Multiple insurance companies offering insurance with benefit cards face regulatory warnings

By reporter Leng Cuihua

The National Financial Regulatory Administration’s Hubei regulatory bureau (hereinafter referred to as the “Hubei Financial Regulatory Bureau”) recently issued a risk-warning letter titled “A Notice on Regulating the Provision of Out-of-Contract Benefits to Policyholders or Insured Persons in the Form of ‘Special Drug Cards’ and Similar Measures During Insurance Business Activities.” It directly targets violations by some insurance companies, namely that they provide “special drug cards,” “CAR-T cards,” and other benefits cards to consumers in their business development.

In fact, regulators in multiple places have previously cautioned against such risks. Industry insiders believe that providing value-added services is the direction encouraged by regulators, but “insurance plus” is not an unlimited combination; companies must stay within the compliance bottom line.

Prohibition on illegal provision of benefits cards

The Hubei Financial Regulatory Bureau said that during its recent regulatory work, it found that some insurance companies, in insurance business activities, provide consumers with benefits cards such as “special drug cards.” This appears to involve giving policyholders or insured persons benefits beyond what is stipulated in the insurance contract. To standardize market order and prevent business and compliance risks, the bureau has made it clear that it is strictly prohibited to illegally give insurance consumers benefits cards such as “special drug cards” and “CAR-T cards.”

“Special drugs” generally refers to high-cost, targeted drugs for treating rare diseases and major illnesses. They are typically outside the scope of ordinary medical insurance reimbursement or have very low reimbursement ratios. “CAR-T,” meanwhile, is a new type of cancer immunotherapy cellular treatment method, and its price is also very high.

According to the introduction, the providers of benefits cards such as “special drug cards” and “CAR-T cards” are third-party institutions. These institutions have not obtained the qualification to operate financial businesses. Their products imitate the terms and claims-liability design of insurance products, which easily leads to disputes among consumers, third-party institutions, and insurance companies.

Li Shitong, co-founder of BestLawyers, told reporters of the Securities Daily that insurance companies purchase “special drug cards” from third parties such as pharmaceutical service companies. Their costs are often low, yet they market them with a gimmick like “coverage额度 of tens or even hundreds of thousands of yuan,” using the gifting of benefits cards as a way to acquire customers and retain them, which entails substantial compliance and operating risks.

On the one hand, third-party institutions are not licensed financial institutions, but the design of the benefits cards is highly similar to insurance products: they promise to deliver the benefits when consumers suffer specified diseases and need to purchase the drugs or receive treatment. In substance, this is already close to insurance functions. On the other hand, consumers may treat the gifted benefits cards as an extension of coverage provided by insurance products, mistakenly believing that the insurance company will stand behind and fulfill the promised payments. However, such benefits are not written into the insurance contract at all and are provided entirely by the third-party institution. Once the third party cannot perform, it is highly likely to trigger disputes among multiple parties.

For this reason, the Hubei Financial Regulatory Bureau has clearly set out four prohibitions: including strictly prohibiting the provision of benefits cards to consumers in insurance business activities; strictly prohibiting the procurement, stocking, and distribution of benefits cards for the purposes of soliciting, driving sales, and follow-up visits; strictly prohibiting, during publicity and explanation of insurance products, linking benefits cards with the insurance company; and strictly prohibiting mixing up the functions claimed for special-drug subsidies, fee reimbursement, and so on associated with benefits cards with the insurance product’s coverage obligations, in a manner that effectively exaggerates insurance responsibilities and deceives insurance consumers.

The service boundaries must be clarified

Strictly prohibiting insurance companies from providing benefits cards does not mean that regulators forbid insurance companies from providing services. Rather, the goal is to clarify the boundaries. The Hubei Financial Regulatory Bureau said: “Encourage exploration of differentiated operations and provide health management services that comply with regulatory requirements.”

“Encourage each insurance company, on the basis of lawful and compliant operations, to segment customer needs and explore differentiated service measures that meet the needs of different groups. Pay attention to distinguishing the boundaries between legitimate value-added services and illegal acts that provide benefits beyond the insurance contract, strictly adhere to the compliance bottom line, and strictly prohibit the provision of value-added services that violate regulatory requirements to customers.” The Hubei Financial Regulatory Bureau said.

In practice, how should insurance companies clarify the boundaries to provide legitimate and truly useful value-added services for consumers? Li Shitong said that such services must strictly comply with the regulations of the “Measures for the Administration of Health Insurance” and the “Notice on Regulating Health Management Services Provided by Insurance Companies,” and must be services directly related to the policy itself; they cannot be unrelated services.

A relevant person in charge from the Beijing branch of a life and health insurance company told reporters of the Securities Daily that, in practice, to distinguish the boundary between legitimate value-added services and illegal provision of out-of-contract benefits, the main considerations involve three levels. First, look at the cooperation model. Legitimate value-added services such as medical “green channel” and health management provided by an insurance company are usually delivered through cooperation agreements signed by the insurance company’s headquarters with third-party institutions. The service content will be explicitly stated in the insurance contract. If the third-party institution has problems, the insurance company must stand behind it, replace the institution, and continue to perform its responsibilities. This form is known as “headquarters-to-headquarters” cooperation, where the insurance company is the final party responsible for the obligations.

Second, look at whether it is “contracted.” Legitimate value-added services must either be listed in the insurance contract terms or a separate service contract must be signed. For example, the “Measures for the Administration of Health Insurance” allows health management services to be covered by a separate contract; services written into the contract have legal effect.

Third, look at the procurement subject. The benefits cards that have been halted in this regulatory action are often procured directly by an insurance company’s branch institution or an individual from a third-party institution. Their product terms imitate insurance but are not insurance.

In short, the core judgment criteria are whether the insurance company bears legal responsibility for continuous performance of the service and whether it is included in contract management. When consumers take out insurance, they also need to carefully identify and avoid being misled by marketing scripts such as “gifting high-coverage benefits cards.”

(Editor: Qian Xiaorui)

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