Pudong New Area of Shanghai is home to 267 insurance institutions, including some giants, such as Shanghai Life Insurance Co. [Photo/Pudong Times]

ON SUNDAY, the Central Commission for Discipline Inspection of the Communist Party of China, the ruling Party's top anti-graft watchdog, announced that Xiang Junbo, chairman of the China Insurance Regulatory Commission, is under investigation for suspected serious violations of discipline. Xiang's case shows the disciplinary watchdog will not only continue fighting corruption, but also further regulate the insurance industry, says Beijing Youth Daily:

Xiang is the highest-level official in the financial regulatory agency to be investigated since the top leadership launched the anti-graft campaign in late 2012. It remains to be known what deeds are being investigated, but they probably have something to do with the chaotic situation in the insurance sector in the past few years.

One aspect of this is that the high rate of return on certain investment-focused life policies, also known as universal life insurance products, have attracted hot money. In 2016, the total income from insurance premiums was 3.1 trillion yuan ($448.6 billion). But sales of universal insurance products in the first quarter alone reached as high as 596.9 billion yuan, with sales growing by 214 percent compared with the first quarter of 2015.

In the development and management of insurance products, the principles of risk pricing, compensation for loss, and good faith must be adhered to. However, China's insurance industry departed from and betrayed these principles, as the China Insurance Regulatory Commission adopted loose polices toward universal insurance products. As a result, many insurance companies have participated in the fierce capital market competition by buying shares of companies listed in the A-share market.

The result has been that the whole domestic insurance market has suffered as a result of speculation and large amounts of capital have flowed from the real economy into the financial sector.

We are not saying that Xiang or the China Insurance Regulatory Commission is solely responsible for the chaotic situation, but the fact is they did not regulate the insurance market well enough. A new chairperson of the regulatory commission will soon be appointed, and we hope whoever takes up this position will help the regulatory body better play its role in ensuring the industry develops in a healthy manner.