A recent ruling published on China Judgments Online revealed a critical illness insurance dispute between an agent of China Life Insurance Company Limited (China Life) and its Shandong branch. The court ruled in favor of the plaintiff, ordering China Life Shandong Branch to pay a 300,000 yuan claim.

In March 2020, Fu Mouxia, an insurance sales agent for China Life, purchased the "Guoshou Kangning Children's Critical Illness Insurance" and supplementary policies for her infant daughter, with a coverage amount of 300,000 yuan and a 30-year term. Fu paid four annual premiums totaling 12,600 yuan.

In February this year, Fu's daughter, then under six years old, was diagnosed with "Type 1 Diabetes and Diabetic Ketoacidosis" at Binzhou Medical University Hospital and has since required continuous insulin treatment. When Fu filed a claim, China Life Shandong Branch rejected it, arguing that the condition did not meet the policy's definition of a critical illness.

The insurer cited three reasons: 1. The diagnosis did not fulfill the critical illness criteria specified in the policy. 2. As the policy seller, Fu was fully aware of the terms and coverage. 3. The low annual premium (900 yuan) relative to the high coverage (300,000 yuan) was deemed unreasonable.

The policy defined "Severe Insulin-Dependent Diabetes" as requiring external insulin for over 180 days and meeting at least one of three additional conditions: proliferative retinopathy, cardiac pacemaker implantation, or toe amputation due to gangrene.

The Wudi County People's Court in Shandong ruled that these additional conditions deviated from standard medical definitions for Type 1 Diabetes, unfairly limiting coverage. Citing China's "Health Insurance Management Measures," the court stated insurers must not impose unreasonable medical standards that restrict legitimate claims.

The court found that: 1. The policy’s restrictive definition contradicted general medical standards for Type 1 Diabetes. 2. The additional conditions were beyond a layperson’s understanding and unfairly reduced coverage. 3. The terms violated fairness principles in standard-form contracts and conflicted with the purpose of critical illness insurance.

Despite Fu’s role as an agent, the court ruled that her professional background did not equate to medical expertise or absolve the insurer of its duty to clearly explain policy terms.

China Life Shandong Branch was ordered to pay the 300,000 yuan claim, refund the 12,600 yuan in premiums, and cover 5,989 yuan in legal fees.

This case mirrors another recent ruling in Liaoning, where an insurer’s denial of a "Severe Type 1 Diabetes" claim was overturned. Courts have consistently rejected insurers’ arguments that restrictive definitions align with medical standards or actuarial logic, emphasizing policyholders’ reasonable expectations of coverage.

The rulings highlight tensions between insurers’ risk management practices and consumer protection principles in China’s insurance market.