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Contracts to ensure customer confidence
By Li Wenfang (China Daily)
Updated: 2004-05-31 08:59
CITIC-Prudential Life Insurance Co will tomorrow become the first insurance company in China to offer plainly written contracts in order to avoid customer confusion.
The company's plainly written contracts will become effective tomorrow, having gained approval from the China Insurance Regulatory Commission (CIRC), China's insurance watchdog.
The contracts are being introduced as the CIRC is promoting the introduction of simply worded contracts as one the insurance sector's major tasks for this year, Tan Kar-hor, general manager of CITIC-Prudential's Guangzhou Branch, told a press conference yesterday.
Regulations on the management of insurance companies, which were revised earlier this month, are also encouraging Chinese insurance companies to introduce more simply worded contracts.
And most insurance contracts are actually so difficult to understand that even CIRC Chairman Wu Dingfu has complained that he has had difficulty reading them.
Tan said that plain language in the contracts would not only help bring the company, its clients and potential clients closer, but also enhance consumer confidence and reduce the number of disputes.
Becoming increasingly important as new and more complex insurance products are being introduced, it would also facilitate the training of insurance agents, he said.
CITIC-Prudential's new contracts are worded and structured in such a way that they are easier to understand without having any negative impact on policy holders, Tan said, adding that more notes and tables are also being used.
For example, terms such as "CITIC-Prudential" and "policy owner" that were used in previous contracts are referred to as "we" and "you" in the new contracts.
Starting working on the wording simplification of contracts in October 2002, CITIC-Prudential tested more than 10 drafts before it agreed the final version of the new contracts.
The new contracts cost the company 10 per cent to 20 per cent more in printing, Tan said.
A number of insurance firms in China had started the simplification process and more insurers were expected to launch new contracts for this purpose, said Yang Yange, deputy director of the institutional administration department at CIRC's Guangdong Bureau.
Hailing CIRC's progress in this regard, Tan said some Southeast Asian markets with a much longer history of commercial insurance did not start to do this until five to eight year ago. Jargon-filled contracts are common in Western markets and CITIC-Prudential has just started this simplification drive in its home market in Britain, he said.
Set up in Guangzhou in 2000, CITIC-Prudential is a 50-50 joint venture between Chinese conglomerate China International Trust & Investment Corp and British financial giant Prudential Plc.
The company started operations at its Beijing Branch in August last year and obtained the approval for its operation in Suzhou in eastern China's Jiangsu Province in March this year.
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