I. The Issue
Article 42 of the Insurance Law(2015 Amendment, the same hereinafter) provides that where, among other circumstances, there is no beneficiary upon the death of the insured, the insurance proceeds shall form part of the insured’s estate, and the insurer shall perform its payment obligation in accordance with the laws on succession (Article 42 of the Insurance Law originally provides that “the insurer shall perform the obligation to pay the insurance proceeds in accordance with the Inheritance Law of the People’s Republic of China”. The Inheritance Law was repealed upon the entry into force of the Civil Code on 1 January 2021). Article 14 of Judicial Interpretation (III) of the Insurance Law(2020 Amendment, the same hereinafter) further provides that where the insurer raises the defense that it has already paid the insurance proceeds to another heir of the insured who holds the insurance policy, the people’s court shall support such defense. With the widespread adoption of electronic policies, the outward-appearance element of “holding the insurance policy” has become increasingly hollow, and whether the insurer’s review obligation is limited to a formal review or extends to a substantive review has become a focal issue in practice.
II. Legislative Intent: Protecting Good-Faith Payment Based on the Appearance of “Holding the Policy”
The judicial interpretation adopts this arrangement mainly because the underlying legal relationship on which an heir of the insured claims insurance proceeds from the insurer is an insurance contract relationship, not a succession relationship. If the insurer were required to examine the heirs’ circumstances, it would have to pay close attention during claims handling to the scope of the heirs, their order of succession, and each heir’s share of the estate. This would greatly increase the insurer’s burden and would hinder claims efficiency. Where the insured has multiple heirs, the heir receiving the insurance proceeds is a person in possession of the estate as referred to in Article 1151 of the Civil Code and shall be under a duty to preserve the estate properly. Other heirs may claim partition against such heirs based on the inheritance legal relationship; where an estate administrator has been appointed, such claim may be asserted through the estate administrator. In answering questions from journalists, the head of the Second Civil Division of the Supreme People’s Court likewise pointed out that insurers, fearing mistaken payment, often refuse to pay when they cannot ascertain the scope of the heirs; Article 14 is intended to improve payment efficiency, and disputes among heirs over distribution are matters of succession law, not of the insurance contract relationship. Judicial practitioners also take the view that, before the estate is partitioned, the insurance proceeds are jointly owned by the heirs in common, any co-owner may claim the entire right, and payment to an heir holding the policy should be recognized as a valid discharge. It follows that “holding the policy” is an appearance of entitlement on which the insurer may rely, and what this Article protects is good-faith payment.
III. Judicial Practice: The Focus of Adjudication Is Whether the Insurer Exercised Reasonable Care
In judicial practice, there is disagreement as to whether the insurer has exercised reasonable care and where the boundary of the insurer’s review obligation lies. One line of decisions takes the formal-review position: the insurer bears only a duty of formal review, the insurer may invoke a statutory defense against the other heirs’ claims, and its payment is treated as a valid discharge as against them and it need not conduct a substantive investigation into the internal relationships among the heirs. Another line of decisions takes the substantive-review position: where the insurer knows that there are multiple heirs, or the application materials contain obvious defects, it still bears a duty of prudent review, and if its failure to perform that duty results in other heirs not receiving their shares, it shall be liable to pay again. Among the cases retrieved, those emphasizing appearance are more numerous, and most of them directly cite Article 14 of Judicial Interpretation (III) of the Insurance Law to dismiss the other heirs’ claims. Cases emphasizing prudence are relatively few, but all of them involve aggravating facts—such as “the insurer, knowing that there were multiple heirs, paid solely on the basis of a unilateral statement” or “the application materials clearly contradicted the facts”—and constitute exceptions at the boundary of the appearance-based approach.
(1) Decisions emphasizing appearance. In Case No. (2026) Ji 05 Min Zhong 2705, the insured, Zhao D, had not designated a beneficiary, and he had as many as 11 statutory heirs. Wang A applied to the insurance company for the insurance proceeds, submitting materials including a certificate of family relationship issued by the residents’ committee, marriage registration records, a medical certificate of death, and a statement of loss of the policy. After a formal review, the insurance company paid RMB 20,000 to Wang A. Some of the heirs—Zhao A, Zhao B, and Zhao C—sued the insurance company to demand payment again; their claims were dismissed at both first instance and on appeal. The appellate court made clear that the insurer’s review obligation is limited to formal review and does not require a substantive investigation into complex family facts such as the internal relationships among the heirs, marital history, the status of children born out of wedlock, or shares of inheritance; based on official documentary evidence, the insurance company had sufficient reason to believe that Wang A was qualified to claim, the materials corroborated one another to form a complete appearance of entitlement, the insurer had fulfilled a reasonable and prudent review obligation, and there was no unlawful payment or gross negligence.
(2) Decisions emphasizing prudence. In Case No. (2016) Chuan 07 Min Zhong 2255, the insured, Chen Lungang, had no designated beneficiary (his designated beneficiary, Luo Suhua, predeceased him), and his first-order statutory heirs were three persons: his father Chen Dunhou, his daughter Chen Lisha, and his wife Jiang Guifang. Chen Dunhou applied for the claim with a Certificate of Statutory Heir Relationship issued by the villagers’ committee and a Letter of Assignment of the Right to Insurance Benefits bearing the signature “Jiang Guifang,” and the insurance company paid the entire RMB 50,000 to Chen Dunhou. Chen Lisha and Jiang Guifang sued. Both the first-instance and appellate courts held the insurance company liable to pay again. The appellate court reasoned that, according to the Certificate of Statutory Heir Relationship, the insurance company should have known that Chen Lungang had three statutory heirs and should have paid each of them their respective shares; yet, relying solely on the rights-assignment statement and the telephone number provided by Chen Dunhou, it paid to Chen Dunhou the RMB 33,333.33 that should have been paid to Chen Lisha and Jiang Guifang, without prudently reviewing the authenticity and validity of that statement and telephone number. The insurer was therefore at fault for inadequate verification and was liable to pay the insurance proceeds to Chen Lisha and Jiang Guifang.
Although the two types of cases reached very different outcomes, their review logic is the same: what the courts actually examine is not whether the applicant “holds the policy” (for example, in Case No. (2026) Ji 05 Min Zhong 2705, the heir’s application for payment was based on materials such as a statement of loss of the policy), but whether, at the time of payment, the insurer exercised a duty of care commensurate with its professional capabilities. Where the materials contain obvious defects, or the insurer already knows of other heirs or of a dispute, yet still proceeds to pay the full amount, there is a real risk that the Article 14 defense will not be upheld.
IV. The Review Obligation for Electronic Policies: Primarily Formal Review, Bounded by Reasonable Care
An electronic policy is a statutory form of insurance certificate. Article 13 of the Insurance Law of the People’s Republic of China (2015 Amendment) requires the insurer to issue an insurance policy or other insurance certificate in a timely manner and permits the parties to agree on other written forms recording the contents of the contract. Article 4 of the Electronic Signature Law of the People’s Republic of China (2019 Amendment) provides that a data message that can tangibly represent the contents it contains and can be accessed and retrieved for use at any time shall be deemed to satisfy the written-form requirements of laws and regulations; Article 5 of the same Law further provides that a data message meeting the prescribed conditions shall be deemed to satisfy the requirements for the original form.
Article 22 of the Measures for the Regulation of Internet Insurance Business (implemented on 1 February 2021) provides that, where an electronic policy is used, the insurance company or the cooperating insurance intermediary shall explain this to the customer and provide the customer with the means of access to its own online platform or the industry’s unified verification platform through which the electronic policy can be queried and downloaded. Article 34 of the Measures for the Administration of Insurance Sales Practices (implemented on 1 March 2024) provides that the insurance company shall, after underwriting approval, promptly provide the policyholder with a paper or electronic policy; the electronic policy shall comply with the national laws on electronic signatures; and the insurance company shall provide a policy inquiry function on its official online platform.
It follows from the above provisions that an electronic policy does not require a unique paper original; its original form is satisfied by the data message under Article 5 of the Electronic Signature Law. What is lost is not originality but the exclusivity of possession: the same policy can be downloaded, forwarded, and screenshotted an unlimited number of times, so any approach that determines entitlement by “who has a copy in hand” breaks down for electronic policies. “Holding” is better understood as the applicant’s ability, through the inquiry channel specified in the policy, to retrieve the complete contents of the policy independently and on a continuing basis, and to assert rights against the insurer on that basis. There are three factors: whether the applicant can independently access the policy inquiry system (having control of the policyholder’s account, mobile-phone verification, or the insured’s identity information); whether the contents retrieved are complete and untampered; and whether this ability to retrieve derives from delivery or authorization by the policyholder or the insured. In the paper era, “holding the policy” reflected, to some extent, the facts of possession and authorization among the heirs. An electronic policy exists as a data message and can be downloaded with a policy number, an SMS link, or a client-app account; “holding” is neither exclusive nor publicly evident, and the appearance-based foundation of Article 14 is significantly weakened. If the insurer releases the full amount merely because the applicant can produce the electronic policy, it will find it difficult in litigation to prove its good faith.
In practice, the insurer has neither the obligation nor the ability to substantively ascertain the full scope of the heirs, and a substantive-review duty should not be imposed on it. However, on the basis of formal review, it should exercise reasonable care: (1) verify the applicant’s identity and whether the proof of kinship with the insured is complete; (2) for a “declaration by all statutory heirs” or a power of attorney, confirm the authenticity of the signatures through traceable means such as video-based signing, facial recognition, or reliable electronic signatures; (3) cross-check the application information against the policyholder, marital status, contact persons, and other information retained in the underwriting system; and (4) suspend payment upon receiving an objection or notice from other heirs. In the context of electronic policies, “holding the insurance policy” should be understood as “lawfully obtaining and submitting the policy information through an identity-verification channel recognized by the insurer,” rather than merely being able to display the policy page—for example, merely providing the policy number, or another person unlocking the insured’s mobile phone after the insured’s death and taking photographs of it.
V. Coordinating the Review Standard with Statutory Claims-Handling Time Limits
The review standard must be coordinated with the statutory time limits. Article 23 of the Insurance Law requires the insurer to make a timely determination, and, in complex cases, to make a determination within 30 days (unless otherwise agreed in the contract), and to perform payment within 10 days after an agreement is reached; Article 25 provides that where the amount cannot be determined within 60 days, the insurer shall first pay the portion that can be determined. If an insurance company’s review is too strict, it faces the risk of overdue claims settlement and interest losses; if its review is too lax, it faces the risk of duplicate payment. It is recommended that insurance companies, upon accepting a claim, notify the applicant in writing, in a single notice, of all required materials; for cases involving numerous heirs or signs of dispute, promptly issue a written explanation and guide applicants to submit notarized succession documents or to confirm their rights through litigation; and keep a record throughout the entire process in their systems, so as to prove both that they exercised reasonable care and that they did not delay performance.
VI. Conclusion
Article 14 of Judicial Interpretation (III) of the Insurance Law is a “safe harbor” for good-faith payment, not an “exemption certificate” for simplified review. In the era of electronic policies, the significance of “holding the policy” as an appearance of entitlement has diminished, and insurance companies must all the more rely on traceable identity-verification and record-keeping mechanisms to prove their good faith, so as to strike a balance between claims efficiency and payment security.
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