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Limited seats available, first come first served. Let us join together for the sustainable cause! [Click to register] Source: Beijing Business Daily As the 2027 "good start" season kicks off, "fast-return" products in the life insurance sector are facing investigation and rectification. On October 12, Beijing Business Daily learned that some life insurance companies recently received a notice from regulators titled "Notice on Carrying Out Investigation and Rectification of 'Fast-Return' Products" (hereinafter referred to as the "Notice").
The "Notice" stated that some companies in the industry have developed ordinary and participating endowment insurance products with a 3-year payment period and 6-year insurance period (i.e., "pay 3, insure 6") in the bancassurance channel, and these "fast-return" products carry the risk of long-term insurance being treated as short-term. It required that insurance companies in principle must not newly file products whose cash value at the end of the third policy year exceeds the premiums paid, and existing products with similar issues should in principle be proactively discontinued.
What is "long-term insurance treated as short-term"? What is the current status of rectification? Where do the risks and root causes lie? Why did regulators step in to correct course at the start of the "good start" season? Around these market concerns, Beijing Business Daily reporters visited multiple bank branches in Beijing for on-site research and found that most non-compliant products have been urgently removed from shelves, adding uncertainty to the unfolding "good start" season. However, a few "fish that slipped through the net" are still on sale.
On-Site Testing: Some Named Products Still on Sale
As the "good start" season begins, the insurance industry has been hit by a regulatory hammer. According to the "Notice" obtained by Beijing Business Daily from industry sources, some companies in the industry have developed ordinary and participating endowment insurance products with a 3-year payment period and 6-year insurance period in the bancassurance channel, deliberately压低 actuarial expense assumptions and shortening the cash value break-even time, using such products to boost scale, which carries the risk of long-term insurance being treated as short-term.
The problem has been called out, and rectification requirements have been made clear. The "Notice" pointed out that companies in principle must not newly file products whose policy cash value at the end of the third policy year exceeds premiums paid. For existing products previously filed with similar issues, companies should in principle proactively discontinue them. Companies with genuine liquidity difficulties should comprehensively assess liquidity gaps, formulate proper cleanup and standardization plans, communicate with regulators, strictly control business scale according to the principle of "output based on input," and set deadlines for product discontinuation and rectification.
What is the current progress of industry rectification? On October 13, Beijing Business Daily reporters visited ten bank branches in Beijing, including state-owned major banks, joint-stock banks, city commercial banks, and rural commercial banks. The vast majority of bank account managers said there are currently no "pay 3, insure 6" endowment insurance products that "break even" (cash value exceeding premiums paid) in three years.
What form do currently sold products take? During the research, several bank account managers recommended multiple "pay 3, insure 6" endowment insurance products that can achieve "break-even" in 4 or 5 years. Specifically, among the "pay 3, insure 6" products recommended by bank account managers to Beijing Business Daily, a "Jin Wen Ying G" endowment insurance (participating) underwritten by a listed insurer can achieve "break-even" in 4 years for the guaranteed portion (excluding dividends); a "Ying Tian Yue (Xin Xiang Edition)" endowment insurance underwritten by a leading life insurer can also achieve cash value exceeding premiums paid in the 4th policy year; a "Hong Ying No. 1 (Xian Li Edition)" endowment insurance (participating) underwritten by a small and medium-sized insurer and a "Rui Ying Bao" endowment insurance (participating) underwritten by another small and medium-sized insurer both achieve 3-year "break-even" when considering illustrated dividends.
However, there are indeed some "fish that slipped through the net" in the market. At a branch of a state-owned major bank, an account manager told Beijing Business Daily that recently "pay 3, insure 6, break even in 3 years" endowment insurance products have basically been removed from shelves, but "Hui Xiang Fu" endowment insurance (participating) from Zhonghui Life Insurance, without considering dividends, can still achieve 3-year "break-even," making it the only product on sale at that branch that meets the "pay 3, insure 6, break even in 3 years" requirement. According to the calculation table provided by the account manager, Beijing Business Daily noted that based on a 28-year-old woman paying 50,000 yuan per year for 3 years, in the third policy year, the guaranteed portion cash value of this product is 151,800 yuan, already exceeding the 150,000 yuan in premiums paid.
Long-Term Insurance Treated as Short-Term May Bring Liquidity Risks
When ordinary consumers see the relevant "Notice," they often wonder: the sooner the cash value catches up with premiums paid, the lower the financial cost may be when surrendering the policy mid-term. For this reason, such products are often easier for customers to understand and accept when sold at bank branches. Why did regulators clearly draw a red line and list long-term insurance treated as short-term as a prohibited practice?
Yang Zeyun, a teacher in the Finance Department of the Business College at Beijing Union University, explained that long-term insurance treated as short-term essentially designs or sells an insurance contract that should be held long-term as a "short-cycle exitable" wealth management-like tool. On the surface, it is merely a difference in holding period, but the deeper problem is that unrealistic actuarial assumptions are used to disguise the insurer's long-term liabilities as short-term fixed-payout products. Long-term insurance treated as short-term is not conducive to the long-term stable operation of insurance companies, easily leads to a mismatch between premium income and the duration of investment assets, and may bring liquidity risks.
Yang Zeyun said that long-term insurance treated as short-term first increases the pressure on insurance companies for duration matching, causing liability cash flows to flow out earlier, making it difficult to find matching assets on the asset side and exacerbating duration mismatch. Second, it increases the difficulty of cash flow matching: cash flows originally meant to exit in six years become cash outflows in three years because policyholders surrender early after profiting in three years.
Long Ge, co-founder and general manager of Zhongtuobang, added that for such "pay 3, insure 6, break even in year 3" insurance products, the liability side is essentially short-term capital in nature, but the asset side must allocate long-term fixed-income and non-standard assets to deliver the guaranteed returns promised in the policy, naturally creating a duration mismatch of short money funding long investments. Once concentrated surrenders increase, the company can easily face liquidity pressure. As reinvestment yields in the current market continue to decline and non-standard asset returns keep compressing, it is difficult to cover the guaranteed returns promised in policies relying solely on real investment returns. In the long run, this can easily generate interest spread losses and may also compound liquidity risks.
Precise Correction Before the "Good Start" Season
Long-term insurance treated as short-term is not new in the insurance industry. In 2017, the former China Insurance Regulatory Commission issued the "Notice of the China Insurance Regulatory Commission on Regulating the Product Development and Design Behavior of Life Insurance Companies," known as "Document No. 134," requiring that for endowment insurance products and annuity insurance products, the first survival benefit payment should be made after the policy has been in force for 5 years, and the annual payment or partial withdrawal ratio must not exceed 20% of the premiums paid.
The regulatory red line for long-term insurance treated as short-term was drawn long ago, but now products with "pay 3, insure 6, break even in 3 years" have resurfaced. Why has an old problem reappeared? This deserves scrutiny. Long Ge admitted that Document No. 134 only blocked the path of "early return of survival benefits." The current new approach is not to allow early survival benefit returns, but to let the policy's cash value rise quickly, so that customers can get their premiums back by surrendering in the third year.
Long Ge also said that bancassurance customers want products that are stable, deposit-like, and can be withdrawn earlier; banks want to earn intermediary business income; and small and medium-sized insurance companies have weak individual insurance channels and urgently need to boost premium scale. As a result, "pay 3, insure 6" endowment insurance has become a volume-driving product. "The fundamental reason for the 'resurgence' of long-term insurance treated as short-term this time is that insurance companies still pursue the ideology of premium scale above all else, which is the internal cause. In addition, external causes include continuously declining interest rates and the regained importance of the bancassurance channel, which prefers such short, fast, and flat products," Yang Zeyun summarized.
As the "Notice" requires, all companies should conscientiously carry out product self-inspections, strictly implement the relevant work requirements of "reporting and acting in unity," and focus on verifying the scientific and reasonable nature of actuarial assumptions such as surrender rates and expense ratios for existing products. At the same time, they should fully calculate the cash flow pressure of relevant products under scenarios of two-way interest rate fluctuations. For companies that blindly pursue scale and cause vicious market competition, regulatory authorities will take regulatory measures such as regulatory talks, orders to rectify, suspension of product filing, and administrative penalties in accordance with the law, effectively safeguarding a fair competitive market environment.
Regulators chose to act at the start of the "good start" season, which is not merely a coincidence of timing, but a move to prevent related products and sales behavior from further amplifying risks during the volume-boosting stage. Yang Zeyun analyzed that regulators intervened at the start of the "good start" season for three reasons: first, to prevent insurance companies from misleading consumers through similar products during the "good start" period; second, to curb the violation of "inconsistent reporting and acting" caused by insurance companies deliberately lowering filed expense ratios for "good start" products while actual expense ratios are higher, thereby preventing expense spread losses; and third, to prevent concentrated surrender risks and liquidity risks arising from nominal long-term but actually short-term products.
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