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Application of the Compilation of Insurance Business Codes at Insurance Companies, Intermediary Institutions, and Asset Management Companies

2012年03月31日   Views

I. Background

The insurance industry is information intensified. The fundamental rule for insurance operations is the “law of large numbers”. Without uniform standards for information denomination, description, classification or coding, it will be difficult to exchange and share industrial information, which means the enterprises cannot make full use of the massive information for their operation and management, and the regulators can hardly monitor and control the industrial risks. Therefore, a proper information structure and an improved standardization of information systems are essential and fundamental to the insurance industry seeking an optimized balance of economic and social benefits.

Standardizing the denomination, description, classification and coding of insurance information can reduce misunderstandings and disputes otherwise. It will be misleading if a certain term is used to denote many objects, or more than one term refer to the same object, or a certain term is defined and described differently, or a certain piece of information is coded differently. Standardization ensures one term is logically linked to one unique object (concept), which means information is more reliable and comparable.

In early 2007, as directed by the CIRC and organized by the Insurance Sub-committee, Ping An Insurance (Group) Company of China, Ltd. (Ping An Insurance) led the standardization study on the classification and coding of insurance information. Based on an agreement between the insurance regulators and insurance institutions, in December 2007, the CIRC approved the release of the Compilation of Insurance Business Codes (JR/T 0034-2007), the first standardization of codes for information classification in the insurance industry. This is a major component of the “basic standards” in the framework for standards in China’s insurance industry and also the foundation of regulatory standards, business standards and information standards of the industry.

The Compilation of Insurance Business Codes is compiled based on the principle of “systematic planning, task prioritization, and fast lane for the urgent need”. The focus of the Compilation of Insurance Business Codes is to incorporate core business codes which are to be exchanged and shared for practice use. For instance, the common codes in bad and frequent need, like for reporting to the regulators, exchanging information outside and within-industry, and communicating with customers are public language for daily exchange and share of information and therefore are prioritized. 

II. Executive Summary of the Compilation of Insurance Business Codes

The architecture design and the code definition in the Compilation of Insurance Business Codes take the classification method in the international insurance standards as references, consider the existing laws and regulations as well as the technological applications, and aim to make the architecture extensible for easy adaptation to the future changes in industrial strategies and standard applications.

The Compilation of Insurance Business Codes includes 114 codes in five categories, which cover the Universal Insurance, Property Insurance, Personal Insurance, Reinsuranceand Credit Insurance (among them,  there are 43  Universal codes, 31  Property Insurance codes, 24  Personal Insurance codes, six  Reinsurance codes and 10  Credit Insurance codes). It also specifies in details the denomination, description, denotation, coding method and value assignment of codes as required by the Basic Principles and Methods for Information Classifying and Coding (GB/T 7027-2002).

For the first time, the Compilation of Insurance Business Codes tabulates the categories and coding of information for 86 insurance objects such as the reason for property claim and the types of conservation, investigates the insurance-related national, international and industrial codes, and then selects 28 classification codes currently used in national and international health organizations, and in industries of banking, public security and etc., so that the standards in insurance industry are consistent with those national, international and industrial standards, which improves the efficiency in exchanging and sharing information.

III. Application and Promotion of the Compilation of Insurance Business Codes

The CIRC sets high priority to the implementation of the Compilation of Insurance Business Codes. In 2007 and 2008, the CIRC issued two circulars (B.J.F. [2007] No.131 and B.J.F. [2008] No.14) respectively, which the insurance companies, intermediary insurance institutions and insurance asset management companies are required to implement, and by which the regulators are required to supervise the implementation.

According to the provisions in the Interpretation on the Standardization Law of the People’s Republic of China, “recommended standards, once becoming a mandatory document, are administratively binding”. In the insurance industry, the Compilation of Insurance Business Codes is administratively binding and should be enforced by all insurance institutions.

In March 2008, the CIRC held the mandatory training workshop on the Compilation of Insurance Business Codes in Kunming, for all local CIRC offices, insurance companies, intermediary insurance institutions, and insurance asset management companies. Currently all insurance institutions have fully implemented the standard in their business operations and management activities as well as in their external information exchange with commercial banks and regulatory agencies.

The Compilation of Insurance Business Codes is a benchmark standard. It is the basis for the compilations of regulatory standards, business standards and information exchange standards of the insurance industry.  It is also the important precondition for information exchange and sharing, and the prerequisite for the modernization of management operations. By the end of May 2011, a total of eight insurance industrial standards (including those under approval) had quoted the Compilation of Insurance Business Codes as the base standard.

 

Standard category

Standard name

Status

Basic standard

JR/T00332007 Insurance Basic Data Element Directory

Promulgated

Information exchange standard

JR/T00362006 Specifications for Reinsurance Data Exchange

Promulgated

Information exchange standard

JR/T00372007 Specifications for Property Insurance Data Exchange under Bancassurance Business

Promulgated

Basic standard

JR/T00482009 Insurance Basic Data Models

Promulgated

Regulatory standard

JR/T00542009 Specifications for Catastrophe Insurance Data Collection

Promulgated

Information exchange standard

JR/T00532009 Specifications for Motor Vehicle Insurance Data Exchange

Promulgated

Regulatory standard

JR/T0047-2009 Standard for Statistical and Analytical Indicators System for Insurance Companies

Promulgated

Information exchange standard

Specifications for Medical Insurance Data Exchange

Under development

 

The CIRC made full use of standardization tools for regulatory innovations. By applying the Compilation of Insurance Business Codes in its second-generation insurance audit system, the CIRC collected more complete and accurate insurance operational information and expanded the coverage of regulatory inspections. Besides, the standard helped to improve the efficiency in on-site and off-site audits as well as regulatory capacity, and became an effective tool for the insurance risk control.

The Compilation of Insurance Business Codes is the foundation for building the information-exchange platform. It has been widely applied to information platforms of the motor vehicle insurance information system, the bank insurance express and medical insurance express systems. For example, on the motor vehicle insurance information platform, a dozen of codes such as the vehicle usage category, insurance category, type of license plate, issue agency category, collection/payment item, collection/payment method and the claimant type are used, which helps to unify the price of common motor vehicles across the industry and improve the accuracy of the premium estimation. The Compilation of Insurance Business Codes adopts the national standard codes such as the organization codes and the hospital codes as well as the public safety sector codes including the traffic accident type and violation behavior, which improves the efficiency in information sharing and exchange between the insurance industry and the public safety and taxation sectors, strengthens the management of intoxicated driving and drunk driving through sharing information with traffic record taken by the police, and makes it possible to process the real-time inquiry of vehicle and vessel tax and the online tax declaration and payment. Overall, the Compilation of Insurance Business Codes will effectively back the implementation of the compulsory traffic accident liability insurance for motor vehicles and protect the consumer rights at the same time.

Insurance companies have also been actively advertising the implementation of the Compilation of Insurance Business Codes. For example, Ping An Insurance has developed a series of corporate rules and policies such as the Implementation Rules for the Compilation of Insurance Business Codes and the Administrative Measures for Purchasing Software which  regulate the standards that the self-developed new systems and latestly-introduced software are required to meet, survey whether the current information systems are standardized, and make plans to reform non-standardized items.

IV. Social and Economic Benefits of the Compilation of Insurance Business Codes

 (I) Higher transparency and better decision making

The Compilation of Insurance Business Codes standardizes 114 commonly used codes in the insurance sector. The codes of the type of motor vehicle, model of motor vehicle and driver classification are standardized so as to help establish the industrial database, define the sub-markets of motor vehicle insurance, estimate a reasonable premium rate, and decrease malicious competition. The standardization of medical codes assists the insurance companies to conduct differentiated management of hospitals, and reduce fraudulent claims. The standardization of organization codes help to address the identification of corporate customers and improve customer services.

 (II) Transaction cost reduction, transaction efficiency improvement, and corporate competitiveness enhancement

There are massive information exchange needs between organizations such as the insurance companies, the reinsurance companies, banks, hospitals, automobile repair shops, asset management companies, insurance surveying, assessing companies, brokerages, agents and public safety authorities. The Compilation of Insurance Business Codes acts as a key bridge to connect the insurance companies to the outside world through information exchange, integration and sharing collaboration with external organizations. The organization codes facilitate the insurance companies to obtain the dynamic information of insured enterprises on a timely basis from the departments of industry and commerce, taxation and organization registration etc. in order to identify business opportunities and control financial risks. The driver classification codes and vehicle classification codes provided by the public safety authority can help the insurance companies to conduct cost and benefit analysis and determine the premiums of different vehicle insurance products. The disease classification codes can help the insurance companies determine the premiums of medical insurance products so as to reduce frauds and overpayments losses. The classification-based hospital compensation analysis by the insurance companies can help hospitals improve medical and management skills to reduce the losses. The Compilation of Insurance Business Codes can also help minimize the information losses due to inconsistent classification, improve the business process, reduce transaction costs, and improve transaction efficiency. It can also be used by enterprises to increase the capabilities of communication and business collaboration, accelerate the transfer of knowledge and technology, promote the technological and management innovations, and improve their core competitiveness.

 (III) Controlling financial risks and maintaining market discipline

The Compilation of Insurance Business Codes, which standardizes the insurance codes, assists insurance companies and regulators to obtain accurate analysis data of operation and quantitative indicators, assess the risks immediately, and prepare sufficient funds accordingly for compensation.. It also helps to construct industrial data platforms so that the insurance companies can meet the specializations required in the price determination of insurance products and the market behaviors, make market players voluntarily comply with common competition rules, conduct regulation operations, avoid low efficiency due to the false and fraudulent activities and maintain the market discipline.

V. Conclusion and Outlook

The China Insurance Industry Standardization Technology Committee (CIISTC) has established a mechanism to refine and improve the Compilation of Insurance Business Codes, so that it is always up to date and practical, and inclusive of the codes related to information exchange and share in the insurance industry.

The adoption of the standardized code can help the insurance regulators obtain statistical analysis data of insurance companies more effectively, enhance the feasibility of information, and then improve the efficiency of supervision.

The standardized codes adopted by the insurance industry facilitate information exchange and share, reduce the cost of information exchange and also simplify the process. The regulation on the classification of business codes and the hierarchical structure of codes helps to standardize business operations and management. The system development and extension is becoming quicker and simpler, which stimulates the growth of the insurance industry.

The standardized platform for information exchange between the insurance industry and other industry peers can reduce the cost of the information exchange and simplify the process, as well as realize real-time information exchange and extensive information sharing.

The use of standardized business codes between the sectors within the insurance companies can help boost the exchange and sharing and application integration of information between the application systems.

 

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