The practice of banks as beneficiaries of compulsory insurance stems from the fact that banks often appear as beneficiaries when buying vehicle loss insurance for collateral.

after borrowing money from the bank to buy a car, the borrower will purchase vehicle insurance as the insured. Insure this type of insurance, because the vehicle has been mortgaged. If the vehicle is damaged or lost during the performance of the loan contract, resulting in reduced or worthless value, the borrower may claim compensation from the insurer on the grounds of the occurrence of the insured accident, and the insurer shall pay compensation to the borrower in accordance with the insurance contract. For banks, the damage or loss of vehicles means that the value of collateral is reduced or worthless. In order to reduce their own risks, banks will actively claim rights for insurance compensation.

The legal basis for the bank to do this is that as the mortgagee of the vehicle, according to Article 8 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Guarantee Law of the People's Republic of China: "In the case of loss, damage or expropriation of the mortgaged property, the mortgagee can be given priority in compensation for the insurance money, compensation or compensation of the mortgaged property", and the bank has priority over the compensation. In order to reduce their own risks, banks require borrowers, as policyholders and insurers, to set themselves as beneficiaries in the process of concluding insurance contracts.

However, it is unreasonable to set the bank as the beneficiary in the car loan and compulsory insurance policy for the following reasons:

This practice does not conform to the original legislative intention of the Regulations on Compulsory Insurance for Motor Vehicle Traffic Accidents (hereinafter referred to as the Compulsory Insurance Regulations).

Article 1 of the Compulsory Traffic Insurance Regulations: In order to ensure that victims of motor vehicle road traffic accidents get compensation according to law and promote road traffic safety, these regulations are formulated in accordance with the Road Traffic Safety Law of the People's Republic of China and the Insurance Law of the People's Republic of China.

Article 31 of the Compulsory Traffic Insurance Regulations: An insurance company may compensate the insured or the victim directly.

First of all, the Compulsory Traffic Insurance Regulations belong to the administrative regulations promulgated by the State Council and are mandatory;

Secondly, it can be seen from the above provisions of the Compulsory Traffic Insurance Ordinance that the original intention of compulsory traffic insurance was "to ensure that the victims of motor vehicle road traffic accidents get compensation according to law";

Third, from the compensation object, "insurance companies … can also directly compensate the victims for insurance benefits". In judicial practice, it is very common for the victims of compulsory insurance or their close relatives to sue the injurer in the people's court after the traffic accident, and at the same time list the insurance company of compulsory insurance as a co-defendant. The people's court often decides that the insurance company will directly pay the compensation under compulsory insurance to the victims of compulsory insurance or their close relatives. :

In order to avoid the risk of car loan, banks require that the first beneficiary of the car bought by the loan must be the bank.

If you don't change the first beneficiary, the problem in the future will be:

If your car is in danger, the insurance company will have to go through the formalities of the bank, because in principle, the insurance company will directly pay the claim to the owner (that is, your company), but with the first beneficiary, it will pay the claim to the first beneficiary. In this case, you must issue a power of attorney from the bank to entrust your company to collect the money.

to put it bluntly, it doesn't matter as long as you can ensure that the vehicle doesn't go out of danger during the insurance period and don't pay for it.