The China Insurance Regulatory Commission (CIRC) said on Sunday that regulatory loopholes should be plugged and supervision stepped up to overcome shortcomings.
A sound regulatory system should be established and supervision stepped up over shareholder ownership structures and the authenticity of insurers' fund sources, the commission said.
In recent years, problems in the industry have been identified, including lax enforcement of rules and systemic loopholes, it added.
"The insurance regulatory system needs to deeply reflect and thoroughly take stock and [resolve shortcomings], refine regulations and improve its methods," the regulator said.
The commission will also closely monitor where insurance funds are invested, and the bar for overseas investment will be raised, it added.
Insurers will have to pay more attention to the development of insurance products, and rule-breaking will draw harsher penalties, the regulator said.
The statement comes amid a widespread regulatory crackdown on what is seen as the excessive use of universal life products by some insurers, and as China's central leadership moves to curb risk in the financial system.
The CIRC vowed last month to improve its conduct and bring the market back to order after its chairman Xiang Junbo was placed under investigation and removed from his post for "serious disciplinary violations," a euphemism for corruption.