Multiple insurance companies offering insurance with benefit cards face regulatory warnings

Reporter: Leng Cuihua

The Hubei Regulatory Bureau of the National Financial Supervisory Administration (hereinafter referred to as the “Hubei Financial Regulatory Bureau”) recently issued a notice titled “Notice on Regulating Activities of Insurance Business Regarding the Provision of Extracontractual Benefits to Policyholders or Insured Persons in the Form of ‘Special Drug Cards’ and Other Means,” directly addressing the illegal practices of some insurance companies that offer consumers “Special Drug Cards,” “CAR-T Cards,” and other benefit cards during their marketing efforts.

In fact, regulatory agencies in several regions have previously warned about such risks. Industry insiders believe that while insurance companies providing value-added services is encouraged by regulators, “insurance plus” does not mean limitless combinations, and compliance boundaries must be strictly adhered to.

Prohibition Against Illegal Provision of Benefit Cards

The Hubei Financial Regulatory Bureau stated that it has recently discovered during regulatory work that some insurance companies are giving consumers “Special Drug Cards” and other benefit cards during insurance business activities, suspected of offering policyholders or insured persons benefits outside of the insurance contract. To regulate market order and prevent operational and compliance risks, the bureau has made it clear that it is strictly prohibited to provide “Special Drug Cards,” “CAR-T Cards,” and other benefit cards to insurance consumers in violation of regulations.

“Special drugs” generally refer to high-cost specialty medications for rare diseases and serious illnesses, which typically fall outside the ordinary medical insurance reimbursement scope or have very low reimbursement rates. “CAR-T” is a new type of cancer immunotherapy, which is also very expensive.

According to reports, the providers of “Special Drug Cards,” “CAR-T Cards,” and other benefit cards are third-party organizations that do not have financial business operating qualifications. The related products mimic the terms and compensation responsibilities of insurance products, which can easily lead to disputes between consumers, third-party organizations, and insurance companies.

Li Shitong, co-founder of BestLawyers, told the Securities Daily that insurance companies often purchase “Special Drug Cards” from pharmaceutical service companies and other third parties at a relatively low cost but use “guarantee amounts reaching hundreds of thousands” as a gimmick. They use the provision of benefit cards as a means to attract and retain customers, posing significant compliance and operational risks.

On one hand, third-party organizations are not licensed financial institutions, but the design of benefit cards is highly similar to insurance products: they promise to fulfill benefits when consumers are diagnosed with specific diseases and need to purchase medication or treatment, which is essentially approaching insurance functionality. On the other hand, consumers may regard the provided benefit cards as an extension of the insurance product’s coverage, mistakenly believing that the insurance company will cover them; however, such benefits are not included in the insurance contract and are entirely provided by third-party organizations. If the third party fails to perform, it can easily lead to disputes among multiple parties.

To this end, the Hubei Financial Regulatory Bureau has clearly defined four prohibitions: including a strict ban on providing benefit cards to consumers during insurance business activities; a ban on procuring, storing, and distributing benefit cards for the purposes of inviting, facilitating, or following up with clients; a ban on linking benefit cards with insurance companies during the promotion and explanation of insurance products; and a ban on conflating the claimed benefits of specialty drug subsidies, expense reimbursements, and other functions of benefit cards with the insurance product’s coverage responsibilities, which would misleadingly exaggerate insurance liabilities and deceive insurance consumers.

Clarifying Service Boundaries

The prohibition against insurance companies giving benefit cards does not mean that regulatory agencies are banning insurance companies from providing services, but rather aims to clarify the boundaries. The Hubei Financial Regulatory Bureau stated: “Encourage the exploration of differentiated operations and provide health management services in compliance with regulatory requirements.”

“Encourage all insurance companies to refine customer needs based on legal compliance and explore differentiated service measures that meet the needs of different groups. It is essential to distinguish between legal value-added services and unlawful extracontractual benefits, strictly adhering to compliance bottom lines, and prohibiting the provision of value-added services that violate regulatory requirements,” the Hubei Financial Regulatory Bureau stated.

In practice, how can insurance companies clarify boundaries and provide consumers with legal, genuinely useful value-added services? Li Shitong stated that related services must strictly adhere to the provisions of the “Health Insurance Management Measures” and the “Notice on Regulating Health Management Services by Insurance Companies,” and they must be services directly related to the policy itself, not unrelated services.

A relevant person in charge from a life insurance company’s Beijing branch told the Securities Daily that, in practice, distinguishing between legal value-added services and unlawful extracontractual benefits mainly involves three aspects. First, it looks at the cooperation model. Legal value-added services provided by insurance companies, such as green channels for medical treatment and health management, are usually established through cooperation agreements signed between the insurance company’s headquarters and third-party organizations, with the service content clearly stated in the insurance contract. If a third-party organization encounters issues, the insurance company is responsible for covering it and must replace the organization to continue fulfilling its obligations. This form is known as “total-to-total” cooperation, where the insurance company is the final bearer of responsibility.

Second, it examines whether there is a “contractual” basis. Legal value-added services must either be specified in the insurance contract terms or signed as a separate service contract. For example, the “Health Insurance Management Measures” allow health management services to be contracted separately, and the services written into the contract have legal effect.

Third, it assesses the procurement entity. The benefit cards that have been halted by regulators are often procured by branches or individuals of insurance companies from third-party organizations independently; their product terms mimic insurance but are not insurance.

In short, the core judgment standard is whether the insurance company assumes legal responsibility for the ongoing performance of the service and whether it is included in contract management. Consumers should also carefully identify when purchasing insurance to avoid being misled by marketing language such as “gifted high-guarantee benefit cards.”

(Editor: Qian Xiaorui)

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