Recently, Li Li (a pseudonym) from Guangdong told reporters that she recently purchased a "high imitation auto insurance" that is very similar to a well-known insurance institution in terms of name and service type, but the quoted price is only half of that institution's. After verification, what she bought was not insurance, but "traffic safety coordination service."
This year, such "bump and run" traffic safety coordination companies that imitate well-known insurance institutions have accelerated their expansion, with market prices mostly only 50-80% of regular auto insurance.
In fact, traffic safety coordination services are just an industry mutual aid business, providing protection for vehicles participating in the coordination by raising funds from car owners to form a coordination fund. However, if the traffic safety coordination company does not do a good job of risk control, it may not be able to bear high compensation.
Some legal professionals pointed out to reporters that the legality of such products is currently controversial in the law, and it is recommended that car owners be cautious in identifying and purchasing regular auto insurance during the vehicle renewal process.
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"High imitation auto insurance" is rampant
In September this year, when the auto insurance was about to expire, Li Li received a call from someone claiming to be a staff member of Ping An Auto Insurance. In the quote sent by the other party, the original price of 3,447 yuan for auto insurance was only 1,500 yuan for a limited time, with a 43% discount.
Li Li quickly signed the contract within half a day and paid the fee, and the aforementioned staff member sent the "policy" as promised.
However, Li Li then found something was wrong. The document provided by the other party had the company name as "Ping An Chuanghui (Hainan) Safety Coordination Service Co., Ltd." instead of "Ping An Auto Insurance." The document name was "Ping An Chuanghui Safety Supervision Service Electronic Order," and the types of services were third-party liability service and medical insurance outside the scope of responsibility service, without mentioning the word "insurance" throughout.
Reporters learned from the industry that the China Insurance Industry Association has issued model clauses for auto insurance. Most insurance institutions' auto insurance clauses refer to the model clauses, with unified standard texts and formats.
(Motor vehicle commercial insurance model clauses. Image source: official website of the China Insurance Industry Association)According to Qichacha, Ping An Chuanghui (Hainan) Safety Coordination Service Co., Ltd. was established in February of this year with a registered capital of 1 million yuan. The main business scope includes motor vehicle safety coordination services, traffic safety coordination services, and the sale of new energy vehicle whole vehicles, etc., and does not include insurance business. There is no equity connection between this company and Ping An Auto Insurance.
It is not uncommon for companies that "bump into" well-known insurance companies and actually sell traffic safety coordination services. After the reporter posted an article under the guise of "vehicle renewal insurance" on a social platform, eight people who claimed to be from insurance institutions contacted the reporter in just two days, including three who sold themselves as insurance company staff but actually belonged to traffic safety coordination companies.
During the investigation, the reporter found that the staff of such companies usually have two characteristics. The first is that they emphasize that they are staff of well-known insurance institutions and weaken or do not mention "traffic safety coordination" at all. For example, a salesperson the reporter contacted claimed to be a staff member of the Zhongbao Group, and repeatedly emphasized during the communication process that they were selling auto insurance products. However, after the reporter verified the business license of the company they were in, it was found that they actually belonged to a Hainan LUTONG Automobile Service Company that was just registered in May this year, and the company did not have the qualification to sell insurance.
The "insurance policy" he provided to the reporter also has differences from the promotional tone. First, the company name is not the Hainan LUTONG Automobile Service Company he mentioned earlier, but Zhongbao Transportation Services (Shanxi) Co., Ltd. Second, the service terms mention that the company is not a property insurance company, but a road traffic safety company with a significant industry mutual aid nature.
The second characteristic of this so-called "auto insurance" is that the sales price is low and the sales process is not standardized, often using rebates and other routines to attract customers. When the reporter inquired about the information with a premium of 6,000 yuan for a certain model last year, the regular insurance companies usually quoted between 6,000 yuan and 6,500 yuan. However, the quotes from companies that handle traffic safety coordination services are significantly lower, ranging from 3,000 yuan to 5,000 yuan, which is 5 to 8 times the normal channel.
In addition, these "bumped" so-called "auto insurance" does not have a clear price tag, and the pricing system is chaotic. The reporter found during communication with several salespeople that some companies have set up large rebates. A staff member told the reporter that the "auto insurance" provided by the company costs 5,000 yuan, but if purchased within a specified time, a rebate of about 1,000 yuan can be given. If friends are recommended to purchase, additional discounts can be applied.
Regular auto insurance has strict regulations on pricing. In September 2023, the State Financial Regulatory Administration issued the "Notice on Strengthening Auto Insurance Cost Management", requiring comprehensive strengthening of internal management of auto insurance costs, continuous improvement of the market-oriented formation mechanism of commercial auto insurance rates, and comprehensive strengthening of the "unity of reporting and practice" in the cost control of commercial auto insurance. That is, the product pricing assumptions used by insurance companies in the product approval or filing materials reported to the regulatory authorities, including cost assumptions, etc., must be consistent with the actual business behavior of insurance companies.
"Distorted" vehicle safety coordination
Vehicle safety coordination is originally a normal industry mutual aid guarantee. The document from the Legislative Affairs Office of the State Council, Guofa Mi Han [2004] No. 204, shows that the traffic safety coordination service system was first established by the Yunnan Provincial Government in 1993. The system requires the original directly affiliated enterprises and institutions of the Yunnan Provincial Department of Transportation to pay traffic safety coordination fees according to the number of vehicles they own, to be used for various economic compensations after participating in traffic coordination vehicles encounter traffic accidents and suffer from natural disasters, passenger accidental injuries, and other situations. It belongs to a mutual aid system among transportation enterprises. In 2012, the State Council issued the "Opinions of the State Council on Strengthening Road Traffic Safety Work", and the second article of the document strengthened the safety management of road transport enterprises "(3) Encouraging transport enterprises to adopt forms such as traffic safety coordination to strengthen industry mutual aid and improve the risk resistance of enterprises", and this advocacy became the basis for the existence of traffic safety coordination.
The industry generally believes that vehicle coordination refers to the collection of funds from car owners, requiring car owners to pay the corresponding traffic safety coordination fees to form a coordination fund to provide protection for large trucks participating in the coordination, and promise to compensate according to the contract agreement in the event of an accident.Why can this traffic safety coordination service set a lower price? Wang Pengbo, the chief analyst of the financial industry at Broadcom Consulting, stated that compared to insurance products from formal insurance institutions, traffic safety coordination services are not subject to the strict regulatory oversight and actuarial pricing mechanisms of the insurance industry. These companies can set prices arbitrarily, attracting consumers with low prices, and after expanding their business scale, they have a larger profit margin.
Some organizations pose as auto insurance companies, using low prices to tempt car owners to unknowingly purchase services.
A business director of an insurance company told reporters that in recent years, the new energy vehicle market has developed rapidly, and the issue of auto insurance pricing has gradually emerged. Compared to traditional fuel vehicles, new energy vehicles have a higher claim rate and higher repair costs, with premiums remaining high. The contradiction of "insurance companies crying losses, and car owners complaining about high prices" continues to exist. Under such circumstances, "high imitation auto insurance" has found an opportunity to exploit.
The number of companies focusing on vehicle safety coordination is surging. The reporter searched for the keyword "traffic safety coordination" in the business scope on Qichacha and found that in the past three years (from January 2022 to the present), a total of 371 similar enterprises have been established, far exceeding the previous number. Among them, several companies have names containing "Dadi," "Ping An," "Guo Shou," "Zhong An," "Zhong Bao," and other words.
With the surge in the number of companies, there are also hidden concerns about the quality of operations, and many companies are suspected to be shell companies. Qichacha data shows that among these 371 companies, a total of 219 companies had 0 insured employees in their 2023 annual reports.
What are the risks?
The low-priced "auto insurance" brings higher risks, and the protection provided by vehicle coordination companies is significantly different from that of formal insurance companies. Unlike formal auto insurance, vehicle coordination is essentially an industry mutual aid action, collecting funds from car owners to form a coordination fund to provide protection for vehicles participating in the coordination. However, if the vehicle coordination company does not do a good job of risk control and cannot bear high compensation, car owners may have to bear huge compensation costs after an accident.
In some previous cases, courts have already ruled vehicle coordination contracts as invalid contracts.
In July 2022, a typical case published by the Intermediate Court of Cangzhou, Hebei, showed that the case determined that motor vehicle safety mutual aid coordination insurance could not be recognized as an insurance contract under the "Insurance Law of the People's Republic of China," and there is a risk of non-performance, which cannot completely replace the defendant in bearing the compensation responsibility caused by traffic accidents.
Li Hao, a lawyer at Guangdong Guangxin Junda Law Firm, told reporters that some enterprises, without insurance business qualifications, charge service fees to non-transportation enterprises and even individuals, and agree in the contract to compensate the served party or the injured third party for losses when the served party's motor vehicle has a traffic accident. The so-called traffic safety coordination service, its legality is controversial in judicial practice.He believes that this so-called traffic safety coordination service has exceeded the scope of transportation enterprise coordination and mutual aid, possessing the main characteristics of motor vehicle commercial insurance. The relevant companies are in essence conducting insurance business under the guise of coordination, which is a disguised operation of commercial insurance business and violates the mandatory provisions of the "Insurance Law." The relevant service contracts are considered invalid.
Moreover, the strength of vehicle coordination companies varies, and the rate of cancellation and revocation is also quite high. According to data from Qichacha, among the 371 companies established from January 2022 to the present, 48 companies have already been canceled or revoked. This means that about 12% of the companies have been canceled within less than 3 years of establishment.
Looking at a longer period, among the 1884 companies whose business scope includes traffic safety coordination services, 472 companies have been canceled or revoked, accounting for as high as 25%.
Previously, the regulatory authorities have repeatedly warned of risks. As early as April 26, 2022, the China Banking and Insurance Regulatory Commission (now the China Banking and Insurance Regulatory Authority) issued a "Risk Alert on Rational Insurance Purchasing with Five Precautions," which clearly pointed out that mutual aid activities launched by non-insurance institutions under the names of "×× Mutual Aid," "×× Alliance," "×× Coordination," etc., are not insurance or mutual insurance and should not be confused with commercial insurance. At the end of September this year, the Jiangsu Regulatory Bureau of the China Banking and Insurance Regulatory Authority issued a "Risk Alert on Motor Vehicle Safety Coordination Not Being Insurance Business," emphasizing that motor vehicle safety coordination is not insurance business. Institutions operating such businesses have not legally obtained insurance business operation permits and are not legally established insurance companies. They are not under the supervision of the China Banking and Insurance Regulatory Authority and its dispatched institutions.
How should the growing traffic safety coordination market be regulated to reduce the likelihood of consumers being misled into purchasing "imitation car insurance"?
Wang Pengbo told the reporter that, first, the legal status and nature of traffic safety coordination should be clarified, and special laws and regulations should be formulated to regulate it, clarifying its differences and boundaries with commercial insurance; second, through various channels and methods, strengthen insurance knowledge education for consumers to improve their understanding and understanding of insurance products and traffic safety coordination services. Of course, consumers themselves should also improve their understanding of insurance business, see the contract text clearly, and avoid being deceived.
Li Hao suggested that if car owners or drivers believe they have purchased the above-mentioned traffic safety coordination services due to the fraud of operators, they can legally complain and report to the insurance regulatory authorities or market regulatory authorities, and request mediation for refund matters. They can also file a lawsuit or apply for arbitration according to the contract agreement, demanding the operators to bear the corresponding legal responsibilities of refund and compensation for their consumer fraud behavior. However, it should be pointed out that different courts or arbitration institutions may make different determinations on the legal effectiveness of such contracts. It is recommended that consumers first understand the past judicial or arbitration views of relevant courts or arbitration institutions on the effectiveness of such contracts before reasonably determining the litigation or arbitration claims.
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