Corruption not sole cause of the chaos in the insurance market

Loopholes in the trademark law must be closed

ON SUNDAY, the Central Commission for Discipline Inspection of the Communist Party of China, the ruling Party’s top anti-graft watchdog, announced that Xiang Junbo, chairman of the China Insurance Regulatory Commission, is under investigation for suspected serious violations of discipline. Xiang’s case shows the disciplinary watchdog will not only continue fighting corruption, but also further regulate the insurance industry, says Beijing Youth Daily:

Xiang is the highest-level official in the financial regulatory agency to be investigated since the top leadership launched the anti-graft campaign in late 2012. It remains to be known what deeds are being investigated, but they probably have something to do with the chaotic situation in the insurance sector in the past fewyears.

One aspect of this is that the high rate of return on certain investment-focused life policies, also known as universal life insurance products, have attracted hot money. In 2016, the total income from insurance premiums was 3.1 trillion yuan ($448.6 billion). But sales of universal insurance products in the first quarter alone reached as high as 596.9 billion yuan, with sales growing by 214 percent compared with the first quarter of 2015.

In the development and management of insurance products, the principles of risk pricing, compensation for loss, and good faith must be adhered to. However, China’s insurance industry departed from and betrayed these principles, as the China Insurance Regulatory Commission adopted loose polices toward universal insurance products. As a result, many insurance companies have participated in the fierce capital market competition by buying shares of companies listed in the A-share market.

The result has been that the whole domestic insurance market has suffered as a result of speculation and large amounts of capital have flowed from the real economy into the financial sector.

We are not saying that Xiang or the China Insurance Regulatory Commission is solely responsible for the chaotic situation, but the fact is they did not regulate the insurance market well enough. A new chairperson of the regulatory commission will soon be appointed, and we hope whoever takes up this position will help the regulatory body better play its role in ensuring the industry develops in a healthy manner.

ALIBABA, China’s largest e-commerce enterprise, revealed that by the end ofMarch, the holders of 83 trademarks had complained against more than 15,000 retailers on its platforms for selling more than 110,000 goods that used terms in their advertising slogans or their products’ names for which they hold trademarks. The retailers paid about 1 million yuan ($145,000) in “trademark use fees”. The legislature, judicial and administrative authorities must work together to address the issue of malicious trademark registration as soon as possible. Beijing News comments:

The malicious registering of trademarks refers to registering some general descriptive terms in an industry as trademarks and then exploiting the trademark lawto claim against the producers and sellers of certain products defined or described by these terms.

For instance, the holders of the trademarks for such terms as “ripped” and “low-waistline” or “slip-on” and “highheel” have the legal right to sue producers and retailers using these words to describe their products. Many will settle with the trademark holders behind closed doors, which is the de facto purpose of the malicious trademark holders.

Alibaba estimates that malicious trademark holders, if the current lawremains unchanged, could actually sue 9 million retailers on its platforms for selling about 60 million products that would infringe upon their “rights and interests” as the trademark owners.

The amount of money they extort dwarfs their cost of registering the “shell” trademarks, for which they actually do not have any tangible products at all.

If the authorities continue to turn a blind eye to such blackmail, they will be conniving in the hard-won intellectual property rights protection laws being an accomplice to parasites. They must plug the loopholes in the trademark and intellectual property rights protection laws to restrict the space for such malicious activities and strengthen their supervision of trademark registration.