Effective June 1, 2011, the “Cash Before Cover” provision introduced in the Chinese market last year, will be implemented across more cities and provinces in China.  The provision stipulates that insurance policy documents may not be issued until the premium or first installment premium is confirmed by  the insurer’s accounting or core business system.

The change applies to new and renewal policies as well as any endorsement that involves additional premium, including increased insurance value, increased rate, or period extension.

Many lines of insurance will be affected, including enterprise property, construction, warranty, liability, marine hull, household property, other property insurances, accident and health insurance, as well as policy-oriented agriculture insurance with the premium paid by insurers.

In some cases, policy coverage may also be restricted, according to Marsh China.  For example, common extensions like "automatic coverage for new locations and values” under property insurance may no longer be automatic.

To date, Shanghai, Guangdong (Shenzhen), Zhejiang (Ningbo), Jiangsu (Wuxi),  Shannxi, Shanxi (Taiyuan), Shandong (Qingdao, Yantai), Sichuan, Chongqing, Henan (Zhengzhou), Hubei, Hunan (Yueyang), Jilin, Inner Mongolia, Liaoning (Dalian), Ningxia, Hainan, Heilongjiang, Fujian (Xiamen) and Gansu have adopted the regulation.

Marsh is communicating with the insurance markets and continues to closely monitor the situation. Clients with business operations in any applicable locations of  cash before cover” should start their insurance renewal process as early as possible. 

Please contact your local Marsh representative, who will work with you to navigate applicable local "cash before cover” requirements as well as any allowable exemptions.