Taihe Research | After a child entered an incorrect verification code, 90,000 yuan was transferred from the account. Will the insurance cover this loss?
Release Date:
2026-09-03
As a vital pillar of the financial system and social welfare, the insurance industry has consistently advanced in a prudent manner, with legal compliance as its bottom line and regulatory requirements as its guiding principle. In an era of increasingly stringent financial oversight, continuous innovation in insurance business models, and ever‑stricter consumer protection, every stage of the insurance value chain—from product design and sales to underwriting, claims handling, and investment management—faces more rigorous compliance standards and clearer legal boundaries. Consequently, a deep understanding of, strict adherence to, and effective application of the law have become essential imperatives for insurance institutions, industry professionals, and consumers alike.
To this end, Taihe Law Firm has officially launched a dedicated insurance law column, offering in-depth, practice‑oriented insights into compliance across the entire insurance value chain from a professional legal perspective. The column promptly interprets the Insurance Law and related regulatory updates, dissects landmark industry cases, and analyzes the reasoning behind judicial rulings in insurance disputes. It focuses on high‑frequency, challenging issues such as sales compliance, claims disputes, personal data protection, and the regulation of intermediary activities, employing plain‑language explanations, scenario‑based breakdowns, and actionable guidance to help insurance institutions strengthen their internal control frameworks, enable practitioners to mitigate professional risks, and clarify the rights and obligations of consumers.
Compliance safeguards trust, and the rule of law ensures long-term stability. We hope this column will serve as a trusted partner for the insurance industry in addressing legal challenges and mitigating compliance risks, ensuring that every policy is lawful and every commitment brings peace of mind.
Introduction:
A parent discovered that 90,000 yuan had vanished from their bank account. Upon investigation, they learned that their child, while playing on a smartphone, had been gradually coaxed into downloading an app and, in a daze, entered a verification code—after which the funds were transferred out. Even more surprising, despite having purchased “account‑funds‑security insurance,” the insurer refused to pay out, citing that the incident constituted “human‑perpetrated fraud” and involved “actions by a family member,” both of which fall outside the policy’s coverage. With each side steadfastly maintaining its position, the court ultimately ruled on the matter.
I. Case Summary
In November 2021, Mr. Li purchased a household comprehensive insurance policy that included “Personal Account Funds Security Insurance,” with a coverage limit of RMB 100,000. At the time of purchase, he had only an insurance application form and three thin insurance policy documents, all printed in small type; the section detailing “circumstances not covered” was neither bolded nor highlighted in any other conspicuous manner.
In March 2024, Li’s son added the customer service account of a certain gaming app on Douyin. The scammer lured him with the promise of “receiving a gift for filling out information” and then falsely claimed that “a minor’s actions had resulted in charges being debited from the parent’s account,” thereby tricking the child into downloading a remote-control app. Unaware of the deception, the child entered a verification code, after which multiple transfers were made from Li’s account, along with POS‑card payments and online quick‑pay transactions, totaling a loss of RMB 90,000. Following the police report, Li filed an insurance claim but received a “Notice of Denial of Claim.”
The insurance company contends that this loss arose from “artificial fraud” or from “the actions of a family member, resulting in the insured account being entrusted to another party without the insured’s genuine intent,” and thus falls within the scope of exclusions.
The policyholder holds the version in effect at the time of application, while the insurer presents a later‑updated version. Can this revised clause really bind a contract entered into three years ago?
II. Court Judgment and Reasons
The court ultimately ruled that the insurance company must pay the full amount of RMB 90,000, based on three main lines of reasoning:
First level: Exclusion clauses are ineffective unless they have been “prompted and explained.” Article 17 of the Insurance Law stipulates that insurers must provide conspicuous notice and clear explanations regarding exclusionary provisions; otherwise, such provisions shall be deemed invalid. In this case, the exclusionary grounds set forth in the policy held by the insured were not conspicuously marked, and the insurer failed to produce evidence demonstrating that it had adequately explained “which circumstances are not covered.” Under the principle of “who asserts must prove,” when an insurer seeks to invoke an exclusion, it bears the burden of proving that it has fulfilled its duty to explain; this constitutes the insurer’s failure.
Second layer: Clauses that are updated only after the policy has been issued cannot have retroactive effect. The new version of the policy terms submitted by the insurer in court was approved and filed at a date later than the date of insurance application. The insurance contract is deemed to have been concluded at the time of application, and the rights and obligations shall be governed by the terms actually delivered at that time. A disclaimer clause that is “supplemented” only after the fact has no binding force on a contract that has already been formed.
Third layer: The circumstances of this case fall squarely within the scope of coverage. The policy terms stipulate that if a personal account or personal information is lost, duplicated, or stolen and subsequently misused—through unauthorized third-party transactions conducted over the internet or telecommunications networks—such losses are covered under the insurance policy. In this case, a third party induced a minor to disclose a verification code and remotely controlled the minor’s mobile phone to carry out unauthorized transfers and purchases, which constitutes a textbook example of “internet‑based fraudulent transactions.” Since the child used the parent’s phone without intent or gross negligence, the insurer should rightfully bear responsibility for this loss.
III. Implications for Insurance Companies
The root of the controversy lies in the existence of “two sets of policy terms”—one in the policyholder’s hands and one with the insurer—resulting in a discrepancy between the product’s actual sales version and its filed version, which often marks the beginning of potential risks. To prevent similar issues, lawyers recommend:
First, the terms and conditions must be “what you see is what you get.” The version provided to the policyholder must match the version actually underwritten and filed with the regulatory authorities; the disclaimers displayed on the sales page, in the policy document, and in the system must be consistent. When updating the policy language, robust management of the transition between old and new versions is essential to ensure that the terms in effect at the time of purchase are fully traceable and verifiable.
Second, the duty to provide explanations must be documented. Exemption clauses not only require conspicuous notice but also necessitate formalizing the process of “clearly explaining” them: for online policies, this includes pop-up read‑throughs and checkmarks confirming acceptance of key terms; for offline policies, it encompasses written records of explanations and “dual recording” materials—each serving as direct evidence that the insurer has fulfilled its obligation to provide adequate disclosure.
Third, claims decisions must withstand review. A denial of a claim is not merely a matter of applying the policy terms; it requires a thorough examination of the insurer’s liability, exclusions, and the nature of the loss, accompanied by a written rationale.
IV. Final Remarks
For the average policyholder, when purchasing insurance, it is essential to carefully review the “Coverage” and “Exclusions” sections and, if necessary, request a written explanation. Keep your insurance application, policy terms, payment receipts, and communication records in a safe place. If your card is fraudulently charged, report the incident to the police immediately and preserve all transaction records. If your claim is denied, do not accept the decision hastily; whether the insurer fulfilled its duty to provide clear explanations and whether the applicable policy version remains valid can both be critical factors in reversing the outcome.
At its core, insurance is about sharing risks and compensating for losses. Whether a policy earns trust depends not on how meticulously the grounds for denying a claim are articulated, but on whether the insurer clearly defines responsibilities and thoroughly discloses risks at the time of application. For policyholders, providing accurate disclosures and making informed, rational purchasing decisions are equally essential obligations.
Attorney Shi Qiao, Areas of practice include insurance compliance and risk management, legal review of insurance products, arbitration and litigation involving significant insurance disputes, design of supply-chain finance structures and risk mitigation in leasing and factoring, fund formation and equity investment, recovery and commercial disposal of non‑performing claims in banking and construction projects, legal advisory services for administrative agencies and state‑owned enterprises, corporate compliance, and major civil and commercial litigation—providing both non‑litigation and litigation services.
Attorney Xie Yuting specializes in dispute resolution and legal advisory services in the insurance sector, ongoing legal counsel for state-owned enterprises, labor disputes, civil and commercial litigation, and the recovery of non-performing assets, including those held by banks.
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