Last year, our team acted as an agent for an annuity insurance surrender case, with a surrender amount of 1.5 million yuan. With the efforts of our team and multiple negotiations, the insurance company finally refunded the full premium to the customer. When formulating the litigation plan, we prepared a plan to claim triple compensation from the insurance company. If the case enters the litigation process, whether insurance consumers can claim triple punitive damages in the event of insurance fraud will become the biggest controversial focus.

1、 Insurance fraud

In the surrender case we represented, the reason for the customer's surrender was that the insurance salesperson engaged in sales misleading behavior during the promotion of insurance products. The so-called sales misleading refers to the behavior of insurance salespeople who, through deception, concealment, or inducement, make misleading propaganda or explanations about insurance products. This kind of misleading sales constitutes "fraud" in civil law, which is referred to as "insurance fraud" in this article.

2、 The controversy over the application of punitive damages

Article 55 of the Consumer Rights and Interests Protection Law stipulates that if a business operator engages in fraudulent behavior in providing goods or services, it shall increase compensation for the losses suffered according to the consumer's request, and the increased compensation amount shall be three times the price of the consumer's purchase of the goods or the cost of receiving the services; If the amount of additional compensation is less than 500 yuan, it is 500 yuan. If there are other provisions in the law, they shall prevail.

According to the above regulations, it seems that all operators who provide goods or services to individuals may face claims for triple punitive damages, including insurance companies. In fact, it was not until 2013 when the Consumer Rights Protection Law included "operators providing financial services such as securities, insurance, and banking" in the scope of adjustment that it was widely believed that insurance consumers could apply three times the punitive damages of the Consumer Rights Protection Law.

The People's Court of Dongcheng District, Beijing (2019) Jing 0101 Min Chu 21048 Civil Judgment holds that "the current Consumer Rights Protection Law has included operators of financial services such as insurance in its scope of application and clearly defined the protection of financial consumers. Therefore, the plaintiff's lawsuit request for the application of relevant provisions of the Consumer Rights Protection Law has legal basis."

The Supreme People's Court (2017) Civil Ruling No. 1462 of the Supreme People's Court pointed out that "natural person consumers who purchase insurance products for daily consumption shall apply the provisions of the Consumer Rights and Interests Protection Law of the People's Republic of China. If this law does not provide for it, relevant provisions of insurance laws and regulations shall apply."

However, in specific cases, there are still different opinions on this matter. Moreover, this divergence seems to be expanding after the Supreme People's Court released the Minutes of the National Conference on Civil and Commercial Trial Work of Courts (referred to as the Nine People's Minutes) in 2019.

The Higher People's Court of Hebei Province (2020) Jiminshen Civil Ruling No. 7960 holds that "according to Article 2 of the Consumer Rights and Interests Protection Law of the People's Republic of China, insurance consumption does not fall within the scope of adjustment of this law. Therefore, the applicant for retrial claims the application of Article 55 of this law, which stipulates triple compensation, on the grounds of the respondent's fraudulent behavior. This is unfounded and should not be supported by law."

The Civil Judgment of Chengdu Intermediate People's Court (2021) Chuan 01 Min Zhong No. 22083 holds that "Yan Kaiping purchased insurance investment products, in accordance with the Minutes of the Civil and Commercial Trial Work Meeting of the Supreme People's Court" (Law [2019] No. 254) The spirit of Article 72 and Article 77 stipulates that insurance investment products are high-risk financial products, and if financial consumers claim that the seller institution shall bear punitive compensation liability in accordance with Article 55 of the Consumer Rights Protection Law on the grounds of fraudulent behavior of the seller institution due to the purchase of high-risk financial products and receiving services, the people's court shall not support it, The seller's institution's liability for compensation is generally limited to the actual losses suffered by financial consumers

In response to the provisions of the Nine Minutes of the People's Republic of China, the Supreme People's Court has provided an explanation in the interpretation and application of the Minutes of the National Conference on Civil and Commercial Trial Work of Courts. The Supreme Court believes that according to Article 2 of the Consumer Rights Protection Law, financial consumption is not within the scope of adjustment of the law, and therefore it is not appropriate to refer to Article 55 of the Consumer Rights Protection Law regarding the triple penalty.

We have noticed that the insurance investment products and other financial products listed in the minutes of the Nine People's Republic of China are limited to the category of "high-risk level". The question is, how to determine a "high risk level"? Can triple compensation be applied when insurance consumers purchase low-risk insurance products? Can consumers apply triple compensation when purchasing insurance products with both investment and protection attributes?

For example, as mentioned at the beginning of this article, can our client's purchased annuity insurance (dividend type) be subject to triple punitive damages? If applicable, does that mean our client can claim a compensation of 4.5 million yuan from the insurance company? Unfortunately, the surrender case we represented did not ultimately enter the litigation process, and the above questions are unknown.

3、 Calculation of punitive damages

There is still a significant disagreement in practice regarding punitive damages in cases of insurance fraud - how to determine the calculation base for triple compensation? From the provisions of the Consumer Rights Protection Law, it seems clear that this issue is calculated based on the price of goods purchased or the cost of services received by consumers.

After searching a large number of judicial cases, we found that this issue is more controversial. Judicial practice provides three opinions:

1. Calculate based on premium. The People's Court of Tongzhou District, Beijing (2018) Jing 0112 Min Chu 10456 Civil Judgment holds that "if an operator provides goods or services with fraudulent behavior, they shall increase compensation for the losses suffered according to the consumer's request, and the increased compensation amount shall be three times the price of the consumer's purchase of goods or the cost of receiving services.". Li Hongyi demands that the insurance company compensate three times the premium already paid. The reason is legitimate and the evidence is sufficient, and this court supports it

2. Calculate based on deposit interest. The People's Court of Dongcheng District, Beijing (2019) Jing 0101 Min Chu No. 21048 Civil Judgment holds that the calculation basis for the plaintiff's claim for three times the compensation amount from the defendant is due to the fact that the insurance contract involved in this case has both investment and living consumption attributes, and the defendant's behavior will not result in the loss of the 500000 yuan premium paid by the plaintiff. Therefore, the plaintiff's demand for triple compensation based on the premium standard paid clearly goes beyond the legislative purpose of establishing this punitive clause in law. Therefore, this court does not support the plaintiff's calculation standards. The specific amount of compensation in this case shall be determined at the discretion of the plaintiff at three times the interest rate of the five-year deposit that has already been paid as premium

3. Calculate based on the difference between premium and cash value. The Jilin Provincial High People's Court (2016) Jiminzhong Civil Judgment No. 515 holds that "the consideration paid by Shitian Huimin for the insurance product in question should not be calculated based on the insurance premium of 670000 yuan. Article 55, Paragraph 1 of the Consumer Rights Protection Law of the People's Republic of China stipulates that the benchmark for triple punitive damages is the price of the consumer's purchase of goods or the cost of receiving services.". Specifically in this case, on the one hand, as both parties to the contract have clearly agreed that the death insurance benefits and the expired insurance benefits are the cumulative insurance premiums paid under this contract, it is not appropriate to consider the insurance premium amount stated on the policy as the purchase consideration... This court takes into account the facts and nature of this case comprehensively, It is considered appropriate to consider the difference between the cash value agreed upon by both parties in the insurance contract regarding the withdrawal after the hesitation period and the paid insurance fees as the consideration for the policyholder's purchase of the insurance product in question

The case has been retried by the Supreme People's Court, which believes that the purpose of the punitive damages system is to increase the protection against losses caused by fraud when consumers purchase goods or receive services for their daily needs. Due to the fact that the two types of insurance products involved in the case, dividend type annuity life insurance and universal type annuity life insurance, have the nature of both financial investment and daily consumption. If the calculation standard of punitive damages is based on the total insurance premium, it will cover the risk losses of natural person financial investment, which does not meet the purpose of the punitive damages system. The second instance judgment has made a certain reduction in insurance premiums as a discretionary measure to calculate the standard for punitive damages, and also provides a basis for its discretionary standard. Therefore, it is not yet sufficient to constitute a situation where there is a lack of evidence to prove the basic facts and there is indeed an error in the application of law that should be retried

4、 Summary

We have noticed that in specific cases, judicial practice has not yet formed a unified opinion on whether insurance consumers belong to "consumption for daily life", whether the Consumer Rights Protection Law is applicable, whether triple punitive damages are applicable, and the calculation base of punitive damages.

Through the study of judicial precedents, we believe that the diversity of insurance product types may be the reason why courts provide different interpretations of the above issues. However, the practice of excluding insurance consumers from the scope of application of the Consumer Rights Protection Law is questionable. After all, in front of professional insurance institutions, individual insurance consumers should still receive special protection under national laws.