls, eliminate improper business models, and secure the industry's stability as an institutional investor. The public comment window remains open through October 3, 2026.