[Case Report] Salesperson's "Persuasion" to Cancel Policy Causing Customer Loss, Insurance Company Held Responsible for Management Negligence

Staff Reporter Lu Yue

Can a customer claim compensation from the insurance company after experiencing a large loss due to canceling and then reapplying for insurance following the insurance agent’s “persuasion”? Recently, the Chaoyang District People’s Court in Beijing heard and ruled on this case, legally ordering the insurance company to compensate for part of the losses caused by the cancellation.

[Case Overview]

Mr. Ji and Ms. Xu are both long-term clients of an insurance company. After obtaining their policy information, insurance agent Lan proactively visited them and “persuaded” them that the interest on their current policies was minimal, and that new products would accrue compound interest with better returns. He suggested canceling their original 10 insurance contracts and purchasing two new policies. Lan also promised that any losses from canceling would be compensated.

Under Lan’s strong recommendation, Mr. Ji and Ms. Xu canceled their previous 10 insurance contracts and purchased two new policies recommended by Lan. However, after canceling, Lan did not fulfill his promise to compensate for the losses. They also discovered that Lan intentionally avoided unfavorable terms during the sales process, engaging in misleading conduct, such as claiming dividends were compound interest and stating “paying premiums for only one year won’t result in losses.”

Mr. Ji and Ms. Xu believe Lan’s false advertising, illegal promises, and misleading sales constitute official misconduct, and that the insurance company should bear the resulting consequences. They sued the insurance company, demanding compensation for their losses from canceling and the refund of premiums paid for the new policies.

[Court Proceedings]

During the trial, the defendant insurance company refused to refund the premiums, claiming that the plaintiffs voluntarily requested to cancel their policies and should bear the losses themselves. The two insurance contracts signed afterward were based on the plaintiffs’ own insurance needs and understanding of the products, and the insurance company had fulfilled its duty to provide explanations.

The court found that insurance agent Lan engaged in false promises to compensate for cancellation losses and misrepresented the rules for purchasing and canceling policies. This led the plaintiffs to mistakenly believe that canceling and using the proceeds to buy new insurance carried no risk or consequences. As an agent of the insurance company, Lan’s promotional and recommendation activities were official acts, and the consequences should be borne by the insurance company.

Furthermore, Lan’s misconduct revealed flaws in the company’s client information management, staff training, and oversight, which allowed him to guide policyholders into canceling and reapplying for insurance through illegal sales practices. The insurance company was at fault and should be held responsible.

The court also noted that the plaintiffs, aware that canceling through normal procedures could result in losses, chose to trust the agent’s illegal promises rather than avoid losses. Therefore, they should bear part of the losses themselves, with the insurance company responsible for 70% of the difference. Regarding the two later contracts, due to issues such as delayed delivery of the policy and lack of consent from the insured, the court ordered their cancellation and invalidation.

[Judgment]

The court ruled that the defendant insurance company pay the plaintiffs 38,427.49 yuan for losses from canceling, and that the two later insurance contracts be declared invalid and canceled. The insurance company must refund the premiums and pay for the use of funds.

[Legal Takeaway]

Presiding Judge Wu Tong emphasized that insurance companies should strengthen client information management and staff oversight during their operations, actively fulfill contractual delivery obligations, and enhance supervision through substantive follow-up. Meanwhile, policyholders should approach insurance rationally, improve compliance awareness, and strengthen evidence retention and risk identification. When sales agents make suspicious claims or promises, customers can call official customer service or visit branches to verify information.