Study On The Internal Control System In China's Life Insurance Companies

China Insurance Regulatory Commission (CIRC) issued the Evaluation Approaches for the Internal Control of Life Insurance Companies (For Trial Implementation) in early 2006, followed by the Regulations on Non-spot Supervision of Life Insurance Companies (For Trial Implementation), Guiding Opinion About Regulating Governance Structure in Life Insurance Companies (For Trial Implementation) and Regulations of Qualification Management of Directors and Senior Management in Insurance Companies. The series of documents closely related to internal control aim to promote and regulate the establishment of internal control in China's life insurance companies for their stable operation as well as sustainable and sound development. The policies show the regulator's increasing attention in this area and urge the companies to establish and improve their internal control system according to certain criteria. Therefore, it has both theoretical and practical significances to choose"Study on the Internal Control System in China's Life Insurance Companies"as the title of the essay, and to discuss the methods in establishing internal control system from the perspective of life insurance companies.The paper starts by briefly summarizing the developing phases of internal control theories at an international level, and argues that China's life insurance companies should adopt the Evaluation Approaches for the Internal Control of Life Insurance Companies (For Trial Implementation) and the overall framework described in American COSO Report as the foundation to establish internal control system. The paper also analyzes the operation features in life insurance companies and the necessity to increase the efficiency of the system by focusing on controlling the risks involved in business operation. To lay a solid theoretical foundation for the practical works, the essay lists the goals and principles needed in the system. By analyzing the problematic issues and relevant foreign experience, we study a case in which a real company's internal control system fell flat, and draw some lesions from it. In the end, following the order of the five major elements in internal control, we discuss how to establish the system from an overall perspective. First, five aspects including corporate governance structure, management philosophy and operation style, organizing structure, corporate culture and human resource management need to be address in order to improve the environment of internal control. Second, using the content in Chapter One to analyze the risk identification, we stress on the man-made risks caused by salespersons, underwriting and claim risks, fund application risks and regulatory risks. Third, life insurance companies should establish an efficient mechanism to collect, manage and communicate information. Fourth, effective controlling procedures are needed. Fifth, a sound self-supervision mechanism is needed, including a continuous supervision on daily operations and internal audit supervision.