“Bundle purchase” group accident insurance has already formed a black-and-gray industrial chain, and regulators have directly pointed to three major loopholes within insurance institutions.

Recently, the Office of the Shanghai Regulatory Bureau of the State Financial Regulatory Administration issued a notice titled “Risk Warning Notice on Matters Related to Group Insurance Business” (hereinafter referred to as the “Notice”). The Notice reported a recent group accidental injury insurance (hereinafter referred to as “group accident insurance”) claims dispute involving rural-related matters that occurred within its jurisdiction.

The Notice shows that a certain agricultural product wholesale company involved in the case fraudulently took out group accident insurance by falsely using the low-risk name of “fruit farmers” and, through illegal online additions, obtained group accidental insurance payouts by骗取 more than ten thousand high-risk insured persons. This has already triggered a large number of claims lawsuits. In relation to this case, regulators pointed out that insurance institutions have shortcomings in three areas: underwriting risk control, the setting of the policy maintenance (endorsement) process, business trace retention, and档案 management.

A reporter from The Economic Daily News learned that in recent years, using shell labor/agricultural companies to fabricate labor relationships to conceal risks for high-risk groups such as people working at heights, has become a professionalized black-and-gray industry chain for taking out group accident insurance or employer liability insurance. In places including Shanghai and Jiangsu, multiple cases of group insurance fraud involving amounts ranging from tens of millions to several hundred million yuan have been investigated.

Group accident insurance has become a tool for arbitrage

Recently, the Shanghai Regulatory Bureau of the State Financial Regulatory Administration received a report from an insurance company stating that a single rural-related group accident insurance policy it underwrote has led to a large number of judicial cases related to claims.

Case details show that a certain agricultural product wholesale company involved insured 500 “fruit farmers” with a group accident insurance policy from an insurance institution. After underwriting was completed, the company added more than ten thousand other insured persons to the same policy item through its own online policy maintenance (endorsement).

Subsequently, the insurance institution received, one after another, claims applications submitted by insured persons under this policy item for injuries or death caused by picking pine nuts. As of April 2026, the policy had completed payment for 40 claims, had 35 claims-related lawsuits, and the amount involved in lawsuits not yet adjudicated is in the range of several million yuan.

It is understood that when the agricultural product wholesale company applied for insurance, it only stated that the insured persons’ occupation was the low-risk “fruit farmer,” without mentioning circumstances such as pine nut picking or high-altitude work. After the insurance institution conducted post-incident verification, it found that the policyholder had no actual office premises, no records of social security contributions, and no production or business activities. The purpose of establishing this agricultural product wholesale company is highly likely to be to purchase group accident insurance for high-risk personnel at low prices and then charge the insured persons high fees to profit.

Group accident insurance was originally a basic coverage product intended to provide fallback protection for enterprise employment scenarios and help protect practitioners from accidental risks. Now, however, it has turned into a core tool for illegal syndicates to carry out large-scale claims fraud and arbitrage, with persistent exposure of industry risk-control weaknesses and disorder in business models.

At a press conference held in early 2025 by the Ministry of Public Security, Hua Liebing, Director of the Economic Crime Investigation Bureau, publicly stated that crimes involving new insurance product fraud occur frequently and are on the rise. They show a trend of spreading from traditional insurance products into a full range of insurance scenarios, such as employer liability insurance, group accident insurance, freight insurance, and return insurance. Serious insurance fraud crimes involving syndicates, professionalization, and cross-regional major activities severely infringe on the legitimate rights and interests of policyholders/insured parties, and the black-and-gray disorder in the insurance sector seriously disrupts the order of the financial insurance market.

Taking employer liability insurance as an example, the product was originally intended to compensate employees for economic losses such as medical expenses and lost income arising from work-related injury or occupational disease, as agreed in contracts, and to play a role in risk mitigation. But this compensation-type product is now frequently linked to insurance fraud. Criminals mainly carry out fraud through methods such as fabricating work injury incidents, forging employee identities, exaggerating the amount of losses, and making repeated claims. This not only increases claim payouts costs for insurance companies, but also adds operational pressure to compliant operating entities.

Regulators urge strengthening risk control

From the regulators’ perspective, the case exposes the following shortcomings by insurance institutions in operating group insurance business:

First, underwriting and risk control are merely procedural. Before underwriting, the institution did not conduct basic checks on the policyholder’s qualifications, business situation, occupation risk level of the insured persons, or whether the policyholders and the insured persons have a labor relationship.

Second, the setting of the policy maintenance (endorsement) process is unreasonable. The policyholder can use the insurance company’s official app (application) or a mini program to add or remove insured persons independently, but the insurance institution did not set restrictions on the number and proportion of insured persons added through policy maintenance, and did not impose any verification requirements on their qualifications.

Third, business trace retention and档案 management are not in place. During the policy application process, questions and disclosures about details were handled through on-site exchanges or phone communication between both parties, and the insurance company did not keep written records of the policyholder’s disclosures regarding the specific working environment and work contents of the insured persons. This has led to difficulties in providing evidence in subsequent handling of judicial disputes.

In response, the regulators issued risk warnings, and each insurance institution should attach high importance to risk control in group insurance business and improve business management. They are required to strengthen underwriting and policy maintenance management. By promoting development through compliance, and by comparing past requirements, insurance companies should send policy inquiry links to insured persons via SMS, emails, and other methods to ensure that insured persons know policy information, understand how to inquire about the policy, and know the details of premium payment, etc.

For the operational weaknesses exposed by insurance companies, Long Ge, Deputy Director of the Innovation and Risk Management Research Center at the University of International Business and Economics, suggested in an interview with a reporter that insurance institutions should implement multi-dimensional and substantive verification, strictly verify policyholders’ business premises, social security payment flows, and labor relationships. They should conduct higher-level review or even directly refuse coverage for “three-no enterprises” group insurance businesses with no premises, no social security, and no actual operation; optimize the online self-service policy maintenance (endorsement) and add-insured function, add an upper limit on the number of insured persons that can be added in a single transaction, and pair it with manual re-checks; and electronically file high-risk inquiry processes and simultaneously push policy information and risk disclosure/confirmation information to all insured persons.

Regarding industry risk-control pain points such as fragmentation of risk information across institutions, he suggested that an industry association should take the lead in building a shared platform for blacklist information covering fraudulent intermediaries and shell policyholder enterprises, and develop unified on-site underwriting verification standards for group insurance business and guidelines for risk control operations in abnormal policy maintenance.

[Author: Tu Yinghao]　(Editor: Wen Jing)

Keywords:

                                                            Insurance