I. Preface
Insurance is different from general commodities, its content is not only professional but also involves the complex rights and obligations relationship between the insurer and the insured, for the insured or policyholder, if it is not professional knowledge, it is difficult to understand the detailed principle of operation behind it, so some scholars call insurance "information asymmetry". [1] In recent years, insurers have used huge databases to support stereotyped contract operations, and this information asymmetry has become more serious. If there is a lack of transaction information or uneven distribution of information, it may induce moral hazard and adverse selection. [2] Therefore, in order to correct the information asymmetry between the parties to the insurance contract relationship, the legislation of various countries has relevant provisions requiring the insurer to provide or explain part or all of the information to the policyholder before entering into the insurance contract. "Insurance Core Principle and Methodology" formulated by the International Association of Insurance Supervisors (IAIS) for the reference of insurance supervisors in various countries Article 25 of the ICP also requires national supervisory authorities to require insurers to provide consumers with complete contractual information prior to the conclusion of the insurance contract. [3] China also has a similar provision in Article 17 of the Insurance Law of the People's Republic of China (hereinafter referred to as the "Insurance Law of China"), of which paragraph 1 is the insurer's general obligation to explain, and paragraph 2 is the insurer's obligation to clearly explain the exemption clause of the insurance contract, and if it is not fully informed and explained, the clause is invalid.

2. Disputes over the insurer's explanation of the performance standards of obligations

It is a very common type of dispute on what standard the insurer should perform the statutory obligation to explain and clearly explain the obligation, and the performance standard includes the dispute between the formal standard and the substantive standard.

1. Formal standards

The formal standard of the obligation to explain, that is, whether the insurer's explanation to the insurance consumer of the relevant terms, including general terms and exemption clauses, meets the requirements of the statutory form requirements. This form of performance has evolved into a question of burden of proof in practice. [5] According to Article 11 of the Interpretation (II) of the Supreme People's Court on Several Issues Concerning the Application of the Insurance Law of the People's Republic of China (hereinafter referred to as "Judicial Interpretation II"), the insurer must first print the "exemption clause" or "precautions" part in the insurance clause by means of bold and larger font. Secondly, the insurer also needs to have the policyholder sign and confirm that the insurer has clearly explained to itself the exemption clause, that he has read and fully understood the relevant content, and signed and confirmed. [6]

From a legislative point of view, when the new Insurance Law was promulgated in 2009, the "formal standard" was generally adopted for the performance standard[7], and after the promulgation of the Judicial Interpretation II in 2013, the formal standard was still supported by some local courts. For example, in 2014, in the appeal case of Zhang v. Jinan Branch of Jinan Property & Casualty Insurance Co., Ltd. Chinese(hereinafter referred to as "PICC Property & Casualty") heard by the Jinan Intermediate People's Court of Shandong Province, the policyholder applied for comprehensive family property insurance with additional theft insurance clauses, and the "Policy Terms" and "Applicant's Statement" were provided in the form of links on the PICC Property & Casualty Insurance Network Application Page. The court held that although the insurer had an advantage over the policyholder's knowledge of the insurance contract and professional knowledge, the policyholder also had a duty of care to understand the basic contract terms and exercise due diligence. [8] Therefore, the court rejected the applicant's appeal and upheld the original judgment, holding that the insurer had fulfilled the insurer's obligation to clearly explain as required by Article 17, Paragraph 2 of the Insurance Law.

2. Substantive standards

The substantive standard of the obligation to explain not only requires the policyholder to make a clear explanation and confirm it formally, but also requires the policyholder to truly understand the content of the explanation. In this regard, there is also a dispute over the policyholder standard and the comprehensive rational person standard. According to the policyholder's standard, the insurer needs to prove that the exemption clause has been accurately understood by the policyholder; According to the comprehensive rational person standard, the insurer needs to prove that what he has done has reached a level that is understandable to an ordinary layman with a general level of knowledge and intelligence. [9]

In practice, both the policyholder standard and the comprehensive rational person standard are supported by local courts. For example, in 2014, when the Qingdao Intermediate People's Court in Shandong Province heard an appeal case over an insurance contract dispute between Ping An Pension Insurance Company and Wang, it adopted the substantive standard of policyholder standards to make judgments. When applying for accident insurance, the insured Wang Moujia mistakenly filled in his occupation as a farmer, he was actually engaged in the work of a rack worker. Injuries that occur during the work of the rack worker are excluded under the terms of the insurance. The court adopted the opinion of the insured's family, holding that Wang Moujia only had primary school education, could not understand the insurance exemption clause, nor could he understand the specific meaning of occupation, and even if the insurance company provided the full text of the insurance policy, it could not be considered that the insurer had fulfilled its obligation to clearly explain the exemption clause. [10]

In contrast, in the same year, the Shanghai No. 2 Intermediate People's Court heard an appeal case involving a life insurance contract dispute with Ping An Property & Casualty Insurance with a relatively low standard, and the court held that in the insurance company's application website, the full text of the "insurance clause" and the "policyholder's statement" are displayed in the form of an embedded web page, and the policyholder must click "I agree" before generating an electronic policy. Therefore, it can be considered that the insurer has fulfilled its obligation to clearly state the exemption clause. In addition, the court also specifically pointed out that online insurance is different in the expression of insurance contracts and the application process compared with traditional insurance sales models such as direct insurance over the counter because the Internet is used as the carrier for concluding insurance contracts. Insurance clauses, insurance policies and other insurance contract documents are expressed in the form of data messages on the web page, which have the same legal effect as traditional paper insurance contract documents. [11]

3. The "Minutes of the Nine People" regulates the standards for explaining the performance of obligations

On September 11, 2019, the Civil Administrative Professional Committee of the Adjudication Committee of the Supreme People's Court adopted in principle the Minutes of the National Court Work Conference on Civil and Commercial Adjudication (hereinafter referred to as the "Minutes of the Nine People"), of which Chapter V provides guiding provisions for the trial of financial consumer rights protection dispute cases. Article 76 relates to the obligation to inform.

Article 76 of the Minutes stipulates that the fulfillment of the obligation to inform and explain is the key for financial consumers to truly understand the investment risks and returns of various high-risk financial products or high-risk investment activities, and the people's court shall, based on the risks of products and investment activities and the actual situation of financial consumers, combine objective standards that rational people can understand and subjective standards that financial consumers can understand. If the seller's institution simply claims that it has fulfilled its obligation to inform and explain on the basis that the financial consumer has handwritten content such as "I clearly know that there may be a risk of loss of principal", and cannot provide other relevant evidence, the people's court will not support its defense.

The significance of this article for the adjudication of insurance disputes lies in the fact that, although after the promulgation of the Judicial Interpretation II in 2013, the Supreme Court has tended to adopt the comprehensive rational person standard in the substantive standard as the criterion for judgment,[12] but in the trial of local courts, or based on different circumstances of the case, the Minutes of the Nine Citizens truly require in writing that the principle that the comprehensive rational person standard in the substantive standard should be used as the adjudication principle in such cases.

This article argues that another significance of Article 76 of the Minutes of the Nine People lies in its expansion of the scope of application of the standard of comprehensive rational person explanation. According to the Judicial Interpretation II promulgated in 2013, its standard of explanation for a comprehensive rational person only applies to the explanation and interpretation of Article 17, paragraph 2, of the Insurance Law, that is, the explanation and interpretation of the exemption clause, and there is no clear provision on the form in which the general explanation obligation stipulated in Article 17, Paragraph 1 of the Insurance Law should be carried out. However, Article 76 of the Minutes does not distinguish between the obligation to clearly explain and the obligation to explain in general, and this article believes that its adjudication principle should be applied to the full text of Article 17 of the Insurance Law, that is, there is no distinction between the obligation to clearly explain and the obligation to explain in general, and the performance standards should meet the standard of explanation of a comprehensive rational person. In current insurance practice, disputes often arise between the policyholder and the insurer over what constitutes an exemption clause due to different standards for the performance of the obligation to explain. Moreover, in the process of selling insurance products, insurance salesmen also have heavy exemption clauses and light general explanations. The promulgation of the "Minutes of the Nine People" also has important guiding significance for reversing the above situation.

Third, the reference significance of EU legislation for effective explanation of insurers

As mentioned above, Article 76 of the Minutes does not distinguish between the obligation to explain the general description of insurance products and the obligation to specify the exemption clause, regardless of whether the Supreme Court intends to do so, objectively raising the standard for insurers to perform the obligation to explain general clauses. A new question for insurers is how general clauses should be explained in addition to exemption clauses in order to meet the substantive standard of a comprehensive rational person.

This article argues that in a limited time, it is difficult for insurance consumers to fully read and understand the entire content of the insurance contract, and their judgment of insurance products is more based on the introduction of the insurer or insurance salesman, and its description and introduction should be highlighted and screened, but the scope should not be limited to liability exemption clauses.

As a relatively developed region in the insurance industry, EU legislation can provide useful reference for China. In order to specifically regulate the information provision obligations of insurers, the German Federal Ministry of Justice has authorized the formulation of the Information Obligation Measures of the Insurance Contract Law (VVG-Informationspflichtenverordnung, hereinafter referred to as the "Insurance Information Measures")[13], which stipulates in detail the scope of information provision obligations that various types of insurance insurers should undertake. Article 1 of the Measures stipulates 20 common noticeable matters for all types of insurance. Article 4 stipulates that when the insured is a consumer, the insurer shall provide a special "commodity information book", which shall contain matters of great significance for the conclusion or performance of the insurance contract, and list nine important matters that should be recorded in Paragraph 2 of the same article. [14]

In 2016, the EU amended the Directive on Insurance Distribution (2016/97/EC) to replace the Insurance Intermediary Directive (2002/92/EC) issued in 2002, and adopted similar provisions to the "Commodity Information Book" in the German Insurance Information Measures. Paragraph 7 of Article 20 of the Directive stipulates that the "commodity information book" drafted by the insurer shall be a short and independent document, and the title of the relevant words "commodity information book" shall be marked at the beginning. The document should be presented in a legible manner, in a readable font size, and at least in print quality below the standard for black and white photocopying using color text. [15] The Insurance Sales Directive also stipulates nine types of information that must be specified in the "Commodity Information Book", including information on the type of insurance, summary of insurance, information on premiums and benefits, exclusions, payment methods and payment terms, the commencement, period, obligations at the time of making a claim, insurance period, and method of termination. [16]

As can be seen from the EU legislation listed above, the EU's obligation to explain focuses on the effectiveness of the statement, that is, the effective explanation of important information in a limited time and space. This article believes that insurance practitioners in China can refer to EU legislation, on the basis of providing the full text of the contract in its entirety, and at the same time prompt and explain the key information of the contract in easy-to-understand language in the form of a "commodity information book". At the same time, for insurance contracts concluded through the Internet, you can refer to the current pop-up method of key clauses adopted by various apps in response to the extraterritorial jurisdiction of the EU General Data Protection Specification, and display the electronic version of the insurance "Commodity Information Book" in the form of pop-up windows, so as to meet the requirements of the Minutes of Nine Citizens for effective explanations of general terms and exemption clauses.

Exegesis:
[1] Luo Junwei, Lu Yonglong, Insurers' Obligation to Explain from the Financial Consumer Protection Law, Monthly Journal of Decrees, Vol. 63, No. 4, April 2012, p. 68.
[2] See Ma Ning, Insurer Explicit Obligation Criticism, Legal Research, No. 3, 2015, p. 103.
[3] Ye Qizhou, New Development of Insurance Consumer Rights Protection, Yuanzhao Publishing House, June 2015, p. 155.
[4] Article 17 of China's Insurance Law stipulates: "If an insurance contract is concluded and the standard terms provided by the insurer are adopted, the insurance policy provided by the insurer to the applicant shall be accompanied by standard terms, and the insurer shall explain the content of the contract to the applicant."
For the clause of the insurer's liability in the insurance contract, the insurer shall, when concluding the contract, make a reminder on the insurance policy, insurance policy or other insurance certificate that is sufficient to attract the attention of the applicant, and clearly explain the content of the paragraph to the applicant in writing or orally; If it is not prompted or expressly stated, this clause shall not be effective. ”
[5] Ma Ning, supra note 3, p. 110.
[6] See Wang Jing, Judicial Review of Insurers' Explicit Stated Obligations, Application of Law, No. 1, 2013, p. 65.
[7] Yang Mao, "Legal Considerations on Improving the Explicit Obligation of Insurers in China", Modern Jurisprudence, Vol. 34, No. 2, March 2012, p. 63.
[8] See (2014) Jishang Zhong Zi No. 658 Judgment.
[9] Ibid., note 5.
[10] See (2014) Lapis Jin Shang Zhong Zi No. 174.
[11] See (2014) Hu Er Zhong Min Liu (Shang) Zhong Zi No. 88 Judgment.
[12] Ibid., note 7.
[13] Ye Qizhou, From the German Insurer's Information Obligation Norm on the Protection of the Information Rights of the Insured, Yuedan Law, No. 4, 2012.
[14] Ye Qizhou, supra note 3, pp. 173-174.

(This article is translated by software translator for reference only.)