(ECNS) -- China's insurance regulator, the China Securities Regulatory Commission (CSRC), has warned investors to be cautious about a planned new insurance product that claims to help avoid stock market risks, saying it is "suspiciously illegal."
A social network and information portal for investors in China said the online-based financial product will be introduced in cooperation with an insurance company and would help reduce losses in market fluctuations.
When certain shares fall beyond the decline limit (10 percent) on a trading day, investors will be guaranteed different amounts of insurance compensation, according to the portal.
The platform is suspected of breaking insurance laws, which stipulate that companies can only offer a new product after having it registered with the China Insurance Regulatory Commission, according to a notice published by the commission.
The commission added that the insurance product acts like a "gambling game" and may further exaggerate financial risks.
Internet-based innovation in the insurance sector is welcome, but must abide by the law, according to the notice.
The commission commented that it would conduct further investigations to prevent investors being misled.
