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The window period is less than one month, and 3.0% life insurance products have been discontinued one after another! Insurance companies are "raising fees" and promoting various sales. Is the last wave of sales boom of the year coming? Who will take over the subsequent main products?

As a weathervane for various financial products, bank deposit interest rates have bid farewell to the "2" figure, and the yield of bank wealth management products has also declined, highlighting the scarcity of insurance products with a predetermined interest rate of 3.0%. Recently, a regulatory notice has finally pressed the "countdown" button for the full withdrawal of 3.0% products.

At a time when market funds are keen on pursuing safe and stable assets, the financial world is undergoing another change. From September 1, 2024, the upper limit of the scheduled interest rate for newly registered ordinary insurance products will be 2.5%, and the relevant liability reserve assessment rate will be implemented at 2.5%; ordinary insurance products with scheduled interest rates exceeding the upper limit will be stopped from sale.

"According to the notice from XX Life Insurance, several increasing term life insurance products will be removed from the shelves at 24:00 on August 31st..." A financial consultant from an insurance brokerage company told reporters that they have received too much news like this recently, and companies have stopped selling 3.0% products one after another."If they say take it off the shelves, then take it off the shelves!"

"The company will stop selling N products, and the premiums of new products will increase to a certain extent. If you need to add insurance, please contact us in time." In the past week, insurance agents have frequently sent messages to remind customers to "grab the high-interest products now!"

Since the market has long anticipated this round of adjustments to the scheduled interest rate, insurance companies have already had corresponding sales strategies and response plans. Daily Economic News learned from the industry that in this round of switching between new and old products, insurance companies seized the opportunity to vigorously promote the sales of 3.0% old products: some insurance companies postponed the time for lowering the commission rate to August 31, and some companies even raised the 3.0% commission rate of the main products, making a final push for the sales of long-term savings insurance and serious illness insurance. At the same time, new dividend insurance products are also being prepared or launched.

The sales window is less than 1 month

3.0% of products have been discontinued

In August, a new round of adjustments to the guaranteed interest rates of life insurance products officially began, leaving less than a month for the sales window for 3.0% products.

On August 2, a reporter from the Daily Economic News learned from relevant channels thatThe State Financial Supervision and Administration Bureau issued the "Notice on Improving the Pricing Mechanism of Life Insurance Products" (hereinafter referred to as the "Notice"), lowering the expected interest rates of life insurance products in batches.

In addition to leaving a sales window of only one month for the 3.0% product, from October 1, the upper limit of the scheduled interest rate for newly registered dividend insurance products will be 2.0%, and the relevant liability reserve assessment rate will be implemented at 2.0%; dividend insurance products with a scheduled interest rate exceeding the upper limit will be stopped from sale; the minimum guaranteed interest rate for newly registered universal insurance products will be upper limit 1.5%, and the relevant liability reserve assessment rate will be implemented at 1.5%.

In the insurance brokerage channel, small and medium-sized companies have successively announced the suspension of sales of related products, including increasing whole life insurance, endowment insurance, annuity insurance and other savings products. It is understood that some small and medium-sized insurance companies have set the suspension time at the last minute.As of 24:00 on August 31, many companies have announced the discontinuation of product sales.

"There are still high-interest products for sale in August. According to your situation, the recommended ones are 3.0% increasing whole life insurance, pension annuity insurance, and education fund insurance." An insurance broker has been working overtime to call customers and ask about their insurance intentions. The broker told reporters that there are indeed a lot of customers who have added insurance recently.

Some leading insurance companies have actively adjusted their business structures and have stopped selling 3.0% increasing whole life insurance with 3-year and 5-year premiums, while promoting the sales of long-term premium products. "At present, the company still has 10-year premium products with 3.0% premiums on sale," said an insider of an insurance company.

A reduction in the expected interest rate means that product premiums will increase. According to calculations by the non-bank financial team of Soochow Securities, when the expected interest rate is reduced from 3.5% to 3.0%, the corresponding gross premium increases for annuity insurance, whole life insurance, term life insurance, endowment insurance and health insurance are 18.7%, 20.2%, 3.5%, 7.5% and 17.1% respectively.

Just a year ago, when life insurance products with a guaranteed interest rate of 3.5% were completely withdrawn from the market, premiums for various products represented by whole life insurance and annuity insurance had already experienced a round of price increases.

The industry has long anticipated this round of product interest rate cuts and is waiting for the shoe to fall. The reporter of "Daily Economic News" learned from the industry that some leading insurance companies are currently increasing sales of 3.0% products by means of increasing fees.

Taking a leading life insurance company as an example, the company recently stopped selling 3.0% increasing term life insurance with a premium of 3 or 5 years, and now provides additional fee support for savings insurance with a premium of 10 years or more. For policies with an average price of over 10,000 yuan, there are also additional fee rewards. For example, for policies with an average price of 10,000 yuan, there is an additional reward of 4% of the first year's standard insurance fee.

After the implementation of the "integration of reporting and banking" in the bank-insurance channel last year, the integration of reporting and banking in all channels is imperative. The recent "Notice" issued by the regulator once again emphasized the deepening of "integration of reporting and banking". The so-called "integration of reporting and banking" means that the product pricing assumptions used in the product approval or filing materials submitted by insurance companies to the regulatory authorities must be consistent with the behavior of the insurance companies in the actual operation process, and they cannot "say one thing and do another".

It is reported that after the implementation of the "integration of insurance and banking", the commission rate of the bancassurance channel has dropped by 30% compared with the previous average level. According to the data from the brokerage agency channel, a drop of about 50% in the commission level is quite common. Industry insiders pointed out that compared with the bancassurance channel and the brokerage agency channel, the cost structure of the individual insurance channel is complex, and some institutions have planned to reduce commissions for their main products.

It is worth mentioning that in order to seize the sales opportunity under the switch between old and new products, some leading institutions postponed the time of commission reduction and made all-out efforts to sprint for the sales of the final 3.0% increasing amount of whole life insurance products.

Insurance salespeople also hope to complete their sales tasks ahead of schedule by "speculating and stopping sales". Insurance companies' postponement of commission cuts and fee increases will hopefully drive high premium growth.

From the withdrawal of 4.025% annuity insurance and 3.5% life insurance, we can see that the adjustment of life insurance interest rates has also stimulated product sales. Affected by the 3.5% product switch last year, from January to July 2023, the five listed life insurance companies, Ping An Life Insurance, China Life Insurance, CPIC Life Insurance, New China Life Insurance, and PICC Life Insurance, achieved a total premium of 1.2 trillion yuan, a year-on-year increase of 8.12%, laying the foundation for the full-year premium performance.

After the high-interest products are withdrawn, insurance sales are expected to return to normal. Some insurance sales staff expressed concerns during interviews that after a month of "carnival", the next four months are likely to be a situation where there are no products to sell and customers are on the sidelines, and the off-season for insurance sales is coming.

How do insurance companies deal with the switch between old and new products? What are the follow-up products after the 3.0% product, and which will become the new mainstream product? The industry believes that during the period of interest rate decline, participating insurance with certain floating returns will occupy a certain market share and become one of the mainstream products in the future.

Participating insurance is considered one of the most promising insurance products. CITIC Securities Research pointed out that compared with traditional non-participating insurance products that only provide a minimum guaranteed return, the potential returns provided by participating insurance are obviously more attractive.

The reporter of Daily Economic News learned that many leading life insurance companies plan to launch new 2.5% dividend insurance in August and September, mainly selling dividend-type increasing life insurance, and will decide the type of products to be promoted in the future based on market acceptance. Some companies also plan to launch dividend-type annuity insurance, dividend-type whole life insurance and other products in the future, and increase the product value rate by setting medium and long-term protection periods.

In addition, some leading companies plan to increase the promotion of health insurance and personal pension products in the second half of the year, and have proposed corresponding reward plans to increase cost investment, which will also be included in the assessment targets.

The industry pointed out that insurance companies can reduce the pressure of liability costs by developing dividend insurance, optimize investment categories and investment periods, and improve investment returns. Dividend insurance has the characteristics of profit sharing and risk sharing between customers and insurance companies. The operating results of the insurance company's dividend insurance business will also be returned to customers in the form of dividends.

It is worth mentioning that this regulatory document "encourages the development of long-term dividend insurance products". For dividend insurance products with a predetermined interest rate not higher than the upper limit, the cash value can be calculated according to the actuarial regulations for ordinary products.

Mark, the actuary manager, said that this means that after the scheduled interest rate is lowered, the discount rate of the cash value of long-term dividend insurance can be the same as before the scheduled interest rate is lowered. The higher the cash value discount rate, the lower the initial cash value, and the faster the cash value increase, which is more conducive to consumers holding dividend insurance for a long time.

In recent years, as regulators push the industry to reduce liability costs, the problem of "speculation and suspension of sales" is inevitable. An executive of a life insurance company said in an interview that in the past period of time, due to the inversion between the pricing interest rate and the actual interest rate, insurance products did not have a particularly obvious advantage in sales. In recent years, savings products such as increasing whole life insurance have been welcomed by the market when market interest rates have fallen, and various companies have followed suit.

In order to ensure a smooth and orderly switch of life insurance products, the regulator also issued supporting documents, emphasizing that insurance companies should strengthen business monitoring, and if they find abnormal fluctuations in business, they should promptly analyze the causes and take corresponding control measures.

In addition, the regulator proposed for the first time to "establish a mechanism to link the scheduled interest rate with the market interest rate and dynamically adjust it". At the specific implementation level, the benchmark value of the scheduled interest rate is determined by referring to the loan market quotation rate (LPR) of more than 5 years, the benchmark interest rate of 5-year time deposits, the yield to maturity of 10-year treasury bonds and other long-term interest rates, and is released by the China Insurance Association. The linkage and dynamic adjustment mechanism should be reported to the State Administration of Financial Supervision. After the triggering conditions are met, each insurance company shall adjust the product pricing in a timely manner in accordance with market principles.

The non-bank financial team of Soochow Securities calculated that the three latest market reference interest rates (August 2, 2024) are 3.85% for LPR over 5 years, 1.80% for 5-year time deposits and 2.13% for 10-year treasury bonds, with an arithmetic average of 2.59%, which is about 50bps lower than the last adjustment period of the pricing rate in August 2023 (3.09%), and is close to the adjustment space this time. "The establishment of a long-term dynamic pricing mechanism this time will help life insurance companies improve their asset-liability management capabilities from the source."

Wang Guojun, a professor at the School of Insurance at the University of International Business and Economics, believes that linking the scheduled interest rate with the market interest rate and dynamically adjusting it is a very smart approach, which is expected to completely solve the lag and passivity of the regulatory authorities in adjusting the scheduled interest rate. "This is a bit like the adjustment of oil prices back then." Wang Guojun made an analogy, "Once it is adjusted dynamically according to the market, the standards, trigger conditions, and scientificity are in place, expectations will be clear, and contradictions will be resolved."

Reporter|Tu Yinghao

edit|Cheng Peng Liao Dan Du Hengfeng

Proofreading|Lu Xiangyong

Cover image source: Daily Economic News, photo by Liu Guomei

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